Q&A: Property tax

The local property tax is now reality, or it will be when the Finance Bill puts into law Michael Noonan’s budgetary measures. But, in announcing the details, the Minister has raised a whole series of questions for homeowners. The tax will be levied at 0.18 per cent on the market value of the property below €1 million; while on any value above that threshold, the tax will be 0.25 per cent annually.

What properties are covered by the tax?

The tax covers all residential property in the State.

Who’s responsible for paying this tax?

The owner of the property is liable. That includes owners of properties rented out to tenants. Only if the tenant has a lease of more than 20 years or a life tenancy does responsibility pass to them.

What happens for local authority homes?

The local authority, or social housing organisation, as owner, is responsible for paying the tax, not the tenant.

Who decides the market value of the property?

The tax will work on the basis of self-assessment. However, the Minister said that Revenue wouldl issue guidance on how to value property. If homeowners prefer, they can get a valuation from a “competent valuer”. To allow for local discrepancies, the tax will work on the basis of market value taxable bands.

And when do I have to set the value?

The value is set on May 1st next. The Revenue will be in communication with all homes before then. Once set, the valuation will stay unchanged until the end of 2016.

Getting back to those taxable bands. How do they work?

The first band will cover all properties worth up to €100,000. Thereafter bands will ascend in multiples of €50,000 – ie €100,001 - €150,000, €150,001 - €200,000 and so on up to €1 million. The tax will be assessed at the mid-point in the band up to €1 million. For properties over €1 million, you are taxed at 0.18 per cent of €1 million, with the balance taxed at 0.25 per cent.

Well, I’m far short of €1 million. If my home is worth €395,000, what tax do I pay?

At €395,000, your home will fall in the €350,001-€400,000 band. The mid-point of that band is €375,000. Multiplying that figure by 0.18 per cent, you get €675. That will be your local property tax bill for a full year.

So that’s the bill I’m facing next year?

Not next year. They are only introducing the new tax in July, so for 2013 you will only pay half the annual sum – in your case, €337.

Okay, but if the house was worth, say, €1.3 million, how would you work it out?

Bands don’t apply for property valued at more than €1 million so you simply calculate 0.18 per cent of the first €1 million, which is €1,800, and then add 0.25 per cent of the balance – in this case, €300,000 – which amounts to €750. All told, the annual tax bill would be €2,550. Next year, it will be half of that.

Once I figure out the cost, how do I pay it?

The Revenue is making it very easy for homeowners to pay their bill. You can pay by direct debit, credit card, debit card and a bank single debit authority. You can also arrange to have the sum deducted at source by your employer, or the entity paying your occupational pension. Deduction at source will also work in relation to certain payments from the Department of Social Protection or the Department of Agriculture.

You may even be able to pay in cash through some service providers.

And what about any outstanding bills for the household charge?

The Revenue is not giving up on that. It will cap the 2012 charge at €130 if paid by the end of next April. After that

the bill tots up again. From July 1st, the unpaid household charge will rise to €200 and will be added to the local property tax bill.

But are we not getting rid of the household charge?

Yes, the household charge will not apply next year because it will be replaced by this new local property tax.

And what about the non-principal private residence (NPPR) charge on second homes?

This will apply in 2013 but not thereafter.

Is anyone exempt from the property tax?

People buying new, or previously unused properties between now and the end of 2016 will be exempt until the end of 2016. First-time buyers of second-hand property will also be exempt, as will houses in ghost estates, mobile homes and properties in other very limited cases.

Say I decide not to pay, what happens?

The Revenue is responsible for compliance and the proposals envisage it seeking to deduct unpaid tax at source from non-compliant taxpayers. For self-employed people, failure to pay will see the Revenue refusing to issue a tax clearance certificate.

If tax is still unpaid, a charge will be put on the property, ensuring it cannot be sold or transferred to new owners without being settled.

OK, OK . . . but what did I hear about deferring the charge?

There will be provision for voluntary deferral for owner-occupiers unable to pay. It will apply only where gross income does not exceed €15,000 for a single person

and €25,000 for a couple. People with income within €10,000 of these limits will be able to defer part of the bill. Those in mortgage distress may also be eligible for deferral. Interest on deferred sums will be at 4 per cent annually, but not compounded. The deferred amount will be a charge on the property payable ahead of any sale or transfer.

You say the charge is 0.18 per cent now. They’re going to increase that every budget, aren’t they?

They say not. The Minister has promised not to increase the national rate during the lifetime of this Government. However, from 2015, local authorities will be allowed to adjust this “national rate” by up to 15 per cent up or, more unlikely, down.

€1m+

Properties valued at over €1 million will be assessed at the actual value (no banding will apply) at 0.18 per cent on the first €1 million in value and 0.25 per cent on the portion of the value above €1 million e.g. a property valued at €1.1 million would incur tax of €1,800 on the first €1 million and €250 on the next €100,000, giving a total of €2,050