Deduction of ZUS contributions in the remuneration of people exempt from PIT

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From August 1, 2019, new regulations apply to the PIT tax relief for employees who are under 26 years of age. The amendment to the Personal Income Tax Act, the Act on Family Benefits and the Act on Healthcare Services Financed from Public Funds of July 4, 2019 introduced a PIT exemption for young employees who do not exceed the annual income limit indicated in Art. . 21 section 1 point 148 of the PIT Act. What are the grounds for a person up to 26 years old to be exempt from PIT and what is the deduction of ZUS contributions from the remuneration of such people? Details in the article!

Pursuant to Art. 21 (1) (148) of the PIT Act, income tax free from the following are: income from the employment relationship, employment relationship, homework, cooperative employment relationship and mandate contracts referred to in Art. 13 point 8 of the PIT Act, received by the taxpayer until the age of 26, up to the amount not exceeding PLN 85,528 in the tax year.

It is worth remembering that when calculating the amount of revenues subject to tax exemption pursuant to Art. 21 sec. 1 point 148 of the PIT Act, the income subject to flat-rate income tax, income tax-exempt and income from which tax collection has been abandoned pursuant to the provisions of the Tax Ordinance shall not be taken into account. The contribution paid on income exempt from PIT cannot be deducted from income and tax. It is the employers who are obliged to check whether the employee is over 26 years of age. and therefore when to start collecting PIT advances from his salary.

Example 1.

Aleksander is a student and is 21 years old. Works in the municipal office on the basis of a mandate contract. He provides office support and earns, in accordance with the contract, PLN 2,050 gross. It is worth noting that his contract is not subject to ZUS contributions, while the advance on income tax is not calculated in this case. That is why Mr. Aleksander receives PLN 2050 on hand.

Deduction of ZUS contributions from the remuneration of persons exempt from PIT

Pursuant to the Act of 27 August 2004 on health care services financed from public funds, if the health insurance premium calculated on the income tax-free under the amended provision is higher than the advance on personal income tax, which the payer would calculate if the income of the insured was not exempt from income tax pursuant to this provision, the premium calculated for each month is reduced to the amount of this advance. Taxpayers up to 26 years of age exempt from personal income tax do not benefit from the exemption from health insurance and social security contributions. As a rule, the deduction of ZUS contributions from the remuneration of young people is obligatory.

According to the information provided by ZUS, persons under the age of 26 who are subject to compulsory health insurance, whose income has been exempted from personal income tax pursuant to the amendments to the PIT Act, are not exempt from the health insurance contribution. Thus, in the normal course, ZUS contributions should be deducted from the remuneration of such a person.

In order to calculate the health contribution that the payer should deduct from the remuneration of a young taxpayer, it will be necessary to calculate the PIT advance, which is not exempt from tax. Therefore, the payer should compare the health insurance contribution with the amount of the personal income tax advance, which would be calculated if the employee's income was not tax-exempt. In a situation where the calculated premium would be higher than the aforementioned advance payment, the premium should be reduced to its amount. In a situation where the premium would be lower than the amount of the calculated advance, the premium will be deducted in full from the insured's income.

Pursuant to Art. 83 sec. 2a. The Act of 27 August 2004 on health care services financed from public funds, if the health insurance premium calculated on income tax-free is higher than the advance on personal income tax, which the payer would calculate if the income of the insured person was not exempt from income tax under this provision, the premium calculated for each month is reduced to the amount of this advance payment; (as we read in section 3 of the above-mentioned act) if the basis for calculating the health insurance premium is the insured's income free of income tax, on which the payer does not calculate the advance payment for this tax.

Example 2.

Dominik is a student and works 1/4 time in an IT company, on the basis of an employment contract.His salary is PLN 1,500 gross. The employer calculates the social security contributions that are incurred from the employee's remuneration, then subtracts the sum of these contributions from the salary base. In this way, he receives the amount from which the health insurance premium should be calculated. The gross health contribution is PLN 116.49. Then you need to calculate the advance income tax, i.e. gross salary less social security contributions and tax deductible costs. In a further step, the tax-free amount should be deducted from the income tax deductible. In this way, the employer will receive the amount of the advance income tax, from which he must deduct the health insurance contribution. The net salary is PLN 1,177.86, while the PIT advance payment is PLN 0. Start a free 30-day trial period with no strings attached!

New obligations of employers in the scope of controlling the payment of contributions and advances on the income of persons up to the age of 26.

The employer is obliged to control each month of employment of a person until the age of 26. in terms of the legality of using the PIT exemption, due to the fact that he is 26 years of age. or exceeding the amount of tax advances. In the case of tax exemption for persons up to 26 years of age the payer takes into account the taxpayer's date of birth, and the important factor is his age at the time of payment of the remuneration.

Example 3.

Joanna turned 26 on April 17. In accordance with the applicable work regulations, the remuneration is payable by the 10th day of each month. Therefore, the salaries for March paid on April 10 should be calculated with tax relief. The employer should not collect and pay income tax advances on the paid remuneration. However, the remuneration for the following months will be calculated on the basis of the rules before the amendment to the regulations, due to the age of the employee.

The employer is still obliged to prepare and provide the young employee with the PIT-11 form, despite the fact that his income is fully tax-free. The PIT-11 form should contain information about the total remuneration paid to the employee in a given year, amounts exempt from tax due to the tax relief for people up to the age of 26, advances collected, as well as social security contributions calculated and collected from the salary and health.

Not all income is exempt from PIT

It is worth noting that under the new regulations, not all income of employees aged up to 26 will be exempt from tax. In particular, the exemptions will not apply to remuneration under a specific task contract, remuneration from economic activity, and also from social security benefits.

To sum up, from January 1, 2020, the employer should refrain from collecting advances for the tax on remuneration paid to persons under the age of 26. until they exceed the income in the amount of PLN 85,528 (up to the limit of the exemption). However, if the taxpayer (a person before the age of 26) submits to the employer a written request for advance payments, the payer should not apply the exemption no later than the month following the month in which he received the application. The payer should remember to submit the above application separately in each tax year until the age of 26. The payer should monitor the moment when the tax exemption ceases to apply to employees due to the age of 26. or exceeding the limit of the amount of revenues. PIT exemption does not exempt from the obligation to calculate social and health contributions in remuneration for people up to 26 years of age. So in this case, the deduction of ZUS contributions should be carried out in the standard way.