Cian O'Callaghan (Dublin Bay North, Social Democrats)
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73. To ask the Minister for Finance if he will ensure that owners of vacant commercial property are not able to write off their commercial rates obligations as business expenses; and if he will make a statement on the matter. [16241/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by the Department of Housing, Local Government and Heritage that Local authorities are under a statutory obligation to levy rates on any property used for commercial purposes in accordance with the details entered in the valuation lists prepared by Tailte Éireann under the Valuation Acts 2001 to 2020.

Rates income is a very important contribution to the cost of services provided by local authorities such as roads, footpaths, the public realm, litter management, public lighting, development control, parks and open spaces; all essential elements to create the environment in which businesses can prosper. Local authorities are fully aware of the challenges facing many ratepayers and work with ratepayers to agree flexible payment options that reflect capacity to pay.

The Local Government Rates and Other Matters Act 2019 Act contains provisions to add to the suite of options already available to local authorities to support local businesses and ratepayers. These include a new rates vacancy abatement, to be decided by local authority members. The vacancy abatement scheme allows the local authority scope for targeted policies in respect of vacant commercial properties. Consideration can be given to the prevailing local economic environment and prevalence of commercial vacancy. Vacancy abatement schemes may be tailored to particular towns, zones within towns, types, or categories of vacant property or circumstances of the vacant property ratepayer.

As outlined to the Deputy in reply to Parliamentary Question No. 338 on 22 January last (1207/25), I am also advised by Revenue that, as a general rule, commercial rates are deductible for tax purposes. In accordance with section 4(4)(a) Local Government Rates and Other Matters Act 2019 as amended by section 263 Historic and Archaeological Heritage and Miscellaneous Provisions Act 2023, the “liable person” for commercial rates is usually the occupier of the premises. In circumstances where a commercial unit is vacant, it is most likely the owner of the property will be the liable person as the person entitled to occupy the property.

Section 97(2)(b) Taxes Consolidation Act 1997 (TCA) permits a deduction from rental income for rates levied by local authorities. However, if a property has been vacant for a lengthy period, the “uneconomic rent” provision in section 75(4) TCA may apply. An “uneconomic rent” is one where the lessor’s obligations and insurance, maintenance, management and repairs expenses consistently exceed the rent derived from the property. If the rent from a vacant commercial property is categorised as an “uneconomic rent”, sections 75, 97 and 384 TCA are disapplied, which means deductions for expenses, including rates, cannot be claimed, and losses from that property cannot be set against profits from other properties, and cannot be carried forward. Further information relating to “uneconomic rents” is available in paragraph 3 of Tax and Duty Manual 04-08-14: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-08-14.pdf .

In cases where there isn’t a long-term vacancy, in general, expenses incurred (including rates) between lettings may be deducted provided the property was not occupied by the landlord following the termination of the letting, and is subsequently let again by the same landlord.

When rates are levied on a person carrying on a trade or profession, the rates are deductible where they represent a cost to the business and are incurred wholly and exclusively for the purposes of the trade or profession. It is possible, depending on the particular facts and circumstances, that rates incurred in relation to a vacant commercial unit could be regarded as being incurred wholly and exclusively for the purposes of the trade or profession. This will be the case, for example, where the commercial unit is vacant for a temporary period pending a ramping up of activities. This deduction is available in accordance with section 81 TCA, which sets out the general rules for deductions for the computation of profits or gains arising in respect of trades and professions.

At present there are no plans to change the policy in relation to the deductibility of commercial rates for tax purposes in the case of vacant properties.