5.4. Land Zoned for Development

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If you own land which becomes zoned for construction through a local plan, then local councils have discretion to impose a tax on the subsequent first sale of this land, to reflect the increased value of the land.

The tax is levied at the rate of 10% on two thirds of the selling price of the land, less VAT payable and transaction costs. Effectively, therefore, the rate of the tax is 6.6% of the sale value.

The discretionary power of the local mairie can only be used on a general basis to all such sales by individuals, following deliberation and a decision by them to introduce the tax.

Accordingly, this tax only concerns the sale of land owned by individuals, not the activities of developers, who are taxed as part of the general system of business taxation.

There are a number of important exemptions from the tax, as follows:

• Sale by an elderly or disabled person on low income (on the same terms as capital gains tax);
• Land transferred free of charge to a family member;
• Land sold for less than three times the original purchase price;
• The sale of the land for less than €15,001;
• Sale of building annexes belonging to the owner;

If you have not owned the land for at least 15 years, then normal capital gains tax is also payable, should you decide to sell the land. The development tax above cannot be set off against liability to capital gains tax.

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