Reimbursement of social security contributions - is it taxable income?

The payment of social security contributions is one of the obligations of every entrepreneur, unfortunately most considered very annoying. Due to the multitude of obligations, a mistake can occur and the entrepreneur will pay higher contributions than he actually should. How to proceed then? Should the reimbursement of ZUS contributions be treated as income?

ZUS contributions as a company cost

An entrepreneur is obliged to pay social security contributions (retirement, disability and accident insurance) and health insurance. Only sickness insurance contributions are voluntary. In addition, contributions to the Labor Fund (FP) are compulsory, and when employing employees also for the Guaranteed Employee Benefits Fund (FGŚP) - entrepreneurs paying preferential ZUS contributions for the first 2 years of operation are exempt from the last two.

Entrepreneurs have two options for settling social security contributions. The paid social insurance contribution may be settled:

• directly in tax deductible costs,

• by deducting from income when calculating advance income tax.

In the case of health insurance contributions, it can only be deducted from tax, so the paid premium is taken into account only when calculating the tax advance.

Attention! The health insurance contribution is the only one that is not fully tax deductible. The entire health insurance contribution currently amounts to 9% of the calculation basis. However, only 7.75% of the calculation basis is deductible.

Importantly, the health insurance premium paid for business activity can be deducted not only from the tax calculated on the income from business activity. We can also deduct the contribution from business activity from the tax paid on income from another source, e.g. from the tax under the employment contract.

In turn, the paid contribution to the Labor Fund paid for the entrepreneur can only be booked as tax deductible costs.

Overpayment in ZUS

If the entrepreneur overpays ZUS contributions, ZUS will ex officio allocate the overpayment towards overdue or current contributions. If the payer is not in arrears, ZUS will ex officio include the overpayment towards future liabilities. Then the entrepreneur, paying the contributions for the next months, reduces the payment for the relevant fund by the amount of the overpayment.

If the payer has no arrears in payments for previous and current periods, he may submit an application to ZUS for reimbursement of unduly paid contributions. Such an application should be submitted to the ZUS branch with territorial jurisdiction over the seat of the enterprise. This can be done traditionally by submitting a written application in person or electronically through a trusted profile on ePUAP.

Important! In the case of submitting an application for the reimbursement of overpaid ZUS contributions, complete the ZUS-EZS-P form and submit it to the appropriate ZUS branch. After approving the application, ZUS has 30 days to refund the overpayment.

Reimbursement of social security contributions and income from activity

In the event of receiving a refund of ZUS contributions, they should be accounted adequately as they were previously settled - increasing income or tax. What is going on? Overpaid contributions:

1. for social insurance (retirement, disability, sickness, accident) in the overpaid part:

• if they have been deducted from the income in the annual tax return - their return should be treated as a separate source of income subject to income tax. The received reimbursement of social security contributions should be entered in the Other sources field in the tax declaration for the year in which the reimbursement of these contributions was received,

• if the premiums were previously classified as tax deductible costs - their reimbursement should be recognized on an ongoing basis in the company's revenues in the month of their receipt, even if the overpayment would apply to months or previous years,

2. for health insurance should be added to the tax in the tax return for the year in which the refund was received,

3. for the Labor Fund should be included in the income in the month of their receipt on the entrepreneur's bank account.

Attention! The recognition of an overpayment and transferring them to cover current liabilities in ZUS contributions also causes an overpayment of contributions that were previously deducted from income (social), tax deducted (health care) or included in tax deductible costs (Labor Fund). The procedure is the same as in the case of returning the overpayment to the entrepreneur's bank account.