Entrepreneurs' ZUS contributions - settlement methods

Most entrepreneurs know that their ZUS contributions may reduce the income tax base. It is also worth knowing the rules for deducting this liability - there are two methods that you can use, but only in some cases they will not differ from each other. Therefore, we invite you to familiarize yourself with the methods of settling ZUS contributions by entrepreneurs.

ZUS contributions - entrepreneur and his obligations

An entrepreneur who has set up his own business must pay ZUS contributions for three types of social insurance - retirement, disability and accident insurance. In addition, it is also necessary to regulate health insurance and the Labor Fund. Payment of sickness insurance contributions is optional.

In 2019, the pension contribution is PLN 558.08 (19.52% of the tax base), disability pension - PLN 228.72 (8%) and sickness insurance - PLN 70.05 (2.45%). Accident insurance is paid in the amount determined on the basis of the Regulation of the Minister of Labor and Social Policy of November 29, 2002 on the differentiation of the interest rate of social insurance contributions for accidents at work and occupational diseases depending on occupational hazards and their effects.

At the same time, new entrepreneurs usually have the right to take advantage of a two-year relief, on the basis of which contributions are paid at a reduced rate. In this case, retirement insurance will amount to 131.76, disability insurance - PLN 54.00, and sickness insurance - PLN 16.54.

How to account for entrepreneurs' ZUS contributions in the tax?

In order to reduce the income tax by paying ZUS contributions, the entrepreneur may choose one of two forms of settlements. Therefore, it is possible to include them directly in costs or to deduct them from income when calculating advance income tax.

The regulations do not dictate the method that an entrepreneur must choose, however, it should be remembered that once a decision is made, it should be valid for the entire tax year. What should you consider when making a decision? The most important thing is the amount of income - with low income or loss, it will be more profitable to classify contributions as tax deductible costs, with high - there will be no difference.

Entrepreneur's ZUS contributions and loss

As a rule, the loss may be settled by the entrepreneur in subsequent tax years. Thus, by including ZUS contributions as costs, the taxpayer increases the loss even more, which will lower his tax base in the future.

On the other hand, if the entrepreneur decides to deduct contributions directly from income, in the event of its absence or low level, it might turn out that it would not be possible to take into account contributions.

Example 1.

Deduction of contributions from income

The taxpayer deducts social security contributions (including sickness) from the income earned. At the end of the year, he will show:

• income: PLN 50,000,
• costs: PLN 45,000,
• social security contributions: PLN 834.55 (excluding sickness insurance) x 12 months = PLN 10,014.60.

When he subtracts the paid contributions (PLN 10,014.60) from his income (PLN 5,000), he will actually make a loss. However, with this solution, part of the contributions (PLN 5,014.60) will be forfeited, as the operating income does not allow for their full deduction. Moreover, he cannot deduct them in the next tax year.

Example 2.

Accounting for contributions to costs

Another taxpayer chose the second method of settling social security contributions - he includes them directly as tax deductible costs. At the end of the year, it will show:

• income: PLN 50,000,
• costs: PLN 55,014.60 (costs from the previous example increased by social security contributions paid, i.e. PLN 45,000 + PLN 10,014.60),

In this case, he would also make a loss on activity, but it would take into account the entire value of social contributions paid. He will have the right to settle the resulting loss over the next 5 tax years, and during one tax year he can account for 50 percent. the value of the loss for a given year.

As you can see, the choice of the form of settling ZUS contributions in terms of income tax is particularly important in the case of taxpayers with low income or loss. On the other hand, entrepreneurs who achieve high revenues are free to decide which form they would like to choose, because each of them will allow for the deduction of paid ZUS contributions in full value.