When Tax Gets in the Way of Transitions: RCT Challenges for Solar Developers in Ireland

May 7, 2026

Originally designed to police compliance in traditional construction sectors, Relevant Contracts Tax (RCT) is increasingly at odds with the realities of the modern, highly specialised renewable-energy supply chain. For many solar developers, RCT has become a material commercial and operational risk – affecting cash flow, contractor availability, project timelines and even Ireland’s competitiveness as a destination for renewable investment.

RCT applies to “constructions operations”, which are defined very broadly under Irish tax legislation. This can include:

Site preparation and groundworks
Civil and electrical installation
Mounting structures and cabling
Grid connection works
Certain O&M activities

The challenges that arise from the seemingly straight forward RCT system are more acute for many solar developers, including ourselves, than traditional developers.

A Skills Shortage in Ireland

A significant challenge that arises is due to Ireland’s reliance on specialist non-resident contractors. Skills required to deliver utility-scale solar include high voltage electricians, grid engineers, commissioning specialists and experienced EPC contractors. Solar developers often look to the UK and mainland Europe due to short skill supply domestically.

Under the RCT system, payments to non-resident contractors for works that take place in Ireland are subject to withholding tax at rate of 20% or 35% unless the subcontractor has proactively engaged with Revenue and secured a 0% deduction rate.

This leads to an immediate cash-flow impact for subcontractors. Albeit refunds are available, this is an administrative process and is seen as a deterrent as contractors will simply choose to work in jurisdictions where such withholding does not apply.

Uncertainty at the Edges of Construction

Another challenge that arises is determining where RCT applies and where it does not.

Solar development involves a wide range of services beyond traditional construction, including:

Environmental and ecological surveys
Grid studies and design work
Project management and supervision
Security, monitoring and maintenance services

The line between RCT and non-RCT services is not always clear and can often lead developers to take a conservative approach which is often the more costly one.

Administrative Burden at SPV Level

Solar Projects in Ireland are typically developed through single-asset SPVs and this leads to increased administrative work for Solar Developers as each SPV may need to:

Register as a principal contractor
Set up ROS access and internal controls
Submit contract notifications
Submit payment notifications before every payment
Monitor deduction authorisations and monthly summaries

This can create a heavy compliance burden often long before the project is revenue generating. Mistakes are easily made and the penalties are calculated on gross payments not the ultimate tax due, therefore the consequences of making a mistake can be extremely costly.

On 5 December 2025, the Department of Finance and Revenue launched a joint public consultation on the modernisation of withholding taxes, including RCT. The consultation is referred to as the eWithholding Tax (eWHT) Consultation. The consultation opened on 8 December 2025 and closed on 30 January 2026. Revenue has not yet published any outcomes or draft legislation arising from the submissions.

Professional bodies and firms have published their responses during the consultation period and the common concerns raised were:

Cash flow pressure created by withholding
Increased compliance and penalty exposure
Impact on Ireland’s competitiveness, particularly for sectors using non-resident contractors.

Looking ahead

RCT is not going away any time soon and Solar Developers operating in Ireland must continue to manage it carefully through early contractor engagement, clear contract scoping and robust internal controls.

For us Solar Developers the eWHT consultation is a step in the right direction as it is the first time RCT cash-flow and operability issues have been acknowledged as part of a wider redesign exercise. However, until the outcomes are published, the current RCT rules will continue to apply.