Relevant Contracts Tax (RCT) for non-Irish contractors

What is RCT?

RCT (Relevant Contracts Tax) is a withholding tax that applies within the construction industry where payments are made by a principal contractor to a subcontractor. It obliges the principal contractor to retain tax from the amount payable to contractors/sub-contractors engaged to carry out relevant operations. RCT applies to non-Irish resident contractors as well as Irish resident contractors. A principal contractor may include property developers, building companies and all associated building trades, as well as individuals who are connected with these businesses.

RCT does not apply where work is carried out directly for a customer not involved in the construction industry.

In what circumstances does RCT apply?

RCT applies to construction activity. It also applies where there is an installation element in addition to the supply of materials. An example would be a company supplying electrical equipment where they also install the equipment onsite in Ireland. It is primarily used in construction, forestry, and meat processing sectors to ensure contractors and subcontractors comply with tax obligations.

What is the rate of RCT?

There are 3 deduction rates for RCT.

• 0% Rate – For fully tax-compliant subcontractors.

• 20% Rate – For registered subcontractors who meet basic compliance requirements.

• 35% Rate – For unregistered or non-compliant subcontractors.

Generally speaking, a non-resident business will be subject to either a 20% or 35% deduction rate.

How does RCT operate?

RCT (Relevant Contracts Tax) is the responsibility of the principal contractor. They are obliged to notify Revenue of any relevant contract including details of the sub-contractor, where the work will take place and the estimated contract value. Revenue will then provide an indicative rate of RCT to be applied. The principal contractor deducts RCT and submits it to Revenue. Subcontractors then receive a deduction summary.

Each time a payment is to be made for work done, the principal contractor is obliged to log that payment in ROS (Revenue Online System) in real-time. Revenue will notify the principal contractor what rate of RCT should be applied.

End-of-Year Reporting – Subcontractors can offset RCT deductions against their final tax liability or claim a refund if overpaid.

How might RCT impact my business?

If you are a subcontractor carrying out short-term work in Ireland, the principal contractor will make a deduction of RCT upon payment to you. It is possible to seek a refund of this deduction from Revenue during the year. Your business will need an Irish tax number to facilitate the reclaim of RCT. 

If you are a non-resident business and you engage others to carry out construction or installation work in the Republic of Ireland, you may be classified as a principal contractor. If you are, you must apply RCT to payments made to subcontractors. It is important to note that you may also have an obligation to register for VAT.

Who is considered a principal contractor in the construction industry?

A business involved in the construction industry that engages other businesses to carry out construction related activities on its behalf.

How Can Non-Resident Contractors Register for RCT?

To operate legally in Ireland under RCT our team can advise on whether RCT applies to you along with advising and assisting both Principals and subcontractors with all aspects of RCT including compliance and processes required.

The  team can also assist with completing the RCT registration and obtaining the best RCT deduction rate. 

Do I need to consider VAT on RCT?

If you are a sub-contractor, VAT is not charged on RCT-relevant services. Instead, the principal contractor is obliged to self-account for the VAT on the service.

If you are a principal contractor, you are obliged to register for and apply VAT in Ireland. Where you carry out construction work for a party that is not a principal contractor, you are obliged to charge Irish VAT on that service. For example, a German company supplies and installs a modular home for an Irish individual who will live in that home.

What if I incur VAT in Ireland, am I entitled to register for and reclaim VAT?

If you are an EU business, it is possible to lodge an EVR claim through your home jurisdiction to reclaim VAT incurred in Ireland. Otherwise, it is possible to register for and reclaim VAT directly from Irish Revenue.

How can Nathan Trust help?

We can assist you with:

• Obtaining a tax number in Ireland.

• Reducing your RCT deduction rate from 35% to 20%. In time, it may be possible to reduce this to 0% but this is unlikely in the short term.

• Lodging reclaims for RCT deducted.

• Registering for VAT, if necessary, and filing VAT returns on your behalf.