ZUS contributions deduction in case of tax loss - it's worth knowing
Entrepreneurs obtain revenues and costs in various proportions depending on the economic situation, sales market and the occurrence of other circumstances affecting the revenues achieved. Sometimes, despite an efficiently operating company, the entrepreneur suffers a loss per year. However, it does not have to be the reason for the bad situation in the company. When running a business, entrepreneurs are required to pay monthly ZUS contributions in the minimum amount, preferential or only health insurance. Is it possible to deduct ZUS contributions in the event of a tax loss?
Social security contributions
The legislator allows the taxpayer to deduct the social insurance contributions paid (e.g. by the entrepreneur) or collected by the payer (paid by the taxpayer and related to the part financed by the employee, e.g. employment contract, order, work) from income. The main point is that contributions must actually be paid, as unpaid contributions are not deductible from your income. Therefore, if there is a situation that the taxpayer has not paid contributions at all for 3 months, and will pay them in the 4th month, then from the income he may deduct all paid contributions for the 3 months that he settled in the 4th month. However, this still does not solve the problem of the deduction of ZUS contributions in the event of a tax loss.
Social security contributions to the costs of the company
There are many situations in the company in which the taxpayer:
- income is so small that it does not settle full paid social security contributions on a monthly basis, and on an annual basis it is also lower than the sum of paid contributions,
- achieves a loss that makes it impossible to deduct contributions at all,
- is not able to deduct paid contributions in the tax year and thus cannot deduct them in the next or the next year (paid ZUS contributions are deductible in the year of their payment). It is worth noting, however, that if the taxpayer has not paid, for example, from October to December 2020 contributions, and paid them in January 2021, then he will have the right to deduct them in January 2021.
In connection with the above-mentioned situations, the legislator allowed the taxpayer to use the second method of recognizing paid social security contributions. They can be included in company costs, but only social security contributions. This solution, however, does not apply to health insurance contributions. The taxpayer can decide whether to deduct contributions from income or to recognize contributions as an expense. It also has the right to change the method of recognizing contributions during the year.
Deduction of social security contributions in the annual tax return - KIS brochure.pdf Description: manual completion form
Recognition of social insurance contributions as company costs allows you to keep paid contributions to be settled for later, in the event of a tax loss arising for a tax year, it will be possible to deduct it from your income over the next 5 years. Therefore, if the taxpayer recognizes the social security contributions as costs, then this cost will not be lost, even if the taxpayer makes a loss for a given tax year. This is because, pursuant to Art. 9 sec. 3 of the PIT Act, the taxpayer will be able to deduct this loss (and thus the social security contributions included in it) in the next 5 years from income, of course if it occurs. The above solution, however, applies only to people who independently calculate and pay ZUS contributions, i.e. people running a business.
In the case of persons running a business and receiving income from an employment contract or mandate, ZUS contributions on these contracts are included in the gross amount of remuneration, i.e. in the part financed by the employee and collected by the payer. The list of these contributions is always provided to the employee on the PIT-11 information.
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Of course, it should be added that if the taxpayer has included the paid ZUS contributions as the company's costs, then these contributions cannot be deducted from the income, because this would result in the deduction of the same contributions twice.
It is also worth mentioning that only social security contributions can be deducted from income, either as a direct deduction or by recognizing contributions as costs. Both the health insurance contribution and the labor fund are not deducted from income, only the labor fund can only be included in company costs, provided that it has been paid. In turn, the health insurance contribution is deductible only from tax.
Deduction of ZUS contributions in case of tax loss and obtaining income from various sources
There are also situations in which the taxpayer, making a loss, did not include social security contributions in the company's costs. If he or she has several social security entitlements, e.g. runs a business, has an employment contract or a mandate, then he has the option to deduct social security contributions, not deducted from business income, from another source of income. First of all, ZUS contributions for activity should be deducted from this source of income. Only then, if all contributions are not deducted, the remaining part can be deducted from other income (employment contract, mandate). The same situation may occur in the case of running a business taxed with a flat tax (PIT-36L) and the occurrence of additional income in the form of an employment contract, mandate (PIT-37), as well as activities taxed with a lump sum and additional sources of income.
It should be added, however, that the deduction of social security contributions cannot be deducted in the case of:
- the occurrence of income exempt from income tax,
- the occurrence of income from which the tax collection was abandoned,
- when social security contributions have been classified as tax deductible costs,
- some revenues earned by natural persons subject to flat-rate income tax,
- returned to the taxpayer in any form.
Taxpayers taxed with a tax card (PIT-16A) cannot deduct social security contributions related to their activity, as they do not have the category of income. Only the paid, reduced health insurance premium can be deducted from the tax. On the other hand, social security contributions for activity could be deducted only in the event of other income such as employment contract, mandate, rental on general terms.
Health contribution in the event of a tax loss
Unlike social contributions, the health contribution is deducted from the calculated tax. It cannot be included in the company's costs, and if it cannot be deducted, then it is forfeited. Of course, unpaid health insurance contributions, which the taxpayer will pay with delay, will be able to collect the payment together in the month, i.e. deduct it from the tax, if it occurs in turn (the possibility of deducting overdue health insurance contributions paid later). If the taxpayer is not able to deduct paid health insurance contributions in a tax year, unfortunately in this case he will not be able to deduct them in the following year.
If a person running a business taxed with a flat rate, general rules or flat tax has income under an employment contract or mandate, then he will be able to deduct paid health insurance contributions in the tax year from the tax calculated on other sources of income.
It should also be remembered that the deduction of the health contribution from the tax applies to 7.75%, i.e. the contribution in the amount lower than the taxpayer pays to ZUS:
- in the case of entrepreneurs, the deduction from tax occurs in 2020 - PLN 312.02,
- in the case of employees, contractors, the reduced health contribution is calculated as the difference between the gross amount and social security contributions financed by the employee x 7.75%.
Therefore, the deduction of ZUS contributions in the event of a tax loss is possible only when they are actually paid and the taxpayer deducts them in costs.
Deduction of ZUS contributions in the wfirma.pl system
In the wfirma.pl system, the deduction of ZUS contributions takes place automatically after the settlement of the ZUS DRA form. The method of recognizing the entrepreneur's social contributions in the settlement depends on the selected method of deduction - in advance income tax or directly in the KPiR. These settings are made in the tab: SETTINGS »TAXES» ACCOUNTING FUNCTIONS, where in the section OWNER SOCIAL CONTRIBUTION, select DEDUCTION IN ADVANCE OR COST IN KPIR and save.
After paying the ZUS contributions resulting from the generated in the tab: START »ZUS» SETTLEMENT DECLARATIONS, the form should be settled in the system. For this purpose, it is enough to mark it on the list and select the option SETTLEMENT from the top menu.
Thanks to this, ZUS contributions will be automatically deducted:
- social contributions - according to the selected method (in advance or as an expense in the KPiR),
- health contributions - in advance tax up to the limit of 7.75% of the calculation basis,
- contributions to the labor fund - as a cost in the KPiR.