A Complete Guide to PSWT for Irish SMEs & Service Providers (2025–2026)

pstw ireland

Published: December 2025
Author: Amergin Consulting Ltd.
Target Audience: Business Owners, Finance Managers, and Small Business Seeking Financial Stability
Book a meeting: https://calendly.com/amergin-group_free/30min

What every consultant, contractor, SME and startup needs to know and how Amergin can help you stay compliant.

Professional Services Withholding Tax (PSWT) is one of the most misunderstood tax regimes in Ireland especially among small businesses, self-employed service providers, freelancers, contractors and even companies receiving payments from Government bodies, public authorities or prescribed persons.

If you provide professional services in Ireland and your client is a Government department, HSE, public body, local authority, higher-education institution, semi-state body, or any organisation listed as a “prescribed person,” you may be subject to PSWT.

And if you pay service providers as a prescribed person, you may have strict obligations to operate PSWT correctly.

With PSWT now operating through real-time electronic systems, and cross-referenced to income tax and corporation tax filings, Revenue has increased visibility into both payers and service providers. Mistakes are expensive. Non-compliance can lead to penalties. And poor understanding can cause serious cashflow strain.

Here is everything Irish SMEs and self-employed individuals need to know.

What Is PSWT?

PSWT is a withholding tax deducted at source when a prescribed person pays for professional services such as:

  • consultancy

  • accountancy and financial advisory

  • legal services

  • medical and healthcare services

  • training and education

  • engineering, architecture, design

  • IT consultancy and digital services

  • PR, marketing, management services

  • and many other advisory-based services

Instead of paying the full invoice amount, the payer must deduct tax and remit it to Revenue. The professional receives the net amount.

Key facts:

  • PSWT is not a final tax.

  • It is credited against your income tax or corporation tax liability.

  • If too much PSWT is deducted, you may be due a refund.

  • All PSWT activity is tracked electronically by Revenue.

Source: Revenue Commissioners – Professional Services Withholding Tax (PSWT) guidance.
https://www.revenue.ie/en/self-assessment-and-self-employment/pswt/index.aspx

Who Must Operate PSWT?

A PSWT deduction must be made by any qualifying “Prescribed Person”, including:

  • Government departments

  • HSE and healthcare bodies

  • Local authorities

  • Public bodies

  • Certain education institutions

  • Semi-state organisations

  • Publicly funded bodies listed by Revenue

If your organisation falls into these categories, you must deduct PSWT from payments for professional services even if the supplier is a company, partnership, sole trader or non-resident.

Failing to withhold PSWT correctly can lead to financial penalties and Revenue intervention.

Who Is Affected by PSWT Deductions?

Anyone providing professional services to a prescribed person may have PSWT applied, including:

  • doctors, nurses, clinicians

  • IT contractors, developers, tech consultants

  • accountants, auditors, payroll specialists

  • lawyers, mediators, legal advisors

  • engineers, architects, QS professionals

  • training providers, educators, coaches

  • marketing, PR and business consultants

  • management service providers

  • financial consultants

Even incorporated companies can be subject to PSWT not just sole traders.

How the PSWT System Works (2025–2026)

PSWT is now a fully electronic regime.

1. Supplier receives a “F45” or payment notification summary automatically

This shows the amount withheld and credited to their Revenue account.

2. Payer deducts tax at the correct rate

The current PSWT rate is 20% of the payment (in most cases).
The rate applies to the gross invoice amount excluding VAT.

3. Deducted PSWT is paid directly to Revenue

The supplier receives the net payment.
The withheld tax becomes a credit that offsets their future tax bills.

4. Supplier claims PSWT against:

  • income tax (Form 11 filers),

  • corporation tax (Form CT1 filers), or

  • can request refunds if over-deducted.

All PSWT deductions appear automatically in the supplier’s ROS PSWT credit viewer.

How PSWT Affects Cashflow for SMEs and Self-Employed Providers

This is one of the biggest issues.

If 20% of your invoice is withheld, small service businesses may struggle with:

  • lower cash inflow

  • difficulty paying suppliers

  • trouble covering payroll

  • increased tax refunds instead of usable monthly cash

  • lumpy cashflow cycles

This issue is particularly acute for:

  • startups

  • freelancers

  • SMEs scaling their team

  • contractors in the public sector

  • medical and healthcare professionals

  • training providers reliant on HSE or public contracts

Cashflow planning becomes essential.

Amergin supports SMEs with forecasting cashflow impacts of PSWT, building reserve systems, and structuring invoices and finances around PSWT obligations.

Common Mistakes Under PSWT and Their Consequences

1. Prescribed persons failing to withhold PSWT

Penalty: they may become liable for the full amount that should have been withheld.

2. Incorrectly applying PSWT to the VAT-inclusive amount

PSWT applies to the amount before VAT.

3. Supplier failing to claim PSWT credits

This leaves money unclaimed and distorts tax liability.

4. Misunderstanding refunds

Many contractors assume they automatically get refunds but timing depends on tax filings.

5. Using incorrect tax reference numbers

This delays crediting PSWT and complicates reconciliation.

6. Relying on spreadsheets instead of ROS

All PSWT is now electronic; manual tracking leads to errors.

7. Not reconciling PSWT credits during tax filing

Can cause incorrect tax returns and delayed refunds.

PSWT for Non-Resident Contractors

Foreign businesses providing services to Irish prescribed persons are also subject to PSWT.

Revenue expects:

  • proper Irish tax registration

  • correct invoicing

  • compliance with withholding

  • awareness of double-tax treaties

Failure to manage PSWT can lead to unexpected withholding, delayed payments, or difficulty reclaiming credits.

Amergin regularly supports non-resident companies delivering projects in Ireland.

How To Claim PSWT Credits

Service providers do not reclaim PSWT from the payer Revenue holds the credit.

You access it when filing your tax return:

If you are a sole trader

PSWT reduces your Income Tax / USC / PRSI liability on Form 11.

If you are a company

PSWT offsets your Corporation Tax liability on Form CT1.

If you have excess PSWT withheld

You may be entitled to a refund after filing.

All credits appear in ROS under:
"PSWT – Credit Viewer"

Why 2025–2026 Will Increase PSWT Scrutiny

Revenue continues to modernise withholding regimes.

Recent changes include:

  • full digitisation of PSWT reporting

  • real-time visibility over payments

  • tighter matching of PSWT deductions to tax returns

  • increased monitoring of mismatched supplier data

  • scrutiny of VAT treatment alongside PSWT

  • alignment with RCT and upcoming eWHT functionality

This means businesses using contractors — or providing services to public bodies — must maintain cleaner books and real-time reporting.

How Amergin Consulting Helps with PSWT Compliance

Amergin supports both prescribed persons and service providers.

For service providers / subcontractors:

  • Setting up ROS access and tax registrations

  • Reviewing whether PSWT applies to your services

  • Reconciling PSWT credits and tax liabilities

  • Cashflow modelling to account for withheld tax

  • Preparing & filing Form 11 / CT1

  • Securing refunds where overpaid

  • Advising on whether incorporation changes PSWT exposure

For prescribed persons / payers:

  • Determining whether PSWT must be applied

  • Implementing correct digital PSWT workflows

  • Ensuring each payment is reported correctly

  • Avoiding penalties for under-withholding

  • Integrating PSWT into bookkeeping systems

  • Regular compliance review and risk minimisation

For both:

  • VAT + PSWT combined treatment

  • Cross-border advice for non-resident providers

  • Transition planning for future eWHT reforms

When PSWT becomes part of a structured system — not a manual afterthought — compliance becomes efficient and predictable.

Conclusion: PSWT Is Manageable With the Right Support

Professional Services Withholding Tax can feel complicated, especially for growing SMEs, startups and service providers working with public bodies. But with the right processes, informed financial planning, and expert guidance, PSWT becomes simply another managed part of your compliance cycle.

Amergin helps Irish businesses turn statutory obligations into operational clarity enabling founders and finance teams to focus on growth, not paperwork.

If you want structured support on PSWT, tax filing, or understanding your obligations:
Amergin is ready to help you every step of the way.

About Amergin Consulting Ltd.

Amergin Consulting Ltd. is a Dublin-based chartered accountancy and business advisory firm serving Ireland’s SMEs and growth companies across construction, technology, professional services, and renewable energy.
We specialise in Accounting, Payroll, Taxation, and CFO Services that help businesses build stronger foundations for profit and compliance.

Need help running a year-end tax review or planning your 2026 payroll changes?
Amergin Consulting’s finance and tax team can help you identify deductions, forecast cash flow, and ensure full compliance before the year closes.
Book your 30-minute consultation:  https://calendly.com/amergin-group_free/30min

Disclaimer

This article is for general informational purposes only and does not constitute financial or tax advice. While every effort has been made to ensure accuracy, Budget 2026 legislation may change upon enactment of the Finance Act 2025.
Public should seek professional advice tailored to their specific circumstances before acting on any points discussed.

 

Sources

Revenue Commissioners – Professional Services Withholding Tax (PSWT)
https://www.revenue.ie/en/self-assessment-and-self-employment/pswt/index.aspx
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