Suspension of a commercial law company - consequences

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Partners of commercial law companies may suspend the company, provided that it does not employ any employees (applies to persons employed under an employment contract). The entrepreneur may suspend the activity without giving a reason, provided that the articles of association of a given company do not specify in detail the conditions for suspending it. The period of suspension of the company may last from 30 days to 24 months. The only exception is February, when you can suspend your business for 28 or 29 days. The period of suspension is given in days, months or months and days. Due to the period defined in this way, words such as week, month or year should not be used in the notification as it will be considered an error. The suspension of a commercial law company may also take place at the request of the entrepreneur, if he does not employ employees, and for the purpose of personal care for a child for a period of 6 months to 3 years.

Suspension of a commercial company

If the entrepreneur operates in the form of a commercial company, a suspension notification is submitted to the National Court Register. Information on the suspension is provided to the register of entrepreneurs on the KRS-Z62 form, which must be submitted to the appropriate commercial court for a given company. From July 1, 2017. new form templates are in force, this should be remembered. The application must also be accompanied by the resolution of the partners of the partnership or the management board of a capital company regarding the suspension, as well as a declaration of not employing any employees. The application for the entry of information on the suspension of economic activity is exempt from court fees. Information on the suspension of business activity is not subject to announcement in the Court and Economic Monitor. When deciding to suspend your activity, you should also prepare reports and applications to the statistical office, tax office and ZUS - ZUS ZWPA form. Partners of a commercial law company deregister directly with ZUS as contribution payers using the ZUS ZWPA form, and also deregister from insurance using the ZUS ZWUA form. The one-stop-shop principle applies to submitting these applications, but this only applies to persons who deliver the application in person to the appropriate branch of the court. Entrepreneurs who decide to submit an application by electronic means are forced to send all documents to the appropriate offices on their own. From submitting the application to the National Court Register, the company has 7 days to notify the competent head of the tax office about the suspension of operations.

ZUS and the suspension of a commercial law company

The suspension of a commercial law company, i.e. the suspension of business activity, has an impact on the insurance obligation. During the suspension period, the entrepreneur (partner of a commercial law company) is exempt from the social insurance obligation. He is also not subject to compulsory health insurance during this period. However, he may decide to pay voluntary contributions for old-age and disability insurance as well as voluntary health insurance. Only at his request, he cannot be covered by sickness and accident insurance due to the fact that he has suspended his activity.

Commercial law companies may reduce the basis for calculating contributions proportionally to the period of being subject to social insurance already in the month in which the business activity was suspended.

An entrepreneur who, in accordance with the provisions of the Act on freedom of economic activity, has suspended the economic activity, is not obliged to pay contributions to the Labor Fund. They are paid for for the period of compulsory retirement and disability insurance, and therefore the entrepreneur is not covered by such insurance during the period of suspension of the activity.

Obligations of the person suspending the activity

The basic obligation of a company that intends to suspend its activity is to report this fact to the National Court Register by submitting an appropriate application with attachments to the commercial court and submitting relevant notifications and applications to the Tax Office and the Social Insurance Institution. The company, in the period of suspension of its activity, cannot achieve revenues from the activities it provides. In addition, the Act specifies the activities that a given entity has the right to perform during the suspension period, namely:

  • has the right to perform all activities necessary to maintain or secure the source of income,
  • has the right to accept receivables, is also obliged 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 in accordance with the rules provided for entrepreneurs conducting business activity.

Entrepreneurs are also responsible for submitting an annual financial report. However, there is an exception which says that an entrepreneur using non-closing books may not submit an annual report for the financial year to which the period of suspension and non-closing of the books relates, but it is a possibility strictly and in detail specified by law.

VAT and the suspension of a commercial law company

Suspension of a commercial company of active VAT payers means that they do not have to submit VAT returns 7 for the periods covered by the suspension. The act, however, provides for exceptions concerning, inter alia, the need to submit a declaration for the tax periods for which the taxpayer is obliged to settle the tax for the performance of taxable activities, for the periods in which the suspension of business activity did not apply to the full tax period, and for those for which the taxpayer is obliged to correct the input tax. The exemption from submitting declarations also applies to EU VAT taxpayers. This provision has been in force since April 1, 2011.

The provisions of the VAT Act also give the right to show the amount of the surplus of input tax over the due tax in the first declaration that will be submitted after the period of suspension of activity. The entrepreneur also has the option to correct the declaration for the last settlement period before the suspension of the commercial law company during the suspension period. Then show the amount of the resulting excess input tax over the tax due as the amount to be returned to the bank account, and not, as in the first option, as the amount to be transferred.

Running several businesses

In a situation where the entrepreneur operates in several enterprises with different legal form, he may suspend one or several forms of activity if he notifies the relevant authorities about it.

Books of accounts

A suspended commercial law company may, while keeping full accounting, not carry out an inventory and not close the books of accounts if the conditions strictly defined by law are met. This privilege may be exercised when no economic event occurred during the financial year in which the entity suspended its operations. More specifically, no event causing financial and property effects (i.e. that no depreciation or amortization was made, no economic operation took place, e.g. payment of real estate tax, tax on means of transport or collection of a commission by the bank for maintaining a bank account). Therefore, the conditions required to take advantage of the option of not closing the books are quite difficult to meet, but not impossible.

If the requirements are met and the entity has the right not to close the books of accounts, it may also be released from submitting the financial statements for the financial year in which it remained suspended and took advantage of the option of not closing the books of accounts. The unit may therefore also be exempt from inventory.

The provisions on non-closing of the books of accounts do not apply to entities in which a commercial company has been suspended and which issue securities and intend to apply for admission or seek admission to trading on a regulated market in a country belonging to the EEA (European Economic Area), and issuers securities admitted to trading on this market.

Due to the right of the suspended companies, the entity has the option to sell fixed assets. The question then arises whether, if they are the only economic operation that requires booking in a given tax year, is it possible to take advantage of not closing the books of accounts for that year? The regulations are very detailed and do not allow for such a possibility, causing the entity to close the books of accounts for a given financial year in such a case.

The company's possession of fixed assets is also associated with their depreciation. During the suspension of operations, assets that are not used as a result of suspension are not subject to depreciation from the month following the month in which the commercial law company was suspended.

PIT and CIT tax

Taxpayers paying income tax on general terms - in the period when a commercial law company was suspended, they are exempt from the obligation to pay advances for income tax, regardless of the form of paying advances to the tax office, i.e.monthly, quarterly, in a simplified form - 1/12 of the output tax resulting from the tax return submitted in the previous year. This provision also applies to general partnerships, partnerships, limited partnerships and limited joint-stock partnerships which have suspended the performance of economic activity pursuant to the provisions of the Act on freedom of economic activity. Partners of companies are also exempt from the obligation to pay advances, provided that they notify the competent head of the tax office in writing not later than within 7 days from the date of submitting the application for entry of information about the suspension of activity.

Taxpayers taxed with the flat-rate income tax on recorded revenues during the suspension of economic activity are exempt from calculating the flat-rate on recorded revenues and paying it to the account of the tax office. An entrepreneur who pays income tax in the form of a tax card has two options: on the basis of the Freedom of Economic Activity Act (also applies to a general partnership) or the right granted to him by the Lump-sum Income Tax Act, namely a break in conducting activities. The break is defined as a lower limit, which says that it should not last less than 10 days and that the taxpayer should report it no later than on the day of its commencement. The difference between the interruption and the suspension of a commercial company also includes the rules for hiring employees. In the event of a break, the Act does not limit the possibility of using it by entrepreneurs employing employees. Regardless of the choice of regulations, in the case of an entrepreneur using a tax card, a person who has not liquidated business activity is considered to be a person running a business, and thus no tax is collected on him in the form of a tax card for the entire period of suspension in the amount of 1/30 of the monthly payment for each day of suspension. Calculation of the amount of the flat-rate income tax payable is left to the discretion of the taxpayer. The taxpayer is also obliged to notify in writing within 7 days from the date of submitting the application for the entry of information about the suspension of the activity of the head of the tax office.

Corporate income tax payers - during the period of suspension of business activity, they are exempt from the obligation to pay advances on income tax, regardless of the form of paying advances to the tax office, i.e. monthly, quarterly, in a simplified form - 1/12 of the tax due resulting from the tax return submitted last year.

Entrepreneurs must remember that the suspension of a commercial company does not release taxpayers from the obligation to submit tax returns for the tax year and from paying the tax.

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Obligation to convene a shareholders' meeting

Suspension of a commercial law company that applies to a limited liability company may exempt from the obligation to convene an ordinary shareholders' meeting. If this happens, the next ordinary meeting will have to adopt resolutions also relating to the financial year in which the activity was suspended.

Business resumption

The day of resuming business activity is the date of submitting the application for the entry of information on the resumption of business activity. It should be remembered that the resumption of activity does not take place automatically after the expiry of the period for which the company was suspended, but only upon the entrepreneur's request to enter information about the resumption of business activity in the register. In the event of failure to submit an application for entry of information on the resumption of economic activity, the court initiates proceedings in which it summons the entities obliged to submit such information within 7 days. In the event of failure to comply with such a summons, a fine is imposed on the obliged, which may be renewed by the court. As a last resort, the court may ex officio remove the entrepreneur from the register.