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RCT only applies to payments made by a principal contractor to a subcontractor under a relevant contract (this is a contract to carry out, or supply labour for the performance of relevant operations in the construction, forestry or meat processing industry).


A list of construction operations that are subject to RCT is available here.

The RCT system is a withholding tax system where a Principal Contractor deducts tax from payments made to a subcontractor, unless the principal has been informed otherwise by Revenue.

All principal contractors in the construction, forestry and meat processing sectors are obliged to engage electronically with Revenue and must:

  1. Notify Revenue of all contracts online
  2. Notify payments online
  3. Provide a copy or details of the Deduction Authorisation to the Subcontractor
  4. Submit monthly/quarterly returns online
  5. Make payments of RCT deducted

Are you a Principal Contractor

A principal contractor in the construction, forestry and meat processing industry is a person who takes on a subcontractor and who:

  • Carries on a business which includes the erection of buildings or the development of land or the manufacture, treatment or extraction of materials for use, whether used or not, in construction;
  • Carries on a business of meat processing;
  • Carries on a business of forestry activities which includes the processing of wood from thinned or felled trees in sawmills or the supply of thinned or felled trees for such processing;
  • Is connected with a company which carries on any of the above businesses;
  • Is a subcontractor who subcontracts all or part of the contract to a subcontractor;
  • Is a local authority or a public utility company;
  • Carries on any gas, water, electricity, hydraulic power, dock, canal or railway undertaking;
  • Certain other Government bodies.
Status of workers engaged by Contractors

When you engage a worker to perform relevant operations, you must first determine whether the worker is a subcontractor or an employee.

Revenue guidance link to employment determination.

Reverse charge Mechanism

The charge the sub-contractor makes to a principal contractor does not include VAT. Instead the principal contractor calculates the VAT on the amount charged by the sub-contractor and pays the VAT directly to the Revenue Commissioners through his VAT return.

Key features of the electronic system include the elimination of the need for C2 certificates, annual returns (RCT35) and other forms, and the introduction of three rates of tax (0%, 20% and 35%) to replace the old C2 exemption and 35% tax rate. Revenue now has the facility to adjust the tax rate of a subcontractor and monitor transactions made by principals to subcontractors almost in real time.

The principal accounts for the VAT on services received from a sub-contractor under what is known as the reverse charge.

  • The charge for services by the sub-contractor does not include VAT on the services.
  • The VAT registered sub-contractor issues an invoice to the principal, which shows all the same information as appears on a VAT invoice, except the VAT rate and VAT amount. The invoice should include the VAT registration number of the sub-contractor.
  • The invoice should also contain the statement "VAT on this supply to be accounted for by the Principal Contractor"
  • The principal contractor pays the sub-contractor for the services. This payment should not include VAT.
  • If RCT is to be deducted, it should be calculated on the VAT-exclusive amount.
  • The principal contractor should include the VAT on the services received from the sub-contractor in his/her VAT return for the period in which the supply is made as VAT on Sales (T1).
  • Where entitled to do so, the principal can claim a simultaneous input credit in his VAT return for the period.

Full details on Revenue site

See also our Blog for further details:


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