Discount for children and social contributions recorded in costs
If social security contributions were treated as tax deductible costs and not as a deduction from income, can I use these contributions to benefit from child tax relief? Can I enter them in the item where the additional reimbursement for pro-family relief is recognized? Unfortunately, the tax alone is not sufficient for the child tax relief to be used in full.
In the case of social contributions relating to the entrepreneur, there is a choice whether to post them as tax deductible costs (entry in column 13 of the KPiR - other expenses) or as a deduction from income. The condition that applies to both cases is the fact that contributions have been paid, they can be entered in the month in which they were paid to ZUS (not in relation to the month to which they relate).
Entrepreneurs choose the option of including ZUS contributions in costs most often when they expect to achieve a low income in a given year, which would not allow the full amount of social contributions to be deducted, or assume incurring a loss. If there is a loss, it can be accounted for over the next 5 years and thus ZUS contributions may have a real impact on reducing income in future periods. However, contributions recognized directly as a deduction from income, if it is too low, are simply lost.
Art. 26 sec. 1 point 2 and 2a of the PIT Act. The entrepreneur is obliged to choose one of the methods of deducting ZUS contributions and to use this method consistently throughout the tax year.
Art. 26 sec. 1 point 2 and 2a of the PIT Act:
“The basis for calculating the tax (...) is income (...) after deducting the amounts:
2) contributions specified in the Act of 13 October 1998 on the social insurance system:
a) paid in the tax year directly for the taxpayer's own retirement, disability, sickness and accident insurance, and persons cooperating with him,
b) deducted in the tax year by the taxpayer from the taxpayer's funds, except that in the case of a taxpayer achieving the income specified in art. 12 sec. 6, only in part calculated, in the manner specified in Art. 33 paragraph 4, from taxable income
- the deduction does not apply to contributions the basis of which is tax-exempt income (revenue) under the Act, and contributions whose assessment basis is income for which tax collection has been waived pursuant to the provisions of the Tax Ordinance;
2a) contributions paid in the tax year from the taxpayer's funds for compulsory social insurance of the taxpayer or persons cooperating with him, in accordance with the provisions on compulsory social insurance in force in a Member State of the European Union other than the Republic of Poland or in another country belonging to the European Economic Area or in the Confederation Swiss, subject to paragraph 13a – 13c "
Part K of the PIT-36 tax return provides for the possibility of using an additional reimbursement when the child relief could not be fully deducted from the tax (the tax was too low). As a rule, an additional reimbursement is due to the amount of social and health contributions paid.
In the information brochure for the PIT-36 testimony it was specified that in item 204 and 205 (regarding the recognition of the amounts of ZUS contributions) taxpayers show the amounts of social security contributions referred to in article 1. 26 sec. 1 point 2 and 2a (i.e. in relation to the provisions on the deduction of contributions from income) and health insurance pursuant to Art. 27b paragraph. 1 and 2 of the Act, i.e. paid in the tax year and subject to deduction, less contributions deducted in PIT-36L, in PIT-28 or shown as deducted in PIT-16A or PIT-19A.
Therefore, part K of the PIT-36 tax return includes only social contributions which were deducted from income. Importantly, the allowance for children is granted on the full amount of contributions paid in a given year, and not only those indicated in the annual declaration in part E (low income may limit the amount of deductible contributions).
However, in the case of posting social contributions in company costs, it is not possible to include them up to the limit of additional reimbursement due to child relief.