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Insight from Padraic Whelan, partner, Deloitte on Budget 2013
Property tax
As expected , the New Local Property Tax will be effective from 1st July 2013.
This new tax applies to owners of Residential Property including Rented Property. Thus tenants are not effected unless they hold a lease of at least 20years or are a life tenant.
The tax will be Self assessed and administered by the Revenue Commissioners. It will be based on Market value. Some Revenue guidance will be available should a person wish to follow same. A banding system will operate up to the €1million limit , in that a house worth between €150,000 and €200,000, will be assessed on €175,000, being the mid point in the band. The bands are in widths of €50,000.
The initial valuation will be valid until the end of 2016.
Rate: The rate (up until 2014) will be 0.18% up to €1million and 0.25% on the excess above. This rate can be increased (or decreased ) by a local authority by 15%. Thus the early signal for uplifts in due course.
Surcharge: The return of this LPT will be linked to a person’s Income tax return , thus a late return will be exposure to an Income tax surcharge which can be substantial.
Exemptions: There are very few but broadly cover new houses which are unsold, new houses that are unused and bought in the 4 years to the end of 2016, second hand homes bought by a first time buyer in 2013 only.
Comment: What is noticeable is that the NPPR charge will continue for all of the year 2013 on second homes and at the same time the LPT will apply for the half of 2013. There was silence on the idea that stamp duty paid on property in the “ boom years “ would be available for offset.
It is likely that Landlords will be forced to increase rents by an average of 1 month’s rent ON A Residential Property letting given normal Income tax will have to be paid first with the balance going to pay the LPT.
