What is relevant contracts tax(RCT)?
A principal contractor must deduct relevant contracts tax (RCT) from payments made to an unauthorised subcontractor engaged to carry out a relevant contract, i.e., construction operations, forestry operations or meat processing operations on your behalf.
There are three rates of withholding tax:
(a) The 0% rate applies where the subcontractor meets the criteria for a subcontractors certificate (C2).
(b) The 20% rate applies to registered subcontractors who do not currently meet the criteria for a C2, but have established a reasonable compliance record.
(c) The 35% rate applies to unregistered subcontractors and subcontractors who have not established a compliance record.
A principal contractor must apply online to Revenue to find out which rate he should apply.
An unauthorised subcontractor can claim credit for RCT against his tax liability.
The new system allows RCT to be offset against other tax liabilities on a monthly basis and the subcontractor can apply for a repayment, if applicable, on an annual basis.