Key recommendations on Ireland's eWHT modernisation

Deloitte has responded to the Department of Finance and Revenue joint public consultation on the modernisation of withholding taxes and a new electronic Withholding Tax system, or "eWHT".

Overview

Ireland's proposed eWHT system would represent a significant modernisation of Relevant Contracts Tax (RCT) and Professional Services Withholding Tax (PSWT). The system also proposes extending withholding tax to platform operators.

5 key recommendations and comments on the eWHT proposal

1. Real-time integration could transform compliance

The proposed eWHT system would embed withholding tax directly into business payment systems via APIs - similar to PAYE modernisation. This approach could eliminate manual calculations and reduce errors, creating seamless connectivity between payment processing and tax reporting. This should deliver greater accuracy and potentially fewer Revenue queries for service providers.

2. Personalised Deduction Rates (PDR) could improve cash flow

Individual service providers could benefit from PDR which would replace blanket withholding rates (20-35%) with personalised rates reflecting actual tax liability. This could address a critical pain point: current withholding often exceeds actual tax owed, creating cash flow challenges. PDR could improve financial predictability and reduce year-end reconciliation complexity. We welcome further details on the PDR as well as the proposed new flat rate for companies and partnerships. 

3. Platform operators would face new compliance burdens

While DAC7 already requires digital reporting by platform operators, the proposed eWHT would extend withholding tax obligations to these operators. We have concerns about compliance and cash flow risks, particularly for smaller platforms. We recommend that Revenue assess DAC7's effectiveness before imposing additional withholding obligations, and consider exemptions for fully compliant platform operators.

4. Implementation timeline would be critical

We recommend that successful adoption would require at a minimum 18-24 months from legislation to implementation. A workable timeframe is critical to allow software providers to develop integrated solutions, Revenue to build robust API systems and testing environments, and businesses to adapt processes. We caution that compressed timelines could risk system failures and compliance confusion. We suggest a phased approach would reduce implementation risk.

5. Adequate revenue resources would be essential

We believe the initiative's success would depend on Revenue having sufficient resources to develop reliable systems, provide clear guidance, establish testing environments, and support taxpayers during transition. We caution that under-resourcing could risk undermining credibility and creating compliance uncertainty.

What Ireland's proposed eWHT system could mean for your business

The proposed eWHT system could offer genuine simplification through automation and real-time integration. However, realising these benefits would require careful planning, adequate resourcing, and clear guidance from Revenue. Service providers should monitor developments and prepare for potential system integration and updated compliance processes, while platform operators should follow the consultation outcome closely.