What is relevant contracts tax in SAP FI - Financial Accounting?

SAP Term: relevant contracts tax

• Component: FI

• Component Name: Financial Accounting

• Description: In Ireland, a tax deduction system relevant for the construction, forestry, or meat processing industries. This system allows the principal contractors to deduct tax at 35% from all payments to subcontractors in the following cases: They have not received a relevant payments card for the subcontractor The annual limit of payment specified by the tax office for the subcontractor has been exceeded This tax only applies if the subcontractor and the principal contractor operate in the same industry.

Smart SAP Assistant

• Key Concepts: 
  Relevant contracts tax (RCT) is a type of withholding tax that is applicable to certain types of contracts in the Financial Accounting (FI) component of SAP. It is a form of income tax that is withheld from payments made to contractors and other non-employees for services rendered. The amount of RCT withheld depends on the type of contract and the country in which the services are performed. 
  
  How to use it: 
  In SAP, RCT is managed through the withholding tax code. This code is used to determine the rate of withholding tax that should be applied to payments made to contractors and other non-employees. The withholding tax code can be set up in the FI module and then applied to relevant contracts. 
  
  Tips & Tricks: 
  When setting up the withholding tax code, it is important to ensure that all relevant information is included, such as the country in which the services are being performed and the type of contract. This will ensure that the correct rate of RCT is applied. 
  
  Related Information: 
  For more information on relevant contracts tax, please refer to SAP's official documentation on withholding taxes.