ZUS contributions paid after the liquidation of business activity on the basis of PIT

Service-Tax

In the course of business activity, the taxpayer has many fiscal obligations towards the state. First of all, we can mention the need to pay taxes and social security contributions. However, due to the fact that ZUS contributions are payable in the month following the month for which they are due, an entrepreneur who liquidates business activity pays ZUS contributions after the end of activity. We will consider how to account for ZUS contributions paid after the liquidation of business activity on the basis of personal income tax.

ZUS contributions as a deduction from income

At the outset, it should be noted that ZUS contributions can be recognized in the settlement of business activity in two ways: as a deduction from income and as a tax deductible cost.

As we read in Art. 26 sec. 1 point 2 of the PIT Act, the income being the basis for calculating the tax is reduced by social security contributions paid in the tax year directly for the taxpayer's own retirement, disability, sickness and accident insurance.

It is worth noting that the deduction of social contributions takes place not only at the stage of determining the annual tax liability, but also when calculating the monthly tax advance.

According to Art. 44 sec. 3 of the PIT Act, the advance payment for a given month is the tax calculated on this income in accordance with the principles set out in Art. 26, which allows it to be assumed that at the time of calculating the advance, the taxpayer may take it into account by deducting it from income.

However, the key information is that only the premium paid is deductible. The payment deadline for natural persons paying contributions solely for themselves has been set as the 10th day of the month following the month in which the obligation to pay arises. The social insurance contribution may be deducted by the entrepreneur from the income from economic activity both at the time of determining the advance tax and in the annual settlement.

ZUS contributions as a tax deductible cost

The second option for taxpayers running a business is to recognize social security contributions as a tax deductible cost.

In this variant, it may also take place at the time of calculating the withholding tax during the year. The income from economic activity constituting the basis for calculating the advance payment with taxpayers keeping tax books of revenues and expenditures is the difference between the income resulting from these books and the costs of obtaining it.

According to the general definition of the tax cost, tax deductible costs are costs incurred in order to achieve income or maintain or secure a source of income, with the exception of the costs listed in art. 23. This means that in order for a given expense to be recognized as a tax expense, it must be related to the conducted business activity (which is obvious in the case of the necessity to pay ZUS contributions for running a business) and at the same time cannot be listed in Art. 23 of the PIT Act.

In the context of the last sentence, it is very important to refer to the wording of Art. 23 sec. 1 point 55a of the PIT Act, which states that contributions unpaid to the Social Insurance Institution are not considered to be tax deductible costs, subject to point 37 and art. 22 sec. 6bb, specified in the Act of 13 October 1998 on the social insurance system, in part financed by the contribution payer.

The above provision clearly indicates that only contributions paid by the taxpayer may be recognized as tax deductible costs. Moreover, they are recognized as an expense in the month of payment, not the month for which they are due.

Example 1.

The taxpayer runs a sole proprietorship, which is the basis for social insurance in ZUS. The contribution for May is PLN 920. The taxpayer paid the premium on June 10. As a result, although the premium applies to May, it will be treated as a cost in June. If the taxpayer did not pay the contribution until July, the amount of the contribution would be tax-deductible in July. For a taxpayer running a business, the ZUS contribution may also constitute a tax deductible cost in the month of premium payment. On the other hand, unpaid contributions are not tax deductible.

ZUS contributions paid after the business was closed

With the above in mind, we can go on to explain the problem posed at the beginning, namely - how to treat the ZUS contribution paid after the liquidation of business activity.

In this respect, the principles presented will apply, which means that the premium may be recognized as an expense or deducted from income as part of the advance payment in the month of its payment. It is not possible to recognize the premium as retrospective cost.

Example 2.

A self-employed taxpayer closed down his company on May 25. ZUS contributions for May were paid on June 10. In these circumstances, the taxpayer cannot include the contribution paid in June in the tax return for May.

The premium paid after the liquidation may not constitute the cost in the month of payment, because there is no longer any non-agricultural business activity that could reduce the income.

Does this mean that the premium paid after the liquidation of business activity cannot be included in the tax settlement at all?

In order to answer this question, we must note that although it is not permissible to settle the contribution on a current basis, the taxpayer may indicate it in the annual declaration as an amount deductible from income. As a consequence, the premium paid after the liquidation of operations will reduce the annual income of the taxpayer, and thus will affect the amount of the annual tax liability.

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Example 3.

A self-employed taxpayer closed down his company on May 25. ZUS contributions for May were paid on June 10. The premium paid in June will be shown in the annual PIT-36 tax return as the amount reducing the taxpayer's income and influencing the determination of the tax base. The ZUS contribution paid after the liquidation is not a tax deductible cost in the current period, because the activity is liquidated. The taxpayer may include this contribution in the annual tax return as a deductible amount from the income.

The issue of settling health insurance contributions

In addition to social insurance contributions, the taxpayer is also required to pay health insurance contributions in the course of business.

The main difference is that the paid health insurance premium (7.75% of the basis for the assessment of this premium to be exact) reduces the calculated tax, not income. As a result, the health insurance contribution is tax deductible, so it is not possible to treat it as a tax cost.

As for the settlement of the health insurance premium paid after the liquidation of the business, the same rules will apply as in the case of the social security contribution. The taxpayer will not be able to recognize the premium paid in this way in the current period, but only at the stage of the annual settlement as a tax deductible amount. Also, the health insurance premium paid after the liquidation will be included by the taxpayer only in the annual tax return. Moving on to the summary, we can point out that ZUS contributions paid after the liquidation of business activity may be included in the tax return, however, this is done on special principles that allow these amounts to be deducted only in the annual tax declaration.