On 1 November 1512, the ceiling of the Sistine Chapel, painted by Michelangelo, was exhibited to the public for the first time. Just over 500 years later, owners of land in Ireland will be paying close attention to another exhibition with the first RZLT maps expected to be published by local authorities on 1 November 2022.

This will be the first in a series of significant steps towards the first RZLT liability date for landowners on 1 February 2024 and the first pay and file due date of 23 May 2024. The significance of the maps published is that they will identify land which local authorities consider to be within the scope of the RZLT charge.

All landowners should be mindful of this significant change in the existing tax landscape and ensure they consider their exposure of the RZLT in sufficient time to allow for any possible mitigating actions to be taken.

1. Overview

The purpose of RZLT is to activate land for residential development purposes. The RZLT will operate as a 3% levy on the market value of relevant land on the relevant valuation date.

2. Criteria for inclusion in RZLT map

The following is the criteria for land to be included in the RZLT maps i.e. land that:

1. is included in a development plan, in accordance with section 10(2) (a) of the Planning and Development Act 2000, or local area plan, in accordance with section 19(2)(a) of the Act of 2000, zoned:
   1. solely or primarily for residential use, or
   2. for a mixture of uses, including residential use
2. it is reasonable to consider may have access, or be connected, to public infrastructure and facilities, including roads and footpaths, public lighting, foul sewer drainage, surface water drainage and water supply, necessary for dwellings to be developed and with sufficient service capacity available for such development, and
3. it is reasonable to consider is not affected, in terms of its physical condition, by matters to a sufficient extent to preclude the provision of dwellings, including land likely to be required for the provision of community services (such as schools, hospitals, cafes etc), land that is contaminated or the presence of known archaeological or historic remains.

3. Local authority mapping procedure

Once the inclusion criteria for the lands are met in the eyes of the local authority, it proceeds to the mapping of those lands. Whereas the painting of the Sistine Chapel took Michelangelo just over 4 years to complete, the timeline for the mapping process (taking appeals and submissions into account) is expected to be concluded within 12 months of the publication of the first local authority draft map as it relates to each landowner.

Effectively, once the draft map is published by the local authority, the landowner has an opportunity to make submissions / appeals relating to the map, until agreement is reached on a final map. In brief, submissions to the local authority entail the landowner proposing reasoned changes to the map, accompanied by an ordinance survey map detailing those changes. We would expect that changes may include why a landowner thinks part or whole of its lands should not be included in a map, or that the date on which lands are deemed to satisfy the above criteria is considered incorrect. The process is outlined in further detail below.

5. The charge to RZLT

Once the ‘relevant site’ is ascertained on the final map, and given that the RZLT is a self-assessed tax, it is up to the landowner to obtain a value of the lands on 1 February. It is this valuation that guides the 3% RZLT.

Again, the onus lies with the landowner when it comes to registering the relevant site post-agreement of the final map. Revenue will assign a unique ID to the site, and this will be referenced in correspondence and tax returns.

The first date upon which landowners will be required to obtain a valuation for the relevant site are either of the following:

1. 1 February 2024 - For relevant sites that meet the criteria for charge to RZLT as at 1 January 2022.
2. 1 February in the third year after the criteria are met - For relevant sites that do not meet the criteria on 1 January 2022, yet meet the criteria at a later date, e.g. a site that meets the criteria on 1 November 2023 shall be liable to tax for the first time on 1 February 2026.

The valuation of the relevant site remains valid for cycles of 3 years. Therefore, the relevant site should be revalued on 1 February every 3 years following the first valuation and the tax paid accordingly based on that valuation. It is worth noting that where Revenue contend that the relevant site is undervalued, a surcharge can be applied of between 10% - 30% to the market value of the site. To this end, supporting documentation relating to the site should be retained and actually must be kept by the landowner by way of ‘proper books and records’. Failure to do so can attract a €3,000 penalty.

Upon receipt of the valuation of the relevant site, the person liable to the RZLT (being the landowner) must file an RZLT return with Revenue and pay the tax due on or before 23 May in the year in which the liability falls due. Where RZLT is not paid, it becomes a charge on the relevant site.

It is also worth being aware that RZLT cannot be deducted for the purposes of calculating a gain or loss for capital gains tax purposes or claimed as a deduction for income tax or corporation tax calculations. Where an RZLT liability and / or related late interest payment remains outstanding, this will prevent the transfer of the lands in the relevant site, by way of sale or long lease, until paid off.

6. Other key considerations

It is to be expected that there will be teething issues with the rollout of this new tax head. As is always the case, situations may arise that have not been provided for in legislation or published guidance and local authorities / Revenue will have to deal with novel scenarios on a case-by-case basis.
For example, it may transpire that lands initially deemed suitable turn out to no longer be suitable if an archaeological find is uncovered. Revenue guidance highlights that there will be individual circumstances that may arise whereby RZLT has been paid and is subsequently refunded by Revenue.
It is also acknowledged that a tax deferral may be required in certain cases e.g. while a site owner appeals against inclusion of a site on a RZLT map or requests a change in zoning, challenges to the grant of planning permission by 3rd parties or where a commencement notice is submitted and substantial development begins and is completed within the planning permission timeline.

There is no doubt that a significant degree of input will be required from all stakeholders – local authorities, Revenue, landowners, Irish Water, the NRA, amongst others. It should be remembered that this body of tax law is both new and evolving.

Landowners and stakeholders alike await the unveiling of the publication of the first RZLT maps with interest.

7. Upcoming key dates in the next 6 months

1. 1 November 2022 – Draft maps will be published on or before 1 November 2022 by the local authorities on the respective websites.

2. 1 January 2023 – Deadline for submissions to be made by relevant site owners to the local authority, relating to the draft map.

3. 11 January 2023 – Submissions published by the local authorities on their websites by 11 January 2023.

8. Action required

Landowners should consider the potential exposure of existing landbanks to the RZLT in advance of 1 November 2022 to allow time to prepare any appeals required should such land be included on the first RZLT maps published.