Relevant Contracts Tax (RCT) is a withholding tax that applies to payments made by a principal contractor to a subcontractor in the construction, forestry and meat processing industries. The legislation obliges the principal contractor to retain 0%, 20% or 35% of the amount payable to contractors/sub-contractors engaged to carry out relevant operations in Ireland. It applies to both resident and non-resident contractors.
The deduction rate applicable to each subcontractor is determined by their own tax compliance history and status. They may receive payments with 0% RCT deducted, provided they keep their tax affairs up to date. The standard 20% rate is applied to subcontractors registering with Revenue for the first time. The 35% rate will apply to all other subcontractors who are either not registered with Revenue for RCT or may have serious tax compliance issues to be addressed.
RCT is a complicated tax that affects a surprising number of individuals and businesses including public and not-for-profit organisations. Failure to comply with the RCT regulations can be very expensive. Revenue recently introduced a new RCT penalty regime which applies from 1 January 2015. Under the new regime, where a principal contractor makes a payment to a subcontractor without the required deduction authorisation from Revenue, a penalty of 3% to 35% will apply. The rate depends on the tax status of the subcontractor.
Although RCT places a heavy burden on business it can be managed relatively smoothly with the proper administration. Our tax specialists look after all administrative issues regarding RCT. We provide effective advice, answer your RCT questions and keep you informed on developments in legislation.
- RCT compliance advice and support
- RCT systems and process reviews
- Advice and support on Revenue audits
- Operation of eRCT