Updated September 2026 · 9 min read
General information for Irish trade businesses, not tax advice. Confirm anything that affects your business with your accountant or Revenue.
Quick answer: RCT stands for Relevant Contracts Tax. It is the system where the business paying you holds back part of your money and sends it straight to Revenue against your tax bill. Revenue describes it as a withholding tax on certain payments by principal contractors to subcontractors in construction, forestry and meat processing. The rates are 0%, 20% and 35%, Revenue sets which one applies to you, and none of it is money you have lost: it is credit against tax you owe. Separately, and this is the part that catches people, those same construction jobs are usually reverse charge for VAT, which means you do not charge VAT on the invoice at all and the main contractor accounts for it instead.
Verified against Revenue's published guidance, September 2026.
What RCT actually is
In Revenue's own words, "RCT is a withholding tax that applies to certain payments by principal contractors to subcontractors in the construction, forestry and meat-processing industries."
Two things follow from that sentence, and both get misunderstood regularly.
It is a withholding tax, not an extra tax. Nothing is taken from you that you would not otherwise owe. The deduction is a payment on account against your own tax bill, and it comes back to you as a credit. A business treating RCT as money lost is mis-reading its own accounts.
It is about payments under a relevant contract, not about you as a person. RCT applying to a job says nothing about whether you are self-employed or employed. That is a separate question with its own tests, and if there is genuine doubt about it on a particular arrangement, it is one for your accountant before it becomes one for Revenue.
The three rates
Revenue states plainly that "The rates of tax are 0%, 20% and 35%."
The rate is set by Revenue, not by the contractor paying you, and it follows your compliance position. Revenue's overview page states the rates without setting out the criteria for each, so if you want to know why you are on the rate you are on, that is a question for Revenue or your accountant rather than something to infer.
What is worth knowing is the direction of travel: outstanding returns push you the wrong way. Our guide to the RTD, the annual VAT breakdown every VAT-registered business in Ireland has to file, covers one example of that, because an outstanding annual return is the kind of thing that affects an RCT-registered case's deduction rate. If you subcontract, a filing you keep putting off is a direct hit to your cash flow, not just a compliance risk.
Who is a principal contractor
This is the part most trades get wrong about themselves.
Being a principal contractor is not a size thing or a status thing. If you take on a job and then subcontract part of it to somebody else, you are the principal contractor for that arrangement, with the obligations that come with it. A two-person operation that puts a day's groundwork out to another crew has just become a principal for that contract.
All of it runs through Revenue's own systems. Revenue is explicit that "All RCT compliance, filing and payments, is conducted online using the Revenue Online Service (ROS)." There is no paper route and no way to do it through your job software, ours included.
The VAT side, which is a separate thing
RCT and VAT get tangled together constantly, because they land on the same jobs and arrive in the same conversation. They are different systems.
Where you supply construction services to a principal contractor, the VAT reverse charge applies. Revenue's rule covers "construction services that are supplied to a principal contractor by a sub-contractor, whether or not the sub-contractor is established in the State", and the principal contractor accounts for the VAT rather than you.
In practice that means the invoice goes out with no VAT charged on it. Not zero-rated, not exempt, and not VAT you collect and pass on. You simply do not charge it, and the main contractor accounts for it on their own return.
That distinction matters more than it sounds. A reverse-charge sale and a genuinely zero-rated sale look identical on most systems, because they share a rate and they share a legal category. They are not the same thing, and they are not meant to sit in the same place on your VAT return.
How this meets the two-thirds rule
If you have read our piece on Revenue's two-thirds rule, the test that can move an entire job from one VAT rate to another based on what the materials cost you, here is how the two fit together.
They do not. Revenue lists "Construction services where principal contractors account for VAT on the receipt of construction services from sub-contractors" among the services that are not subject to the two-thirds rule. There is no rate for the test to change, because you are not applying a VAT rate on that invoice in the first place.
The catch is that a subcontractor can be doing reverse-charge work for a principal and ordinary VAT-able work for householders in the same week. The two-thirds rule is live on the second kind and irrelevant on the first, and telling them apart is a question about the contract rather than about the numbers.
Where JobFlow fits
We build JobFlow, Irish job management software, so read this knowing that.
You can mark a customer or a partner as a principal contractor, and mark a job's invoice as RCT work with its site identifier, so the paperwork carries what it needs to carry. The useful part is what happens underneath: the supply is recorded as reverse charge rather than as a zero-rated sale, so the two stay apart on your VAT reporting instead of being quietly filed as the same thing. That is a real distinction that most systems lose, for the reason given above.
Reverse-charge jobs also switch off the two-thirds warning, because the rule does not apply to them and a warning about a rule that is set aside is worse than no warning.
What JobFlow does not do
Being straight about the edges, because this is where an article like this usually oversells.
It does not file anything with Revenue. There is no ROS connection, so contract notifications, payment notifications and your returns are all done by you or your accountant in ROS, exactly as before.
It does not set or calculate your deduction rate. Revenue sets that.
And it does not decide whether a particular job is a relevant construction service, or whether the reverse charge applies to it. That is a judgement about the contract you signed, and no software can make it for you. What it can do is make sure that once you know the answer, the records behind it are right.
The honest summary
RCT is not complicated to understand. It is a withholding tax with three rates, run through ROS, and the money comes back to you as credit. What makes it painful is that it arrives bundled with a VAT rule that works differently from every other job you do, on the same invoices, in the same week.
Get the two separated in your head, keep your returns filed so you stay on the better rate, and let your accountant make the judgement calls about which contracts are in scope. That is most of it.
FAQ
What is RCT?
Revenue's own description is that RCT is a withholding tax that applies to certain payments by principal contractors to subcontractors in the construction, forestry and meat-processing industries. In plain terms, the business paying you holds back a slice of your money and sends it to Revenue against your tax bill, rather than paying you the full amount.
What are the RCT deduction rates?
Revenue states the rates of tax are 0%, 20% and 35%. Which one applies to you depends on your compliance position, and it is Revenue that sets it rather than the contractor paying you. Keeping your returns filed is what keeps you on the lower end.
Does RCT mean I am an employee of the main contractor?
No. RCT is a withholding tax on payments under a relevant contract, not a judgement that you are employed. Whether someone is genuinely self-employed or actually an employee is a separate question with its own tests, and it is one for your accountant if there is any doubt.
Do I charge VAT to a principal contractor?
Not on construction services covered by the reverse charge. Revenue's rule covers construction services supplied to a principal contractor by a sub-contractor, whether or not the sub-contractor is established in the State, and the principal contractor accounts for the VAT instead of you. So that invoice goes out with no VAT charged on it.
Does the two-thirds rule apply to my reverse-charge jobs?
No. Revenue lists construction services where principal contractors account for VAT on the receipt of construction services from sub-contractors among the services that are not subject to the two-thirds rule. There is no rate for the test to change, because you are not applying a VAT rate on that invoice at all.
Sources
- Revenue, "Relevant Contracts Tax (RCT)". The definition of RCT and the sectors it covers, the 0%, 20% and 35% rates, and that all RCT compliance, filing and payments is conducted online through ROS.
- Revenue, "What is reverse charge (self-accounting)?". That construction services supplied to a principal contractor by a sub-contractor are subject to the reverse charge, whether or not the sub-contractor is established in the State, and that the recipient accounts for the VAT.
- Revenue, "Two-thirds rule". The list of services not subject to the two-thirds rule, including construction services where principal contractors account for VAT on the receipt of construction services from sub-contractors.
This is general information, not tax or legal advice. RCT and VAT rules change, and your own circumstances matter. Confirm your position with your accountant or with Revenue directly at revenue.ie.