In construction, Relevant Contracts Tax (RCT) and the VAT reverse charge decide how you are paid and how you invoice. We keep principal contractors' RCT right, help subcontractors stay on the best RCT rate, and handle the VAT, payroll and year-end accounts around them.
Information checked 3 October 2026 against Revenue and CRO guidance.
What's included
Relevant Contracts Tax applies when a principal contractor pays a subcontractor for construction, forestry or meat processing work. The principal notifies Revenue of each contract and each payment on ROS, deducts tax at the rate Revenue gives, and pays it over. A new principal must register with Revenue within 21 days of entering its first relevant contract.
| Rate | Who it applies to | Tax on a €10,000 payment |
|---|---|---|
| 0% | Full tax compliance over the previous three years, a fixed place of business and proper records | €0 |
| 20% | Substantial compliance; also the usual rate for new registrations | €2,000 |
| 35% | Poor compliance, not registered, or identity not verified | €3,500 |
A principal that pays a subcontractor without notifying Revenue faces a penalty of 3%, 10%, 20% or 35% of the payment, depending on the subcontractor's rate. A late deduction summary carries a €100 surcharge, and late RCT costs interest of 0.0274% a day. The deduction summary and payment are due by the 23rd day after the end of each monthly or quarterly period.
| Subcontractor's status | Penalty |
|---|---|
| 0% rate | €300 |
| 20% rate | €1,000 |
| 35% rate | €2,000 |
| Not known to Revenue | €3,500 |
When a subcontractor supplies construction services to a principal, the subcontractor invoices without VAT and the principal accounts for it. The principal includes the VAT on its return as VAT on sales and, if entitled, reclaims the same amount, so the net cost is usually nil.
Worked example
A subcontractor on the 20% RCT rate invoices €10,000. The principal deducts RCT of €2,000, pays the subcontractor €8,000 and pays the €2,000 to Revenue. On its VAT return the principal shows reverse charge VAT of €1,350 (13.5%) on sales and claims €1,350 back, a net VAT cost of €0. The subcontractor claims the €2,000 RCT as a credit against its own tax.
The principal reviews the deduction summary and pays the RCT deducted by the 23rd day after the end of each monthly or quarterly period.
Source: Revenue: RCT for principal contractors, checked 3 October 2026.
Revenue gives 0% where the subcontractor has been fully compliant with tax payments, returns and Revenue requests for the previous three years, has a fixed place of business and keeps proper records. Revenue reviews the rate regularly, so staying up to date matters.
Source: Revenue: RCT for subcontractors, checked 3 October 2026.
No. RCT applies to payments by principal contractors, such as builders, developers and certain public bodies, to subcontractors. A private individual paying for work on their own home is not a principal contractor.
Source: Revenue: RCT for principal contractors, checked 3 October 2026.
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