Written answers

Tuesday, 15 November 2016

Department of Finance

Public Procurement Contracts

Photo of Brendan SmithBrendan Smith (Cavan-Monaghan, Fianna Fail)
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192. To ask the Minister for Finance if his attention has been drawn to the increasing concerns of contractors within the construction sector in relation to the procurement of public contracts due to unfair competition from contractors, particularly from Northern Ireland, which have a lower cost base and continue to gain further advantage with the procurement of building materials and labour in Northern Ireland due to the weakness of sterling; if contractors, regardless of their base, are obliged to pay the statutory labour rates here along with other statutory taxes and levies; and if he will make a statement on the matter. [35190/16]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I would like to assure the Deputy that I am aware of the ongoing issues in the construction sector including the challenges faced by contractors. However, as regards procurement, under EU law, public contracts above certain values must be advertised EU-wide and awarded to the most competitive tender in an open and transparent process. The aim is to promote an open, competitive and non-discriminatory public procurement regime which delivers value for money. It would be a breach of the rules for a public body to favour or discriminate against particular candidates on grounds of location or nationality and there are legal remedies which may be used against any public bodies for infringing these rules.

With regards to statutory labour rates, all workers posted to Ireland from another EU Member State have the protection of all Irish employment rights legislation in the same way as employees who have an Irish contract of employment.  Therefore, once it is clear that a person is working in the State under a contract of employment, on a full-time or part-time basis, that person is entitled to be paid the statutory wage rate applicable under Irish law.

I am advised by the Revenue Commissioners that non-resident contractors are obliged to register for and pay relevant taxes for activities carried out in the State. This includes, Relevant Contracts Tax, Value Added Tax, Employers PAYE and depending on the circumstances income tax or corporation tax.

Relevant Contracts Tax

Relevant Contract Tax (RCT) applies to payments to subcontractors on construction, meat processing and forestry operations carried out within the State. Relevant contracts must first be registered on Revenue's eRCT system and principals must subsequently notify Revenue of all payments to subcontractors made on relevant contracts via Revenue's e-RCT system.

RCT applies irrespective of whether the Principal or subcontractor or both are resident outside the State. If the work is being carried out in the State, RCT must be operated.

VAT

All non-resident principal contractors (individuals, partnerships and companies) who are engaged in Relevant Contracts in the construction industry in the State must register for VAT and account for VAT under the VAT reverse charge rule.

Employers PAYE

All employers, including non-resident employers, must register for PAYE as an employer and operate PAYE/PRSI/USC in respect of income attributable to the performance in the State of an employment.

Income Tax/Corporation Tax

A non-resident contractor which has a permanent establishment which lasts for more than 6 months is liable for income Tax if a sole trader or corporation Tax if a company, on the profits arising from the Permanent Establishment.

Under Ireland's Double Taxation Agreements the term "Permanent Establishment" expressly includes a building site or construction or installation project.

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