Written answers

Tuesday, 7 March 2023

Photo of David StantonDavid Stanton (Cork East, Fine Gael)
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120. To ask the Minister for Finance further to Parliamentary Question No. 196 of 23 February 2023, if his Department is considering any changes to the range of professional services for which professional services withholding tax is operated; if professional services to which PSWT currently applies could instead be considered for the relevant contracts tax; and if he will make a statement on the matter. [11385/23]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Professional Services Withholding Tax (PSWT) is a deduction at the standard rate of income tax, currently 20%, from relevant payments made by accountable persons to specified persons in respect of certain professional services. The tax deducted is a payment on account against the specified person’s final Income Tax or Corporation Tax liability for the year, with the amount of PSWT deducted credited against the tax liability for that year. A specified person can include businesses undertaken through a company, sole trade or partnership.

Accountable persons include Government Departments, State agencies and bodies, local authorities, colleges and authorised medical insurers.

The range of professional services that come within the scope of PSWT includes, but is not limited to:

- Services of a medical, dental, pharmaceutical, optical, aural or veterinary nature.

- Services of an architectural, engineering, quantity surveying or surveying nature, and related services.

- Services of accountancy, auditing or finance and services of financial, economic, marketing, advertising or other consultancies.

- Services of a solicitor or barrister and other legal services.

- Geological services.

Relevant Contracts Tax (RCT) is a withholding tax that applies to certain payments made by principals to subcontractors in the construction, forestry and meat processing sectors. The RCT tax deducted is credited against the subcontractors Income Tax or Corporation Tax liability for that year.

The rate of deduction that is applied on payments to subcontractors can be zero, 20% or 35% and is determined by a number of factors including the tax compliance record of the subcontractor.

Where a principal contractor enters a relevant contract with a subcontractor, they are obliged to submit details of the contract to Revenue. Immediately before a principal makes a payment to a subcontractor, the principal must notify Revenue of their intention to do so. Revenue will respond with a deduction authorisation and notify the principal of the rate of deduction to be applied to the payment.

While some persons may operate as a principal for the purposes of RCT and an accountable person for PSWT, these withholding taxes in general apply to different sectors and the administrative process for each withholding tax is different. However, they both play an important role in ensuring the tax compliance of service providers and subcontractors that come within scope of each of the withholding taxes.

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