RCT Ireland: Relevant Contracts Tax Explained for Contractors

Relevant Contracts Tax (RCT) is a Revenue withholding tax on payments between principal contractors and subcontractors in construction, forestry and meat processing. If your business hires subcontractors in one of these sectors, or is paid as a subcontractor by one, RCT isn't optional paperwork — get it wrong as a principal contractor and Revenue can charge you the tax that should have been withheld, plus penalties, even if you never deducted a cent.

What is RCT and who does it apply to

RCT applies to "relevant contracts" — construction operations, forestry operations (thinning, felling, planting), and meat processing. It covers everything from a sole-trader electrician subcontracting on a house build to a large civil engineering firm working under a main contractor.

Two roles exist under RCT: the principal contractor, who engages subcontractors and is responsible for operating the deduction, and the subcontractor, who is paid net of any RCT withheld. Many businesses are both on different jobs — a firm can be a principal on one contract and a subcontractor on another.

The three-step eRCT process

RCT is administered entirely through Revenue's eRCT system on ROS (Revenue Online Service) — there is no paper option. Every relevant contract goes through the same three steps:

Contract notification — before work starts, the principal contractor registers the contract and the subcontractor's details with Revenue via eRCT
Payment notification — before making any payment, the principal notifies Revenue of the gross amount due; Revenue responds with a Deduction Authorisation stating the rate to apply
Payment and remittance — the principal pays the subcontractor net of the deduction (if any) and remits the withheld tax to Revenue; the subcontractor receives a copy of the Deduction Authorisation as proof

Deduction rates

Revenue sets the deduction rate for each subcontractor individually, based on their tax compliance history — not a flat rate applied to everyone:

Rate	Who it applies to
0%	Subcontractors registered for RCT with an up-to-date tax compliance record
20%	Subcontractors registered for RCT but with a less established or imperfect compliance record
35%	Subcontractors not registered for RCT, or with a poor compliance record

Penalties fall mainly on the principal contractor

The financial risk under RCT sits mostly with the principal contractor, not the subcontractor. If a principal pays a subcontractor without going through eRCT — or skips the payment notification step — Revenue can raise the principal for the tax that should have been withheld, calculated at 35% of the payment, regardless of what the subcontractor actually owed. This exposure exists even where the subcontractor has since paid their own tax in full; failing to operate RCT correctly is treated as a separate liability for the principal.

Making a payment before receiving a Deduction Authorisation from Revenue
Applying the wrong deduction rate to a payment
Failing to remit deducted RCT to Revenue on time
Treating a contract as outside RCT's scope when it falls within construction, forestry or meat processing

RCT and tax clearance for public sector contracts

RCT compliance feeds directly into your standing for public sector tenders. A poor RCT history — late payment notifications, deductions not remitted on time — pushes a subcontractor toward the higher deduction rates and can affect eligibility for a tax clearance certificate, which most State bodies (and many private principal contractors) require before awarding or continuing a contract. If public sector or Peppol-invoiced government work is part of your business, staying current with RCT is a commercial requirement as much as a legal one.