‘Vacant Homes Tax’ on residential properties
The Vacant Homes Tax (VHT) is an annual tax applicable to residential properties used as dwellings for less than 30 days within a 12-month chargeable period, introduced by the Finance Act 2022. The primary objective of this tax is to boost the housing supply by encouraging owners of vacant residential properties to make them available for rent or purchase rather than generating revenue. It applies to habitable residential properties and not to derelict or uninhabitable ones.
The first chargeable period ran from November 1, 2022, to 31 October, 2023, with a filing deadline on November 7 and tax payment due in January 2024. VHT is levied annually at three times the base Local Property Tax (LPT) rate on the value of habitable residential properties used as dwellings for less than 30 days during a chargeable period. Property owners must self-assess their VHT liability by checking the previous chargeable period and filing electronically within seven days after it ends.
The criteria for VHT are that the property must be residential and used as a dwelling for less than 30 days. "Dwelling" is interpreted as a place where a person lives temporarily or permanently, involving activities like eating, sleeping, and relaxing. It must be occupied overnight or used for normal activities to meet the 30-day threshold.
Exemptions from VHT encompass properties exempt from LPT, those subject to bona fide tenancies lasting at least 30 days in the chargeable period, and properties changing ownership during the chargeable period due to gift, sale, inheritance, or compulsory purchase. These exemptions align with the tax's aim of increasing the housing supply.
The status of a property is determined by whether it's deemed residential, and if suitable as a dwelling on November 1 of the relevant chargeable period. If the property is let to an unconnected tenant for at least 30 days at market rent and the tenancy is registered with the Residential Tenancies Board (RTB), or if the ownership changes during the chargeable period, it falls outside VHT's scope.
To be considered "vacant" for VHT, a property must not have been used as a dwelling for 30 days or more during the chargeable period. Revenue provides a Tax and Duty Manual that clarifies various aspects of VHT, including when it applies, exemptions, obligations, and how to claim them.
Property owners, investors, and developers, as well as those with occupancy rights, are advised to understand their obligations and consider compliance with VHT legislation. More information on VHT can be found in the Revenue Commissioner’s Tax and Duty Manual, available on the Revenue website: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-22b/22b-01-01.pdf.
About the author: Sinéad Leahy is a Trainee Solicitor with Dermot G. O’Donovan Solicitors.