When to suspend your activity to save on social security contributions?
A person running a business has the option to suspend it. What does it mean? It is a periodic cessation of business activity. "Suspension" is a practical solution for entrepreneurs who, for various reasons, for a certain period of time cannot or do not want to run a business, but do not want to close it, because they plan to resume it in the future. We answer the question when to suspend your activity to avoid paying ZUS contributions.
General rules for suspension of operations
Pursuant to the Entrepreneurs' Law Act, a person running a business may suspend it:
- for a limited period
- or for an indefinite period,
however, not shorter than 30 days.
Importantly, economic activity may only be suspended by an entrepreneur not employing employees, while pursuant to Art. 22 sec. 2 Entrepreneurs' rights, exceptionally, an entrepreneur who employs only employees on maternity or parental leave may suspend their activity.
Suspension of business activity - rights and obligations
Pursuant to the provisions of the Entrepreneurs' Law, during the period of suspension of economic activity, the entrepreneur cannot perform economic activity and generate current income from non-agricultural economic activity. However, during the period of suspension:
- he has the right to perform all activities necessary to maintain or secure the source of income;
- may accept receivables or the obligation to settle liabilities arising before the date of suspension of business activity;
- has the right to sell its own fixed assets and equipment;
- has the right or obligation to participate in court proceedings, tax and administrative proceedings related to business activity performed before the suspension of business activity;
- performs all obligations prescribed by law;
- has the right to earn financial income, also from activities carried out before the suspension of business activities;
- may be inspected on the terms provided for entrepreneurs engaged in business activity.
Suspension of business activity - notification
In order to notify the suspension of business activity, the entrepreneur is obliged to submit the completed CEIDG-1 form to the commune office. In it, check box 3 - "application for entering information on the suspension of business activity", and then indicate the date of commencement of the suspension and its expected period (not shorter than 30 days). The form may be submitted electronically, information on this subject is available on the website of the Central Register and Information on Economic Activity.
On the basis of the submitted CEIDG-1 form, information about the suspension of business activity will be sent to ZUS automatically, and the Social Insurance Institution prepares the relevant documents:
- ZUS ZWPA - deregistering the contribution payer;
- ZUS ZWUA - deregistering the entrepreneur and possibly the cooperating person from insurance;
- ZUS ZCNA - deregistering family members (if such persons have been reported).
The entrepreneur will receive written information about the prepared documents from the Social Insurance Institution.
When is it profitable to suspend your business?
An entrepreneur is exempt from paying social contributions from the date of suspension of business activity, and from the next month - also from paying health insurance. Thus, a person planning to suspend the activity can save on the premiums paid by choosing the right moment.
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When to suspend your activity so as not to pay any contributions?
As already mentioned, an entrepreneur paying social contributions is exempt from paying them from the first day indicated in the CEIDG application as the day of suspension of activity. This means that if the activity is suspended during the month, social contributions are calculated proportionally to the days of conducting activity prior to the suspension.
Ms Anna suspended her business activity on August 10. She is reported to ZUS with the code 05 10, i.e. she pays full contributions. While generating the ZUS DRA declaration for August, Ms Anna reduced the contribution base proportionally to the 9 days of running a business (from 1 to 9 September). However, she was obliged to pay the health insurance premium in full.
Contribution base "large ZUS": PLN 3,155.40
3155.40: 31 (number of days in August) x 9 (number of days of business before the suspension) = PLN 916.08
The contribution base in August is PLN 916.08
Pension contribution: PLN 916.08 x 19.52% = PLN 178.82
Disability contribution: PLN 916.08 x 8% = PLN 73.29
Accident contribution: PLN 916.08 x 1.67% = PLN 15.30
Sickness contribution (voluntary): PLN 916.08 x 2.45% = PLN 22.44
Contribution to the Labor Fund: it is not paid, because the base PLN 916.08 is lower than the minimum wage (PLN 2,800)
The sum of social contributions for August will be PLN 289.11
The health insurance premium will not change, i.e. it will amount to PLN 381.81
The sum of social contributions and health contributions is PLN 670.92.
In turn, the situation is different in the case of the health insurance premium. It is always paid in full (it is indivisible) and even if the activity was carried out one day a month, the health insurance premium should be paid in full.
So when to suspend your business so as not to pay any contributions? Well, it's best to do it on the first day of the month. As a result, the entrepreneur will be exempt from paying both social and health contributions for the entire month.
Mr. Andrzej submitted a CEIDG application indicating the suspension of operations on September 1. This means that the last ZUS contributions will be paid for August (until September 10). However, in September, Mr. Andrzej will be exempt from social contributions.
Ms. Olga suspended her activities on October 31. This means that for October he will pay the full health insurance contribution and social contributions less one day.
An entrepreneur using a start-up allowance or preferential ZUS contributions does not lose the right to them when the activity is suspended. However, the suspension period is included in the period of running a business, i.e. 6 or 24 months of lower contributions, the period of suspension of business activity is shortened.
As a rule, suspension of activity is a transitional period, and the entrepreneur plans to resume it sooner or later. The most common reason is the periodicity of running a business and thus a reduction in revenues. Therefore, it is worth knowing when to suspend your activity in order to save on paid ZUS contributions.
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