For Written Answer on : 23/02/2023
Question Number(s): 196 Question Reference(s): 9318/23
Asked by: David Stanton T.D.
To ask the Minister for Finance if his Department has considered the impact of the Professional Services Withholding Tax (PSWT) on the cashflow of eligible businesses; and if he will make a statement on the matter.
Professional Services Withholding Tax (PSWT) is a deduction at the standard rate of income tax, currently 20%, from relevant payments made by accountable persons to specified persons in respect of certain professional services. The tax deducted is a payment on account against the specified person’s final Income Tax or Corporation Tax liability for the year, with the amount of PSWT deducted credited against the tax liability for that year. A specified person can include businesses undertaken through a company, sole trade or partnership.
Accountable persons include Government Departments, State agencies and bodies, local authorities, colleges and authorised medical insurers.
The range of professional services that come within the scope of PSWT includes, but is not limited to:
- 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.
The legislation governing PSWT provides that a specified person may in certain circumstances make a claim for a refund of PSWT in the same tax year in which it is deducted (referred to an “interim refund”). Among the requirements for the making of an interim refund claim is the requirement that the specified person’s profits for the previous period are finalised and any tax due for that period has been paid.
The electronic PSWT system introduced by Revenue in 2021 ensures that all deductions of PSWT are credited against a service provider’s Revenue account immediately upon notification of the payment to Revenue by accountable persons. This ensures that PSWT deducted, where appropriate, is available for refund without any delay.
The need to ensure tax compliance by service providers is particularly important where the Exchequer is the ultimate source of the funds being paid out by accountable persons. PSWT plays an important role in ensuring tax compliance by service providers in the sectors that come within scope of PSWT.