Start-up relief for entrepreneurs - who can use it?

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On April 30, 2018, the provisions on the possibility to take advantage of the relief when setting up a business for the first time entered into force. The start-up tax relief introduces changes to the payment of social and health insurance contributions for new entrepreneurs. Will every new entrepreneur be able to take advantage of this right?

What is a start discount?

The start-up relief is one of the many solutions included in the Business Constitution package, which is to make it much easier for young entrepreneurs to run a business. ZUS starts with the exemption from the obligation to pay social security contributions for 6 calendar months from the date of starting a business.

Who is the start discount for?

An entrepreneur will be able to take advantage of the start-up tax if he meets the following conditions (Article 18 of the Entrepreneurs' Law):

  • is a natural person,

  • undertakes business activity for the first time or undertakes it again, however, with the reservation that at least 60 calendar months have already passed since the date of the last suspension or termination of business activity,

  • the activity conducted by him may not be performed for the benefit of the former employer for whom, prior to the commencement of economic activity, that person performed work under an employment relationship or a cooperative employment relationship.

The start-up tax relief is an entitlement and is not obligatory, so it is up to the entrepreneur whether or not to use it. If the person conducting the business resigns from the start-up allowance, this entitlement shall not be lost. He will be able to use it again, but only after 60 calendar months from the date of termination of activity or its suspension.

6 months - how to determine?

The exemption from paying social contributions, i.e. the start relief, may last 6 months. Importantly, only the entrepreneur himself will be exempt from paying social contributions, while persons employed by him under employment contracts, civil law contracts and cooperating persons will not be exempt from paying social contributions.

If the entrepreneur starts operating on the first day of a calendar month, this month should be treated as the first month of the relief, while when the entrepreneur starts operating during the month, then the current month should not be included in the 6-month relief period.

Example 1.

Anna will set up a business on January 1, 2019 and will benefit from the start-up tax relief. She will not pay social contributions for 6 months, and in her case, ZUS will start on June 30, 2019.

Example 2.

Mr. Henryk will establish his business on October 14, 2018. Eligible for a Start Relief. 6 months for which Mr. Henryk will not have to pay social contributions, will end on April 30, 2019.

Interestingly, when the entrepreneur suspends the activity during the start-up allowance period, this period will not stop the 6-month run. This means that when the entrepreneur resumes his activity, he will be able to continue using the start-up tax relief if he did not use the full 6 months of the relief before the suspension of the activity.

ZUS for start and health insurance

An entrepreneur who decides to take advantage of the start-up tax relief will be obliged to pay only the health insurance premium. The health insurance premium is 9% of the calculation basis (in 2019 the lowest premium is PLN 342.32). A person using the start-up relief will pay the full amount of the health insurance contribution every month, regardless of when they started using the relief, because the health insurance premium is indivisible.

Example 3.

Ms Krystyna will start running a business on January 4, 2019 and will benefit from the start-up tax relief. For both January and the following months of 2019, it will pay a health insurance premium in the amount not lower than PLN 342.32. It doesn't matter that the activity started during the month.

During the start-up relief period, health insurance will be obligatory for the entrepreneur. In addition, the entrepreneur will be able to register members of his family for health insurance.

Start-up relief - consequences of non-payment of social security contributions

During the start-up relief, the entrepreneur is exempt from paying social security contributions, which has certain consequences. First of all, an entrepreneur who pays only the health insurance premium must take into account that he will not receive an allowance from the Social Insurance Institution in the event of incapacity for work or maternity. During the relief period, the entrepreneur will not be entitled to a sickness benefit from accident insurance in the event of an accident at work or an occupational disease. By paying the health insurance premium, the person benefiting from the start-up allowance will have access to free health care under the national health fund.
Importantly, the period of the 6-month start-up relief, during which the entrepreneur does not pay social security contributions, will not be taken into account when determining the right to a retirement pension or disability pension and may affect the amount of the benefit granted.

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How to apply for a start discount?

In order to apply for the start-up relief, the entrepreneur should submit the ZUS ZZA declaration to the social insurance institution. The application should be made with the insurance title code 05 40 XX, and the day when the business is established as the insurance obligation arises. The declaration should be submitted within 7 days from the date the insurance obligation arises, i.e. within 7 days from the date of commencement of business activity. The ZUS ZZA application declaration may be submitted to the social insurance institution in paper or electronic form.

Obligation to submit settlement declarations and ZUS to start

An entrepreneur submitted for a start-up relief who does not employ any employees after submitting the first declaration with proof of health insurance contributions, is exempt from the obligation to submit a monthly ZUS DRA declaration to the social insurance institution. If there are no changes in contributions, then the entrepreneur is only obliged to pay the contributions in a timely manner, without having to show them in the declarations.

An entrepreneur not employing employees has until the 10th day of the following month to submit a settlement declaration and to pay contributions. In the case of employing employees, the deadline for paying contributions and submitting the declaration is the 15th day of the following month.

Relief to start what next?

After 6 months of the start-up relief, the entrepreneur will be able to pay preferential premiums for the next 24 months. They are calculated on a basis of assessment equal to 30% of the minimum wage. In 2019, this base amounts to PLN 675.00. The calculation of the 24 months after the expiry of the 6-month relief will depend on the mode of the end of the relief period:

  • if the entrepreneur resigns from the start-up allowance before the expiry of 6 months, the 24-month period will be counted from the date indicated in the application for registration for social insurance,

  • if the entrepreneur uses the full period of the 6-month relief, then the 24-month preference mode will start on the day following the end of the period of using the relief.

After 6 months of the start-up allowance - or earlier, if the entrepreneur resigns from it - he will have to deregister from health insurance on the ZUS ZWUA form with the insurance title code 05 40.

At the beginning, ZUS can significantly facilitate running a business, because it is a significant saving. The entrepreneur may also resign from the tax relief at any time and start paying social contributions. It should also be emphasized that when using the start-up relief, the entrepreneur has the opportunity to benefit from medical care under the National Health Fund, because he will pay the health insurance premium. However, in the event of illness, the entrepreneur will not be able to receive sickness benefits, because during the tax relief period, they will not pay social contributions, including sickness contributions.