Income tax exemption from ZUS

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One of the available assistance offered to entrepreneurs under the anti-crisis shield is exemption from social security contributions. Currently, entrepreneurs receive letters from ZUS in which they get the right to use this form of assistance. Importantly, the granting of the right to be exempted from ZUS takes place after several months. This means that the entrepreneurs have already paid the contributions from which they were released. How should the exemption from ZUS be accounted for? Will there be income on the entrepreneur's side? Let's check it out!

For what periods can you get exemption from ZUS?

Anti-crisis shield 6.0 allowed entrepreneurs to take advantage of the exemption from ZUS for the period July-September 2020 and for November 2020. However, this is not the end, because under the anti-crisis shield 7.0 entrepreneurs can take advantage of the exemption from paying contributions for December 2020 and January 2021 or only for January 2021. These exemptions apply to both social and health contributions, as well as contributions to the Labor Fund, Solidarity Fund, Guaranteed Employee Benefits Fund and the Bridging Pensions Fund for these months. The exemption from ZUS under the anti-crisis shield 6.0 and 7.0 applies only to entrepreneurs from selected industries who submitted applications to the Social Insurance Institution on time. Until March 31, 2021, taxpayers can still apply for exemption from ZUS. The conditions for exemption from ZUS under shield 7.0 are described in the article: Shield 7.0 - which PKD applies to and when can applications be submitted?

What happens to the contributions covered by the exemption from ZUS?

The exemption from ZUS does not depend on whether the ZUS contributions from which the entrepreneur wants to be exempt have been paid on time. An entrepreneur may also be exempt from unpaid ZUS contributions. Moreover, according to Art. 31zo paragraph. 9 of the Act on special solutions related to the prevention, counteracting and combating COVID-19, other infectious diseases and crisis situations caused by them, the paid ZUS contributions, from which the entrepreneur has been exempt, may be refunded on the terms specified in art. 24 of the Act on the Social Insurance System. Art. 24 sec. 6a of the Act on the Social Insurance System:

Unduly paid contributions are credited ex officio by the Institution towards overdue or current contributions, and in the absence of them - against future contributions, unless the contribution payer submits an application for the reimbursement of contributions. (...)”.

Example 1.

Mr. Łukasz has been the owner of the hotel for 5 years as part of his business activity. On February 20, 2021, he applied for an exemption from ZUS contributions for December 2020, which he paid in January 2021. Due to the introduced restrictions related to the pandemic, Mr. Łukasz did not pay contributions for the next month, i.e. January 2021. Can Mr. Łukasz apply for a refund of paid contributions , if he receives a positive decision regarding exemption from ZUS for December 2020?

Due to the fact that Mr. Łukasz did not pay ZUS contributions for January, arrears with ZUS arose on this account. If ZUS issues a positive decision, pursuant to which Mr. Łukasz will be exempt from ZUS contributions for December 2020, despite the submitted application for their reimbursement, ZUS will allocate the funds paid towards arrears, i.e. ZUS contributions for January.

Example 2.

Mr. Aleksander runs a restaurant and has applied for exemption from ZUS for January 2021. All due ZUS contributions are paid by Mr. Aleksander on time, therefore there are no arrears on this account. Can Mr. Aleksander apply for a refund of the paid ZUS contributions?

Yes, due to the fact that Mr. Aleksander does not have any arrears with ZUS, he may submit an application for the reimbursement of previously paid contributions, which includes the exemption.

Example 3.

Ms Anna was exempted from ZUS for January 2021. She received a letter from ZUS on March 10, 2021. However, she did not apply for the reimbursement of paid contributions and on March 1 she paid the contributions for February. What will happen to the amount of ZUS contributions from which Ms Anna was exempted and which have actually been paid?

Due to the fact that Ms Anna did not submit an application for the reimbursement of paid ZUS contributions, they will be automatically allocated to cover the ZUS contributions for the next month.

Exemption from ZUS and tax records

Entrepreneurs have the right to include social contributions directly in tax costs or deduct them together with health contributions in advance income tax. In the case of contributions to the Labor Fund, they increase the amount of tax costs and are included in column 13. KPiR - Other expenses. Pursuant to Art. 22 sec. 6bb of the PIT Act, ZUS contributions may be included in tax costs in the month for which they are due, provided that the contributions have been paid. On the other hand, pursuant to Art. 23 sec. 1 point 55a of the PIT Act is not considered to be tax deductible costs of unpaid ZUS contributions. ZUS contributions, from which the entrepreneur will be released, are considered to be undue. As a result, ZUS contributions cannot be included in the tax calculations. If the entrepreneur was dismissed from ZUS for a month for which he did not pay contributions, receiving the decision from the Social Insurance Institution granting the exemption does not have to perform any actions. Due to the fact that ZUS contributions had not been paid earlier, they were also not included in tax settlements. The exemption from ZUS does not generate taxable income. In a situation where the entrepreneur has paid ZUS contributions, from which he was then released, he is obliged to correct the settlements. It should do so on a day when:

  • received information about the granted exemption from ZUS;

  • he received a refund of social security contributions from which he was exempted

- whichever happened first.

The above procedure was confirmed by the Director of the National Tax Information in the individual ruling of November 20, 2020, ref. No. 0113-KDIPT2-1.4011.724.2020.2.AP, in which we read:

"In the case of payment of ZUS contributions, the correction of costs should be made - as a rule - on the date of receipt of the information from ZUS referred to in Art. 31zq paragraph. 5 of the COVID-19 Act.

And so, if:

  1. taxpayer:

  • submitted an application for exemption from the obligation to pay contributions and received the information referred to in Art. 31zq paragraph. 5 of the COVID-19 Act i

  • has applied for reimbursement of contributions, but contributions have not yet been reimbursed

- the correction of costs is made on the day of receiving from ZUS the information referred to in art. 31zq paragraph. 5 of the COVID-19 Act, on the terms set out in Art. 22 sec. 7c of the Personal Income Tax Act;

  1. taxpayer:

  • submitted an application for exemption from the obligation to pay contributions and received the information referred to in Art. 31zq paragraph. 5 of the COVID-19 Act i

  • he did not apply for a reimbursement of contributions, so the premiums for March have been entered against the premiums for April

- the correction of costs is made on the day of receiving from ZUS the information referred to in art. 31zq paragraph. 5 of the COVID-19 Act, on the terms set out in Art. 22 sec. 7c of the Personal Income Tax Act;

  1. taxpayer:

  • submitted an application for exemption from the obligation to pay contributions and

  • submitted an application for the reimbursement of contributions and the contributions were returned to him before he received the information referred to in Art. 31zq paragraph. 5 of the COVID-19 Act

- the correction of costs is made on the day of receiving the reimbursement of contributions for March, in accordance with the principles set out in Art. 22 sec. 7c of the Personal Income Tax Act. (...)

Therefore, the Applicant is obliged to correct the costs on the day on which he received the information referred to in Art. 31zq paragraph. 5, if he first received this information or on the day of receipt of the reimbursement of contributions, if the reimbursement of contributions took place earlier than the receipt of the information referred to in Art. 31 of the COVID-19 Act, in accordance with Art. 22 sec. 7c of the Personal Income Tax Act ”.

Example 4.

Ms. Emilia submitted an application for exemption from ZUS for December 2020 and an application for the reimbursement of ZUS contributions paid on January 10, 2021 covered by the exemption. On February 28, she received positive information from the Social Insurance Institution (ZUS) granting exemption from ZUS. Ms Emilia received the reimbursement of contributions on March 5, 2021. Social contributions and the Labor Fund for December 2020 were included as an expense in the KPiR in January 2021, and health contributions for December 2020 - directly in the calculation of the tax advance for January. How should Emilia make a correction in connection with the exemption from ZUS?

To set the date of the correction, you should analyze the dates that are related to the situation:

  • On January 10, 2021, ZUS contributions for December 2020 were paid, and thus the advance payments for January 2021 were included in the tax calculations;

  • On February 28, 2021, Ms. Emilia received information from ZUS about her exemption from ZUS for December 2020;

  • On March 5, 2021, Ms Emilia received a refund of contributions.

The correction should take place on the day of receiving the decision on exemption from ZUS, because this event occurred first before the reimbursement of contributions. The adjustment would consist in derecognition from the costs of social contributions and contributions to the Labor Fund, which were recognized in January 2021 as a cost in the KPiR. To do this, add internal proof for the sum of deducted contributions and include it in a negative amount in column 13. KPiR - Other expenses. The proof is issued with the date of receipt of the decision - i.e. February. However, the reimbursed health insurance contributions will be shown only in the annual tax return for 2021 under the "Tax additions" item.

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How to include the exemption from ZUS in the wFirma.pl system?

The method of booking the adjustment related to the exempt ZUS contributions depends on whether these contributions are recognized directly in costs or as a deduction in the advance payment. In the case of contributions to the Labor Fund, the correction should be included in the internal document in the tab: EXPENDITURE »ACCOUNTING» ADD »INTERNAL PROOF on the date of receipt of the decision to cancel contributions or on an earlier date of return of paid contributions. In the Total field, enter the value of previously recognized contributions as a cost in KPiR in a negative value (preceded by a minus sign).

The same should be done with exempt social contributions, which are recognized directly in tax costs.

In the case of health contributions and social contributions (if they are included in the tax advance), they are recognized at the time of generating the annual tax return for the year in which the decision to redeem or refund contributions was issued, as:

1. In the case of the PIT-36 form:

  • increasing the tax base in part H1 - in the part related to social contributions;

  • increasing the tax in part I in the line Additions to the tax - in the part concerning health insurance contributions.

2. In the case of the PIT-36L form:

  • increasing the tax base in part F.1 - in the part concerning social contributions;

  • increasing the tax in part G in the Add Taxes line - in the part concerning health insurance contributions.