RCT (Relevant Contracts Tax) System
Ireland's construction industry operates under the RCT system, which affects how VAT and income tax are handled.
Principal Contractors
Main contractors hiring subcontractors for construction work. Must operate RCT deductions and submit monthly returns.
Subcontractors
Specialists providing services to main contractors. Subject to RCT deductions unless holding C2 certificate.
Material Suppliers
Suppliers of construction materials and equipment. Standard VAT rules apply, not subject to RCT system.
Construction VAT Rates & Applications
Different VAT rates apply to construction services, materials, and property types.
Construction Services VAT
Materials & Equipment VAT
Mixed Supplies: Materials + Services
Two-Third Rule Application
- • If services >2/3 of total: Apply 13.5% to entire supply
- • If materials >2/3 of total: Apply 23% to entire supply
- • If neither >2/3: Split and apply appropriate rates
- • Must keep detailed records of breakdown
Common Examples
- • Kitchen fitting: Usually 13.5% (service dominant)
- • Electrical installation: Often 13.5% (service dominant)
- • Material supply + fitting: Depends on ratio
- • Roofing with materials: Check two-third rule
RCT Compliance for Construction Businesses
Step-by-step guide to RCT registration, deductions, and monthly returns.
1. RCT Registration Requirements
Principal Contractor Registration
- • Tax Reference Number (TRN) required
- • Apply through ROS or Form RCT-R
- • Must register before first subcontractor payment
- • C1 certificate issued upon approval
Subcontractor Registration
- • Automatic registration with tax compliance
- • C2 certificate for 0% RCT rate
- • Requires good tax compliance history
- • Renewed annually if eligible
2. RCT Deduction Rates
C2 certificate holders (tax compliant)
Standard rate for registered subcontractors
Unregistered or non-compliant subcontractors
3. Monthly RCT Returns
Return Requirements
- • Due by 14th of following month
- • Submit even if no payments made (nil return)
- • Include all subcontractor payments
- • Deductions must be remitted to Revenue
Penalties for Late Returns
€1,520 penalty for late RCT returns, plus 10% surcharge on unpaid deductions.
VAT Registration for Construction Businesses
Construction businesses should register for VAT early to maximise input VAT recovery.
VAT Registration Benefits
High Input VAT Recovery
Reclaim 23% VAT on equipment, vehicles, materials purchases
Professional Credibility
VAT number essential for commercial contracts and tenders
Supplier Relationships
Access to trade suppliers offering VAT-exclusive pricing
Cash Flow Management
Monthly VAT refunds during equipment purchase phases
Typical VAT Recovery Amounts
Small Construction Business
Annual VAT recovery on equipment and materials
Medium Construction Company
Annual VAT recovery including vehicles and plant
Large Construction Enterprise
Substantial VAT recovery on major equipment purchases
Automate Construction VAT & RCT Compliance
PayVat handles the complex VAT and RCT requirements specific to Irish construction businesses.
VAT Automation
- Automatic 13.5% vs 23% VAT calculation
- Two-third rule application for mixed supplies
- Input VAT tracking for materials and equipment
- Bi-monthly VAT return generation
RCT Integration
- Subcontractor rate verification (0%, 20%, 35%)
- Monthly RCT return preparation
- Automated deduction calculations
- Deadline reminders and compliance alerts
Ready to Simplify Construction VAT & RCT Compliance?
Trusted by Irish construction businesses for automated VAT and RCT compliance.
Professional VAT and RCT compliance service