Relevant Contracts Tax and the oil and gas sector

04 December, 2019

Oil and gas companies undertaking explorations and exploitations in Ireland have an obligation to operate Relevant Contracts Tax “RCT”. 

Given the broad scope of RCT, it is important that companies operating in this sector are aware of when RCT should be operated, and have adequate controls and processes in place to manage RCT compliance. 

What are the common RCT pitfalls for the oil and gas sector?

Failure to operate RCT can result in costly tax settlements. In our experience, most penalties for RCT non-compliance have stemmed from a lack of knowledge of RCT and when it should apply, such as:

  • Mistaken belief that RCT doesn’t apply - oil and gas companies not recognising that RCT applies to their sector and the extent of the works caught for RCT;
  • Companies unaware of the territorial scope of RCT and that it includes any area over which Ireland has exploration/exploitation rights.
  • Procurement not being aware of RCT rules – failure to recognise that a contract is within the scope of RCT at the time that a contract is entered into;
  • Non operation of RCT on payments for the supply of labour (e.g. inter-company payments, payments to employment agencies. 

If you are a subcontractor operating in the oil and gas sector, what should you consider? 

  1. Revenue application to obtain a 0% rate. 
    Securing a 0% RCT rate means that you can receive payments gross, without deduction of RCT. 
  2. Offset RCT withheld
    Subcontractors can offset any RCT withheld on payments to them against other tax liabilities. 
  3. Register as Principal Contractor
    To the extent that you are engaging other contractors, you may have an obligation to register as a Principal Contractor and operate RCT on payments to subcontractors.

 

Contact us

Emer O'Sullivan

Director, PwC Ireland (Republic of)

Tel: +353 1 792 6695

Elaine O'Rourke

Senior Manager, PwC Ireland (Republic of)

Tel: +353 1 792 5098

Jim Kinahan

Senior Manager, PwC Ireland (Republic of)

Tel: +353 1 792 8641

Emily Bourke

Senior Manager, PwC Ireland (Republic of)

Tel: +353 1 792 6796

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