Relevant Contracts Tax (RCT) is a withholding tax that a principal contractor in construction, forestry or meat processing deducts from payments to subcontractors, at a rate of 0%, 20% or 35% that Revenue sets for each subcontractor. Everything runs through ROS: the principal notifies the contract, notifies each payment before making it, deducts what Revenue's deduction authorisation says, and pays the tax by the 23rd day after the end of the return period.
RCT applies to payments under a "relevant contract": a contract, other than an employment contract, to carry out or supply labour for relevant operations in construction, forestry or meat processing.
RCT has been fully electronic since 1 January 2012. Principals must deal with Revenue through the Revenue Online Service (ROS).
A business is a principal if it uses a subcontractor to carry out relevant operations in those sectors. Revenue's list also includes persons connected with such companies, local authorities, housing associations, Government Ministers, statutory bodies, and businesses that install or repair gas, water, electricity, railway or telecommunications works.
The main exception: construction work carried out solely on buildings or land for the business's own use, or its employees' use, does not make it a principal.
Each contract notification includes a declaration that the contract is not employment. Revenue points principals to the five-question framework from the Supreme Court's 2023 Karshan judgment. Misclassification brings PAYE, PRSI and USC arrears, interest and penalties.
A principal must register within 21 days of entering its first relevant contract, through eRegistration in ROS or myAccount, or on form TR1 (individuals) or TR2 (companies). A principal receiving construction services from subcontractors must also register for VAT, whatever its turnover. Our guide to the VAT registration threshold covers the normal tests.
Subcontractors do not file a separate RCT registration. They give the principal their name exactly as registered with Revenue, their tax reference number (TRN) and proof of identity. When the principal notifies the contract, Revenue registers them for RCT if needed and sends a confirmation letter showing their rate.
On entering the contract, the principal gives Revenue the subcontractor's TRN and name, the sector, nature and location of the work, start and end dates, and estimated value. The principal must check the subcontractor's identity first and keep the evidence.
Revenue issues a Site Identifier Number (SIN). If Revenue cannot verify the subcontractor's identity, the principal must tell them in writing, within 7 days or before paying (whichever is earlier), that 35% will be deducted.
Immediately before each payment, the principal notifies Revenue of the gross amount and payment date. Where the VAT reverse charge applies, that is the VAT-exclusive figure.
Revenue replies straight away with a deduction authorisation showing the rate and amount to deduct. Where tax is deducted, the principal must give the subcontractor a copy or its key details.
After each period, ROS shows a deduction summary of every payment notified. The principal checks and corrects it before the 23rd; if not amended, it is treated as the return. The RCT deducted is paid by the same date.
| Rate | Who it applies to | Tax on a €10,000 payment |
|---|---|---|
| 0% | Full compliance with tax payments, returns and Revenue requests throughout the previous 3 years, plus a fixed place of business and proper records | €0 |
| 20% (standard rate) | Substantial compliance over the previous 3 years; also the default for new tax registrations | €2,000 |
| 35% | Poor compliance, not registered or identity not verified; also where Revenue considers 20% will not cover the income tax due | €3,500 |
For a company to get 0%, each director and anyone controlling more than 15% of the ordinary share capital must also meet the 0% conditions.
Revenue reviews rates in periodic Bulk Rate Reviews. A subcontractor whose rate rises can see the reasons in ROS, fix the issue and run a self-review, allowing 72 hours after resolving it. A formal appeal must be made within 30 days of the determination.
| Obligation | Deadline |
|---|---|
| Register as a principal | Within 21 days of the first relevant contract |
| Contract notification | On entering the contract, before any payment notification |
| Payment notification | Immediately before each payment |
| Review or amend the deduction summary (return) | By the 23rd day after the end of the period |
| Pay RCT deducted | By the 23rd day after the end of the period |
| Tell Revenue you have stopped being a principal | By the end of the month after the month of cessation |
Revenue sets your filing frequency: section 530 TCA defines the return period as the period of one or more months that Revenue specifies in a written notice to you. A monthly filer's deduction summary covers one month and a quarterly filer's covers three. Revenue does not publish criteria for quarterly filing, so check the frequency shown in ROS and ask your accountant if you think it should change.
Since 1 January 2015, a principal that pays a subcontractor without following a deduction authorisation faces a penalty on each payment:
| Subcontractor's status | Penalty on the principal | Penalty on a €10,000 payment |
|---|---|---|
| 0% rate | 3% of the payment | €300 |
| 20% rate | 10% of the payment | €1,000 |
| 35% rate | 20% of the payment | €2,000 |
| Not known to Revenue | 35% of the payment | €3,500 |
The principal must submit an unreported payment notification, and ROS calculates the penalty and surcharge. If it is not paid, Revenue issues a Notice of Opinion, which can be disputed in the courts.
Any amount withheld without a deduction authorisation is not RCT, so the subcontractor gets no credit for it. Civil penalties can also apply for failures such as not registering or not keeping records.
Revenue automatically credits RCT deducted to the subcontractor's record, then offsets it against liabilities as they are declared:
Offsets happen no later than 7 days after the liability falls due. Subcontractors with debt warehousing or an instalment arrangement must ask for offsets through MyEnquiries.
A cash repayment is only possible after the end of the tax year, once the Form 11 or CT1 is filed, an assessment has issued and all liabilities are paid. Our guide to Form 11 and preliminary tax explains the annual cycle.
Where RCT applies to construction services supplied by a subcontractor to a principal, VAT is dealt with by reverse charge.
Construction services generally carry the 13.5% reduced rate. Revenue notes a 9% rate for construction of qualifying apartments from 26 November 2025 to 31 December 2030, and 23% for items such as scaffolding hire. VAT rates can change, so check after Budget 2027 (6 October 2026).
A building company, registered for VAT with full input credit, engages a plastering subcontractor. On 10 November 2026 the plasterer invoices €10,000 with no VAT and the reverse charge wording. Before paying on 14 November, the company submits a payment notification for €10,000.
| Step | Subcontractor on 20% | Subcontractor on 35% |
|---|---|---|
| Payment notified (VAT-exclusive) | €10,000 | €10,000 |
| RCT deducted | €10,000 x 20% = €2,000 | €10,000 x 35% = €3,500 |
| Net paid to subcontractor | €10,000 less €2,000 = €8,000 | €10,000 less €3,500 = €6,500 |
| RCT paid to Revenue (monthly filer) | €2,000 by 23 December 2026 | €3,500 by 23 December 2026 |
| Reverse charge VAT in box T1 | €10,000 x 13.5% = €1,350 | €1,350 |
| Input credit in box T2 | €1,350 | €1,350 |
| Net VAT cost to the principal | €0 | €0 |
The plasterer's €2,000 or €3,500 is credited to its Revenue record and offset against its own taxes, with any balance repayable after the year ends.
Had the company paid without a payment notification, it would face a penalty of €1,000 or €2,000. A public body principal with no VAT recovery would still account for the €1,350 but could not claim it back, so the job would cost €11,350.
We help principal contractors and subcontractors set up RCT on ROS, check deduction summaries before each 23rd, and get the VAT reverse charge entries right. Book a chat, see our tax services, or add your RCT and VAT dates to the free compliance calendar (launching soon).
There are three rates: 0% for subcontractors with an up-to-date tax compliance record, 20% for those who are substantially compliant, and 35% for poor compliance or anyone not known to Revenue. Revenue sets the rate and shows it on each deduction authorisation.
The deduction summary is the return, and both the return and the RCT deducted are due by the 23rd day after the end of the monthly or quarterly period. A late return carries a €100 surcharge.
No. Where the VAT reverse charge applies, the principal notifies Revenue of the VAT-exclusive amount and RCT is calculated on that figure.
The principal pays a penalty of 3%, 10% or 20% of the payment where the subcontractor's rate is 0%, 20% or 35%, and 35% where the subcontractor is not known to Revenue. Each payment made without operating RCT attracts its own penalty.
Not as cash. During the year Revenue offsets the credit against the subcontractor's VAT, PAYE and other liabilities, and any balance is repaid only after the year ends, once the Form 11 or CT1 is filed and all liabilities are paid.
A new tax registration gets 20% automatically because there is no three-year compliance history, though Revenue can allow 0% in suitable cases. A subcontractor without a valid tax reference number and name is deducted at 35%.
Last checked: 3 October 2026. Written by the M.A. Whately team. This guide is general information, not advice for your situation; talk to us before acting on it.
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