Relevant Contract Tax (RCT) operates in the Construction, Meat Processing and Forestry Sectors in Ireland and in accordance with Irish Tax Legislation ‘Principals’ operating in each of these sectors are obliged to operate RCT / make RCT deductions on payments being made to Contractors (i.e. subcontractors) which they engage to carry out ‘Relevant Operations’.
No RCT implications arise if no Relevant Operations are outsourced by a Principal.
The RCT deduction rates are 0%, 20% (standard rate) and 35% and the non-operation of RCT can expose a Principal to significant penalties, even if the RCT deduction rate is 0%.
The general criteria that dictates the RCT deduction rates are as follows:
O% Deduction Rate – to qualify for this rate, the Contractor concerned must be fully compliant for 3 years prior to the year in which the contracts was entered into and for the part of the current tax year that has elapsed.
20% Deduction Rate – the 20% standard RCT deduction rate applies to payments made to Contractors who are known to the Irish Tax Authorities who are not fully tax compliance at the time the payment is being made by the Principal
35% Deduction Rate – this rate applies to payments made to Contractors who are either unknown to the Irish Tax Authorities (i.e. Not registered for Irish Tax) or to contractors with a particularly poor track record of tax compliance.
The RCT system is fully online and administered through the Revenue Online System (ROS) and it obliges Principals to ‘Notify’ full details of any ‘Relevant Contracts’ entered into with Contractors immediate following the award of the contract.
Information to be provided by the Principal when notifying a contract includes:
- Name, address and tax reference number of Contractor engaged
- A full description of the service which the contractor has been engaged to provide ( additional detail is necessary for ‘labour only’ contracts)
- The overall Value of the contract
- The location at which the work is to be carried out
- The expected duration of the contract
Once the contract has been notified, ROS issues a contract reference number (to be used by thePrincipal when providing advance details of payments to be made) to the Principal as well as an Indicatory RCT deduction rate that ‘is likely’ to apply to any related payments being made. If the contractor’s reference number has been provided, he/she receives a copy of the detail provided through ROS.
However, advance online application must be made for a ‘Deduction Authorisation’ to obtain confirmation of the RCT deduction rate that applies to each individual payment as the contractors level of compliance may change (thus affecting the RCT deduction rate applicable) as the contract progresses.
It is important to appreciate that RCT obligation arise regardless of where the Principal and Contractor are based or what country or currency the related payments are made in/ from if the contract provides for the carrying out of ‘Relevant Operations’ in Ireland or within Irish Territorial Waters.
We have very significant expertise in dealing with all areas of Relevant Contracts Tax and can assist with the following:
- Advising clients on their strategy to ensure full compliance with RCT
- Analysis of specific transactions to determine any RCT related implications arising
- Review of historic periods to identify any potential RCT exposures
- Bespoke RCT training sessions for both Principals and Contractors
- Negotiations with the Irish Tax Authorities to resolve any RCT technical queries or exposures
- Advising regarding the interaction of RCT and Irish Value Added Tax (VAT)
We also provide a full range of Relevant Contracts Tax Compliance services including:
- Tax registration as a Principal or subcontractor
- Making Contract notifications on ROS
- Filing applications for ‘Deduction Authorisations’