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Professional Services Withholding Tax (PSWT) – Updated System 2021

Professional Service Withholding Tax (PSWT) is a withholding tax (currently at 20%) that applies in Ireland to payments made by ‘Accountable Persons’ for certain professional services. The current PSWT system is somewhat of an outlier when compared to the electronic systems that are now in place for other taxes.

Finance Act 2020 provided legislative updates for the introduction of an ‘electronic’ system of PSWT which Revenue intend to implement from 1 July 2021. The new system will replace the current paper based system and the changes are subject to a Ministerial Commencement Order.

The proposed changes will allow accountable persons to record PSWT payments through an online payment notification system via the Irish Revenue Online Service (ROS) and will end the use of the paper forms (F45) for every single payment currently in place. This is a very welcome change for both accountable and specified persons (persons receiving the payments subject to the withholding) and should ease the compliance burdens for both parties. The replacement of the paper forms with electronic “payment notifications” will allow accountable persons to submit details of their payments which are subject to PSWT via ROS and should reduce the labour intensive administrative process of issuing large volumes of paper forms.

The changes will also be welcomed by specified persons as it will ease the process of obtaining refunds of PSWT given all payments received will be visible when they log into their own account on ROS and the paper forms (F45) which were required to claim a refund will no longer be required.

The type of services which typically come within the scope of PSWT include the following (non exhaustive) list:

  • 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

In general, Accountable Persons who must operate PSWT are public bodies, government agencies, and semi-state companies including the following:

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

New ePSWT system

Under the current system a form F45 is given to the specified person in respect of each relevant payment. This can often lead to issues particularly if these forms are lost as replacement forms are required in order for a refund claim to be made resulting in additional work for both parties and causing cash flow issues for the specified person.

Under ePSWT, Accountable Persons can submit a ‘Payment Notification’ to Revenue using the ePSWT service when making a relevant payment. Details required the recipients’ income tax or corporation tax number and their country of residence. Revenue will then issue a payment notification reference number to acknowledge receipt.

Accountable Persons will be able to review payments submitted and batch uploads will be facilitated via uploading a .csv file. The due date for the electronic submission of the monthly return and for remitting the PSWT deducted from payments to Revenue will be the 23rd day of the following month. Specified Person’s will also be to view payment notification details of PSWT withheld.

The Accountable Person will also be required to file an annual return detailing all relevant payments and PSWT deducted during the tax year. This return will be due to be filed by 23 February of the following tax year, a nil return should be filed if appropriate.

The modernisation of the PSWT system should hopefully provide a welcome relief from the paper based system which should ease the refund process. Irish Revenue indicate the expected commencement date for these changes is 1 July 2021, however, the time of the Minister’s commencement order is not yet clear.

Should you need any advice in relation to these changes, please contact a member of our team.

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