As at 30 June 2016, the Income Tax (Construction Subcontractors) Regulations have yet to be revised in line with the stricter requirements of the new tax regime.
The comments below describe the current regulations and not the anticipated but as yet unpublished new regulations.
Companies operating as subcontractors in any construction operation are subject to the Income Tax (Construction Subcontractors) Regulations. Under these regulations, the main contractor is obliged to deduct and pay over to the Income Tax Office 25% of any payment made to the subcontractor that does not represent the direct cost of materials.
This deduction is not required if the subcontractor holds a valid exemption certificate issued by the Income Tax Office. A certificate will generally only be issued if the subcontractor meets the requirements prescribed by the Regulations. Subcontractors need to apply to the Income Tax Office for the exemption certificates.
A contractor who fails to make the appropriate deductions from payments to any subcontractor who does not hold a valid exemption certificate commits an offence under the Regulations and may be subject to penalties.