Revenue Note for Guidance
Chapter 1 of Part 18 provides for the deduction at source of tax at the standard rate of income tax from payments for “professional services” made to individuals and companies by Government Departments, local authorities, the Health Service Executive, commercial and non-commercial State bodies, etc. The withholding tax applies generally to fees and similar payments made by accountable persons but not to payments already covered by PAYE (Chapter 4 of Part 42), the subcontractors tax deduction scheme (Chapter 2 of this Part) or to payments by one accountable person to another accountable person in reimbursement of relevant payments. Payments to certain exempt accountable persons and charities are also included.
“professional services” covers a wide range of services including medical services, architectural and engineering services, financial services, legal services and geological services.
Non-residents come within the ambit of the scheme, but they are entitled to receive a full refund if the income, which has suffered the tax, is not chargeable to Irish tax.
Although tax has been withheld at source from professional fees, any fees represented by the payments must be taken into account in calculating the profits or gains of the recipient for tax purposes. The tax deducted, however, is available for set-off against the tax chargeable on those profits or gains and any excess of amounts deducted over the determined tax liability may be refunded to the taxpayer.
Provision is also included for interim refunds in certain cases (including cases of particular hardship).
This section is concerned with the definitions and construction of certain terms for the purposes of the Chapter.
(1) Some of the key definitions contained in this section are:
“appropriate tax” is the amount of tax which must be deducted by an accountable person from a relevant payment. The amount deducted is an amount represented by applying the standard rate of income tax in force at the date of payment to the VAT exclusive amount of the payment.
“basis period of assessment” in relation to a specified person (that is, a person in receipt of a payment to which this Chapter applies) means —
Where 2 basis period overlap, then subject to subsection (3) the period common to both is treated as falling into the second basis period. Where there is an interval between the end of the basis period for one year of assessment and the basis period for the next year of assessment, the interval is deemed to be part of the second basis period.
The reference to the overlapping of 2 basis periods covers the situation where 2 periods coincide or where one period is included in another. The reference to the period common to both is to be construed on this basis.
“partnership trade or profession” is defined as a trade or profession carried on by two or more persons in partnership.
The term “professional services” includes —
“relevant medical expenses” are expenses incurred in respect of services provided by a practitioner which are, or may be, the subject of a claim under a contract of insurance other than expenses —
“relevant payment” is —
Excluded are —
“specified person” is the recipient of the relevant payment. In the case of a partnership which is in receipt of a relevant payment, each individual partner is a specified person.
(2)(a) The amount of a relevant payment, which is subject to a deduction of tax, is the amount of the payment before the tax is deducted.
(2)(b) The appropriate tax referable to an accounting period or a basis period for a year of assessment is the appropriate tax deducted from all relevant payments which are taken into account in computing the specified individual’s profits or gains for that period.
(3) As a transitional arrangement to deal with the change to the calendar year basis of assessment from 2002, where a 12 month period ending between 1 January 2002 and 5 April 2002 is the basis period for both the short tax “year” 2001 and the tax year 2002, the period in question will be treated for Professional Services Withholding Tax (PSWT) purposes, as the basis period for the short tax “year” 2001 only. This ensures that the taxpayer will get credit for PSWT deducted in that 12 month period against income tax payable for the short tax “year” 2001. The credit is not deferred to the tax year 2002.
Relevant Date: Finance Act 2019