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.Sub-Contractors Tax 

- A Guide 

Introduction                          What is a C2?

What happens if I do not have a C2?

Is that the end of my tax obligations?

How do I qualify for a C2?     How do I get a C2?

Tax Refunds/Credits             Further advice & forms

Introduction

If you are a sub-contractor in the construction, forestry or meat processing industries in Ireland, Relevant Contracts Tax (RCT) applies to you.

RCT is a tax deduction system where principal contractors deduct tax at 35% from payments to sub-contractors who do not have a “certificate of authorisation” (C2), and for whom they have not received a relevant payments card.

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What is a C2?

A C2 is a certificate issued by the tax office to a sub-contractor. A C2 allows a principal contractor to apply to the tax office for a relevant payments card (RCT47) for you.

Once the principal contractor has this card, they can then pay you, without deducting tax from payments to you.

The C2 is a personalised card similar to a credit card. It has a full-face photo and signature of the sub-contractor or nominated user.

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What happens if I do not have a C2?

If you do not have a C2, the principal contractor will not be able to obtain a relevant payments card for you.

They must then deduct tax at 35% on all payments made to you.

Tax is deducted on the gross payment, which includes VAT.

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Is that the end of my tax obligations?

Where tax is deducted by a principal contractor it is only a payment on account. The tax deducted may be more than you are due to pay or it may be too little. If too much tax is deducted you should contact the tax office for a refund or to have the tax credited against tax owing. If too little is deducted you should contact the tax office and pay the balance.

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How do I qualify for a C2?

To be entitled to a C2 you must:

This means that all taxes due must be paid up to date and all tax forms completed. The tax office generally examines the previous 3 tax years.

If they have been tax-resident in another country in the past three years, you will need to obtain a certificate from the Revenue Authorities in that country, confirming that they have complied with the tax laws of that country.

If you are applying as a partnership the tax history of the partnership and of each individual partner is examined.

If the application is made by a company the tax history of the company and of each director/person associated with the company is examined.

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How do I get a C2?

You apply for a C2 by:

Your first C2 is valid from date of issue to the following 31^st December. A C2 is generally renewed every year, assuming the holder’s tax affairs are kept up to date.

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Tax Refunds/Credits

How do I get credit for tax deducted?

When you get a payment from a principal contractor, from which tax at 35% has been deducted, you will also get a completed RCT Deduction Certificate (Form RCTDC).

To claim a refund of tax deducted, all you need to do is to sign the Deduction Certificate and send it to your local tax office.

If you owe any tax in your own right (e.g. Income Tax, PAYE/PRSI, VAT), these will first be offset against the amount deducted.

Where you do not have any outstanding tax liability, the tax deducted will normally be refunded to you.

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Further advice & forms

McGibney & Company, Chartered Accountants, can advise you on any aspect of these regulations, and provide you with copies all forms you require. We will be delighted to assist you.