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Relevant Contracts Tax

Relevant Contracts Tax. Introduction In order for the system of RCT to be applied there must be a principal contractor, a subcontractor and a relevant contract between them The principal contractor must withhold tax at 0%, 20% or 35% on payments made to a subcontractor under a relevant contract.

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Relevant Contracts Tax

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  1. Relevant Contracts Tax Introduction • In order for the system of RCT to be applied there must be a principal contractor, a subcontractor and a relevant contract between them • The principal contractor must withhold tax at 0%, 20% or 35% on payments made to a subcontractor under a relevant contract

  2. Relevant Contracts Tax Principal Contractor • A person engaged in construction • A person engaged in the meat processing industry • A person engaged in the forestry industry • A local authority or public utility society • A government minister acting in their official capacity

  3. Relevant Contracts Tax Principal Contractor • Any board established by statute • A person carrying on a business involving the development of land • Aperson who carries on any gas, water, electricity, hydraulic power, dock, canal or railway undertaking • A person carrying on repair, installation or alteration of a telecommunication system

  4. Relevant Contracts Tax Relevant Contract • A contract between a principal contractor and a subcontractor where the subcontractor; • Carries out the relevant operations, or • Is answerable for the carrying out of such operations by others, or • Acts as an employment agency in arranging the labour of others, or • Furnishes his/her labour or the labour of others in carrying out the operations

  5. Relevant Contracts Tax Operation of scheme • Principal provides Revenue with details of contract and subcontractor • Electronically • Subcontractor name and tax ref number • Value of contract • Declaration that its not a contract of employment

  6. Relevant Contracts Tax Operation of scheme • Immediately prior to a payment, the Principal must notify Revenue of the amount of payment • Revenue informs Principal of the deduction to be made • Called a deduction authorisation • Specifies rate to be applied

  7. Relevant Contracts Tax Operation of scheme • Zero rate for fully tax compliant subcontractors • 20% for substantially compliant subcontractors • 35% for all others • Revenue will maintain a record of the tax deducted and issue a quarterly statement to the subcontractor • Principal must pay tax to Revenue by 23rd of following month, along with a return

  8. Relevant Contracts Tax Operation of scheme • Principal can be liable for penalty of €5,000 plus RCT at 35% for failing to deduct tax correctly • Late filing of return is liable to interest at 0.0219% per day from 14th of month • A subcontractor subject to 35% rate can apply for repayment from Revenue and once all tax liabilities are satisfied, Revenue will repay excess

  9. Relevant Contracts Tax Operation of scheme • Otherwise, RCT is applied as a deduction against income tax for the subcontractor, much like preliminary tax

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