Understanding Professional Services Withholding Tax (PSWT) in Ireland

Understanding Professional Services Withholding Tax (PSWT) in Ireland
PSWT stands for Professional Services Withholding Tax. It is a tax deducted at source by certain government bodies, state agencies, and specified entities when they make payments for professional services. Here’s everything you need to know about how PSWT works and what it means for service providers.
1. Who Does PSWT Apply To?
PSWT applies to payments made for professional services provided by individuals, partnerships, or companies. Typical examples of professional services subject to PSWT include:
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Medical, dental, and veterinary services
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Legal services (such as solicitors and barristers)
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Accountancy and auditing services
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Consultancy services (including business, marketing, and IT)
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Engineering, architectural, and surveying services
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Training services provided on behalf of certain bodies, like FÁS
2. How Does PSWT Work?
When a government body or specified entity pays for professional services, it deducts 20% of the payment as PSWT before making the payment to the service provider. The deducted amount is then remitted directly to the Revenue Commissioners by the paying body.
3. How Is PSWT Treated for Tax Purposes?
It’s important to note that PSWT is not a final tax. Instead, the amount deducted acts as a credit against your overall income tax liability. For example, if your total tax liability for the year is €10,000 and €3,000 has been deducted as PSWT, you will only need to pay the remaining €7,000 to Revenue.
4. Claiming PSWT Credits
To claim the PSWT credit, you must include the details of the tax deducted on your tax return. The paying body will issue you an F45 form, which shows the amount of PSWT deducted. This form is essential evidence when filing your tax return.
5. Example of PSWT in Practice
Imagine you provide consultancy services to a government department and issue an invoice for €5,000. The department deducts 20% (€1,000) as PSWT and pays you the remaining €4,000. When filing your tax return, you declare the full €5,000 as income and claim the €1,000 PSWT as a credit against your tax liability.
6. Key Points to Remember
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PSWT applies only to payments from specified bodies for professional services.
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The deducted amount is a credit against your tax liability, not an additional tax.
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Keep all F45 forms as proof of PSWT deductions for your tax return.
Contact us:
If you provide professional services to government bodies or state agencies, it’s crucial to understand how PSWT affects your payments and tax obligations. Gallagher Keane can help you navigate PSWT compliance to ensure you claim the correct credits and avoid any surprises at tax time. Please contact us at [email protected]
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