Relevant Contracts Tax (RCT) 2024
Relevant Contracts Tax (RCT) is a withholding tax that applies to certain payments by principal contractors to subcontractors in the construction, forestry and meat-processing industries.
The RCT system operates on a tiered basis, with tax rates determined by the subcontractor’s compliance with Irish tax regulations. The rates are as follows:
- 0%: Subcontractors with an up-to-date compliance record.
- 20%: Standard rate for most compliant subcontractors.
- 35%: The highest rate, usually applied to subcontractors who are either unregistered for RCT or have significant compliance issues.
All RCT compliance, filing and payments are conducted online using the Revenue Online Service (ROS).
All principal contractors are required to register to use the ROS facility. Subcontractors should also register for ROS to access details regarding their RCT transactions.
Principal contractors must notify the contract with the subcontractor to the Revenue Commissioners. Prior to making any payments to subcontractors the principal contractor must also verify the withholding tax rate to be applied to the payments. Where tax is withheld, the subcontractor can reclaim this amount from Revenue.
Some key points regarding RCT are set out below. If you require any assistance please do not hesitate to contact us.
RCT for Non-Resident Subcontractors
RCT applies to non-resident subcontractors. If the work is being carried out in Ireland, a principal contractor should deduct RCT from any payments to the subcontractor in accordance with Revenue’s instruction. This is the case even if they are also non-resident. They must provide the subcontractor with a copy of the deduction authorisation.
RCT Reclaims
Non-resident subcontractors can submit an RCT refund claim to the Revenue Commissioners at any time during the year and there is no limit to the number of refund claims that can be made provided that they have no obligation to be registered for corporation tax or income tax. If you need assistance with this process, we are here to help.
Payments without deduction of RCT
If the subcontractor has a 0% RCT rate from Revenue the principal contractor must still submit a payment notification to the Revenue Commissioners, however, they will make all payments gross to the subcontractor without deducting any RCT.
To qualify for a 0% RCT rate, the subcontractor must have an up-to-date compliance record with the Revenue. A review of the rate can be requested at any time.
Value Added Tax (VAT) reverse charge
Under RCT, the principal contractor accounts for VAT to the Revenue Commissioners directly under the reverse charge basis. It applies to subcontractors involved in the construction industry only. Non-resident subcontractors who provide construction services to principal contractors are not required to register for Irish VAT.
Further information
Should you have any queries regarding RCT and the operation of the system, please don’t hesitate to get in touch with our Tax Team.
Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.