Wage refund when employing the unemployed

Service-Tax

Entrepreneurs can apply for the reimbursement of the salaries of employees who had the status of unemployed before employment. Remuneration is reimbursed by the employment office, the received support has effects in terms of settlements with the tax office.

As a rule, employers wishing to use the funds are required to hire the referred unemployed persons full-time for the period of 12 months of reimbursement and for another 12 months after its completion. Failure to meet the obligations will result in the necessity to return the obtained aid in an amount proportional to the period in which the employment was not maintained, together with statutory interest accrued from the date of receipt of the refund for the first month, within 30 days from the date of receiving the starost's request.

Employers with whom the unemployed terminates the contract or will be obliged to dismiss the unemployed person with disciplinary action will not be obliged to reimburse them. In such cases, the employment office will refer the next unemployed person. If the office cannot supplement the staff shortages, the support received for the period in which the previously referred unemployed person was employed is not subject to reimbursement.

The most popular types of assistance related to the employment of an employee include:

  • reimbursement of wages and salaries when employing people up to 30 years of age,
  • reimbursement of wages and salaries for employing 50+ employees.

Received refund of wages and PKPiR

The concept of business income has been defined in Art. 14 sec. 1 of the PIT Act. This provision stipulates that the amounts due, even if they have not been actually received, are considered as income from non-agricultural economic activity, after excluding the value of the returned goods, granted discounts and discounts.

Income from economic activity also includes subsidies, subsidies, subsidies and other free benefits received to cover costs or as a reimbursement of expenses, except when these revenues are related to the receipt, purchase or own production of fixed assets or intangible assets.

Moreover, the PIT Act in Art. 21 contains a catalog of revenues that benefit from the exemption. The catalog does not include the amount of remuneration refunds, therefore the received amount should be included in the income from the conducted business activity.

Such a position was confirmed by the Director of the Tax Chamber in Katowice in a letter of May 18, 2015, file ref. IBPBI / 1 / 4511-148 / 15 / ESZ, where we can read:

(...) In view of the above and the presented facts, it should be stated that the funds granted to the Applicant (reimbursement of expenses incurred), received from the state earmarked fund do not constitute the subsidy referred to in Art. 21 sec. 1 point 129 of the Personal Income Tax Act, benefiting from the exemption from taxation with personal income tax.

In connection with the above, received by the Applicant under the so-called the employment voucher, the funds constituting the reimbursement of expenses incurred by him constitute income from non-agricultural business activity, subject to personal income tax (...).

Wage refund as an expense

As a rule, the employee's remuneration is the cost in the month for which it is due, provided that it was paid or made available within the time limit resulting from the provisions of the labor law, contract or other legal relationship between the parties.

In the event of failure to meet the deadline, the remuneration is included in tax deductible costs only when it is actually paid or made available to the employee.

An entrepreneur who receives a refund in connection with the employment of an unemployed person may include the remuneration and due social security contributions in the part financed by the payer in costs.

Both the gross remuneration of this employee and the amount of social security contributions in the part financed by the payer due for the payment of this remuneration should be included in the PKPiR in the full amount, i.e. without reducing by the amount of the refund due.

This position is also confirmed by the tax authorities. An example may be the individual interpretation of the Director of the Tax Chamber in Katowice of July 6, 2016, file ref. IBPB-1-2 / 4510-403 / 16 / MS, where the authority confirmed that the taxpayer correctly counts the amount of gross remuneration PLN 1,850 in the month for which it is due to tax deductible costs, despite the fact that they are financed from a subsidy. In this letter we can read:

(...) that the principles contained in the above-cited articles exclude the general principles of deductibility of costs regardless of the nature (linking) of costs with revenues. This means that the employer who pays the above-mentioned receivables may include them as tax deductible costs in the month for which they are due (i.e. on an accrual basis) (...).

Salaries in PKPiR

Salaries under the employment contract should be included in column 12 PKPiR (salaries in cash and in kind) in the gross amount, including social security contributions financed by employees and tax advances paid to employees.

On the other hand, column 13 of PKPiR (other expenses) should include social insurance expenses in the part financed by the employer and contributions to the Labor Fund and the Guaranteed Employee Benefits Fund.

On the other hand, the amount due to reimbursement of the remuneration of an employed employee referred by the employment office should be entered by the taxpayer in column 8 (other income), on the date of its receipt (credited to the bank account).

Example 1.

The employer received a refund of wages for an employed unemployed person. The salaries were paid out on November 30. On that day he included them in costs. The salary refund was received on December 10th. On this day, it should recognize the income from its receipt.