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Taxes & Duties

IT 19 - Professional Services Withholding Tax (PSWT)

Introduction

Professional Services Withholding Tax (PSWT) applies to payments made by certain public bodies and other entities in respect of the provision of professional services. These bodies/entities are known as accountable persons and the persons to whom relevant payments are made are known as specified persons. PSWT is deducted at the standard rate of tax in force at the date on which a relevant payment is made.

PSWT is deducted from the total amount of the payment for a professional service including, in general, any amount in respect of expenses or third party costs, but excluding any VAT charged by the person providing the service.

PSWT deducted from a relevant payment is given as a credit against the gross amount of income tax or corporation tax chargeable on the specified person who provided the service. Pending PSWT being given as a credit against the tax chargeable on a specified person, provision is made for interim refunds of PSWT deducted where certain conditions are satisfied.

Accountable Persons

The following types of bodies and entities are accountable persons and are required to deduct PSWT from relevant payments made by them in respect of professional services:

  • Government Departments and Offices,
  • Local authorities, etc.
  • The Health Service Executive,
  • Authorised Health Insurers, and
  • Commercial and non-commercial semi-State bodies.

A comprehensive list of accountable persons is set out in Schedule 13 to the Taxes Consolidation Act 1997. In addition to the bodies and entities listed on Schedule 13, any subsidiary of a body/entity listed on Schedule 13 is also an accountable person for PSWT purposes.

Mandatory e-Filing

With effect from 1 January 2010, accountable persons are required to file all tax returns (including monthly and annual PSWT returns i.e. forms F30 and forms F35) by electronic means using the Revenue Online Service (ROS). All payments of tax are also required to be made by electronic means. Information relating to mandatory e-filing is available on the Revenue website at www.revenue.ie.

What professional services are subject to PSWT?

Basically, all professional services are subject to PSWT, including:

  • 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, and
  • Training services provided on behalf of FÁS.

What is the rate of PSWT?

The rate at which PSWT must be deducted from relevant payments is equal to the standard rate of income tax. This is currently 20% (November 2012).

From whom/what should PSWT be deducted?

Subject to certain exclusions (see below), PSWT must be deducted by accountable persons from all payments made to specified persons for professional services. The specified persons who provide professional services may be individuals, companies, persons operating through partnership arrangements or persons who may not ultimately have a liability to tax (e.g. non-residents).

Exclusions

The following payments are not regarded as relevant payments and PSWT should not be applied by accountable persons to them:

  • payments that are liable to tax under the PAYE system,
  • payments that come within the Relevant Contracts Tax (RCT) scheme,
  • payments that are made by one accountable person to another accountable person:
    • in re-imbursement of payments for professional services, or
    • where the income of the accountable person receiving the payment is exempt from income tax or corporation tax;
  • payments that are made to charities which have been granted an exemption from tax by the Revenue Commissioners.

Expenses, VAT, Stamp Duty and fees

When an accountable person makes a relevant payment for professional services, it is obliged to deduct PSWT from the total amount of the payment:

  • including any amount in respect of expenses or third party costs and, where relevant, in respect of late payment interest, but
  • excluding any VAT charged by the specified person providing the professional service and/or any amount in respect of Stamp Duties, Land Registry fees, Deed of Registration fees, Company Office fees or Court fees paid by the specified person to the appropriate authorities as part of the professional service.

How does a specified person get proof of PSWT deducted?

Where a specified person provides professional services to an accountable person, the specified person providing the service is obliged to provide the accountable person with:

  • in the case of an individual, his/her Personal Public Service Number (PPS No.), and
  • in the case of a company, its tax reference number.

If VAT is included in a relevant payment, the person’s VAT registration number must also be provided, if different from the PPS No. or tax reference number. Non-resident persons are required to state the tax reference that applies to them in their country of residence.

When making a relevant payment, the accountable person is required to give the specified person a Form F45 confirming the amount of the payment made and the amount of PSWT deducted. Forms F45 are valuable documents and should be carefully retained and, if requested, presented to the specified person’s Revenue office in support of a credit claim.

Where, exceptionally, the Form F45 originally issued to a specified person is lost or destroyed, the accountable person may issue a Form F43 in its place. A Form F43 may also be issued where the original F45 needs to be corrected. Requests by specified persons for Forms F43 should only be made to accountable persons in these limited circumstances.

How is PSWT credited to a taxpayer?

General

Credit for PSWT deducted, as shown on Forms F45, should be claimed by a specified person when submitting their tax return.

PSWT deducted from a relevant payment is, by virtue of section 526 of the Taxes Consolidation Act 1997, available to be set against the gross amount of income tax or corporation tax chargeable on the specified person who provided the service. It is given as a credit against the amount of income tax or corporation tax chargeable in arriving at the amount of tax payable by the specified person.

For individuals assessable to income tax, credit for PSWT deducted from a relevant payment is normally given against the amount of income tax chargeable for the tax year in which the relevant payment is chargeable to tax. (However, see Commencing Business below).

For companies assessable to corporation tax, credit for PSWT deducted from a relevant payment is given against the amount of corporation tax chargeable for the accounting period in which the relevant payment is chargeable to tax.

Commencing Business

For an individual commencing business, credit for PSWT deducted in the first year of business will not normally be given until the second tax year. This arises because the profits shown in the first 12 months’ accounts can form the basis of taxation for the first two tax years. In these circumstances, the PSWT is deemed to be deducted in the basis period for the second tax year. However, such an individual may qualify for an interim refund -see "Interim Refunds of PSWT|" below.

Preliminary Tax

Under the Pay & File system, preliminary tax in respect of a tax year or accounting period is payable by a specified person directly to the Collector General by reference to the amount of tax payable [1] by the specified person for that tax year or accounting period. However, in order to avoid interest charges, a certain minimum amount of preliminary tax must be paid for the tax year or accounting period involved. In the case of an individual liable to income tax, the amount of preliminary tax to be paid must be equal to or exceed the lower of:

  • 90% of the amount of tax payable for the tax year,
  • 100% of the amount of tax payable for the previous tax year, or
  • 105% of the amount of tax payable for the pre-preceding tax year. (This final option is only available where preliminary tax is paid to the Collector General by direct debit and does not apply where the tax payable for the pre-preceding year was nil).

As indicated earlier, PSWT can be taken into account as a credit against the amount of tax chargeable for a tax year or accounting period in computing the amount of tax payable for the year or period.

  1. Tax payable is the gross amount of tax due (i.e. amount chargeable) less any credits to which the person is entitled.

Example

An individual estimates that the amount of income tax chargeable on him or her for the tax year 2012 to be €40,000 and has PSWT of €10,000 available as a credit against the amount of income tax chargeable for that year. Therefore, the amount of income tax payable by the individual for the year 2012 is €30,000.

For the tax year 2011, the income tax chargeable on the individual was €25,000 and PSWT of €15,000 was available as a credit against the amount of income tax chargeable for that year. Therefore, the amount of income tax payable for 2011 was €10,000.

If the individual wishes to pay preliminary tax for 2012 by reference to the 90% rule, then the amount to be paid directly to the Collector General is €27,000 (i.e. €30,000 x 90%). If the individual wishes to pay preliminary tax for 2012 by reference to the 100% rule, then the amount to be paid directly to the Collector General is €10,000 (i.e. €10,000 x 100%).

Regardless of which option the individual takes, the PSWT of €10,000 that was deducted in 2012 may not be treated as a payment (or part payment) of the preliminary tax that is required to be paid directly to the Collector General.

Interim refunds of PSWT

General

A specified person may claim an interim refund of PSWT for a tax year or accounting period instead of waiting to claim it, when submitting a tax return, against the amount of tax chargeable for the year or period. Applications for interim refunds should be made to the Revenue office that deals with the tax affairs of the specified person. Application is made on Form F50 (available from the Revenue Forms " Leaflets Service at LoCall 1890 306 706 and from the Revenue website www.revenue.ie or by using the following link: pdfForm F50 - Claim for an Interim Refund (PDF, 51KB).

The following three conditions must be satisfied before an interim refund of PSWT can be made for an accounting period or tax year:

  1. The profits of the previous accounting period or of the basis period for the previous tax year must have been finalised,
  2. The tax payable for the previous accounting period or previous tax year must have been paid in full, and
  3. Forms F45 for the PSWT included in the claim must be provided to the taxpayer's Revenue office.

Example

PSWT is deducted from a relevant payment made on 1 July 2012. Accounts of the specified person are made up to 30 September each year and the relevant payment will be taken into account in computing the profits for the year to 30 September 2012.

In the case of an individual, in order to qualify for an interim refund, the profits of the basis period for the tax year 2011 (i.e. profits for the year ended 30 September 2011) must have been finalised and the tax payable for the tax year 2011 must have been paid. In the case of a company, in order to qualify for an interim refund, the profits of the accounting period ended 30 September 2011 must have been finalised and the tax payable for that period must have been paid.

From the PSWT deducted, an amount equal to the tax liability at (ii) above is retained. In addition, an amount equivalent to any outstanding VAT, PAYE or PRSI liability is retained. The balance of PSWT deducted, if any, is then available to be refunded to the specified person.

Commencing Business

A person who has recently commenced business may wish to apply for an interim refund. Because such a person would be unlikely to satisfy the three conditions outlined above, Revenue applies special treatment whereby likely tax liability of the first tax year or accounting period is estimated in calculating whether an interim refund arises.

Particular hardship

In situations where a specified person shows that there is particular hardship, an interim refund may also be claimed. In these circumstances, Revenue may waive, in whole or in part, one or more of the conditions that are normally required. Revenue will consider applications under particular hardship where, for example, amounts of PSWT deducted are substantially in excess of likely final tax liability in certain unusual or extraordinary circumstances where an interim refund would otherwise be denied.

Statement of Practice SP-IT/3/90

Statement of Practice SP-IT/3/90 relating to "Withholding Tax - Interim Refunds" should be consulted for full details relating to interim refunds, including circumstances where particular hardship applies. It is available from Revenue Forms and Leaflets Service at LoCall 1890 306 706 or from the Revenue website www.revenue.ie or by using the following link: pdfStatement of Practice No. SP-IT/3/90 "Withholding Tax - Interim Refunds" (PDF, 25KB).

Charities and Non-residents

Where a charity has been granted exemption from tax by the Revenue Commissioners, PSWT should not be deducted by an accountable person from payments made to the charity for professional services provided that confirmation of the exemption is received from the charity. Otherwise, PSWT should be deducted by the accountable person from any payments made for professional services. In circumstances where a charity is not liable to tax but PSWT has been deducted, it can claim a repayment.

Charities who wish to claim exemption from tax, or a repayment of PSWT deducted, should contact Charities Section at the address below or by e-mail to: charities@revenue.ie.

Revenue Commissioners,
Collector General's Division,
Government Offices,
Nenagh,
County. Tipperary.

LoCall 1890 666 333 (ROI only) or 00353 6763400 (outside Ireland)

PSWT should also be deducted by accountable persons from payments made to non-residents for professional services. Non-residents of the State who are not chargeable to tax in the State for the year in which PSWT is deducted may apply for a repayment to International Claims Section at the address above or by e-mail to: intclaims@revenue.ie.

Where a non-resident is chargeable to tax in the State for the period in which the PSWT is deducted, claims for credit, refund, or interim refund of PSWT should be made to the Revenue office that deals with the tax affairs of the non-resident. Non-residents are chargeable to tax in the State for the period in which the PSWT is deducted, if during that period they carry on business through a permanent establishment situated in the State.

Further Information

This leaflet is for general information only. If you need further information or clarification on any point, please refer to the more detailed pdfRevenue Guide on PSWT (Leaflet IT 61) (PDF, 2.53MB) on the Revenue website www.revenue.ie or contact your local Revenue office.

Revenue

Revised December 2012


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