Significant changes to the RCT (Relevant Contracts Tax) System are due to be introduced on the 1st January 2012. Sub-Contractors are advised to familiarise themselves immediately with the new changes by consulting their tax advisors or by visiting www.revenue.ie. The new system will be a simplified, self service electronic system with a strong emphasis on e-billing paperless transactions. Every sub-contractor or their agents will have to register online (ROS) to avail of the new system. The main changes include different rates of withholding tax from 0% to 35% based on the relevant contractor’s tax compliance status. All payments must now be notified to Revenue by the principal contractor for approval prior to transfer. The relevant withholding tax will then be advised. There will be no C2 cards in the new system. All sub-contractors must also submit proof of identity i.e. passport or driving license to the principal contractor to comply with Revenue regulations. From the principles point of view, all contracts must be advised to revenue for approval using basic information supplied by the sub-contractor. Revenue will then contact the sub-contractor to verify the details and to advise the relevant rate of withholding tax. The principle will then notify Revenue of any proposed payment against the agreed contract figure. Revenue will then advise withholding tax, if any, and a copy is sent to the relevant sub-contractor for their records. Penalties will apply if a principal contractor makes a payment without contacting Revenue for authorisation. Any withholding tax will be credited immediately to the sub-contractors tax account and the principle will make their monthly or quarterly return as normal. Principles will be able to access the system from November 28th 2011 and transitional arrangements will be applied. Sub-contactors must register with ROS to avoid being placed in the 35% bracket. Zero rate sub-contractors must keep their tax affairs up to date to maintain that status going forward. Again, further details can be found at www.revenue.ie including FAQ’s, video tutorials, etc. from November 28th 2011.
