On 7 June, the Amendment to the Social Security System Act was signed by the President. This means that a large number of businesses will soon benefit from favourable changes to the payment of social security contributions.
However, entrepreneurs have many questions, so we answer the most common ones.
What is the most significant change introduced by the Amendment?
Entrepreneurs engaged in non-agricultural business activities will be able to benefit from an exemption from paying contributions to their own compulsory old-age pension, invalidity pension and accident-at-work insurance, for one calendar month of their choice in each calendar year (so-called ‘contribution holiday’).
Who can benefit from a contribution holiday?
Only entrepreneurs engaged in non-agricultural business activity, as defined in Article 8(6)(1) of the Social Security System Act, can benefit from the contribution exemption.
In addition, the Amendment provides for some additional restrictions, related to the size of the business and the scale of its operations.
As a result, only those meeting all of the following conditions will be able to benefit from the new solutions:
- Number of employees condition
In the calendar month preceding the month in which the application for a contribution holiday is made, the entrepreneur has not registered more than ten persons (including the entrepreneur) for old-age pension, invalidity pension and accident-at-work insurance or health insurance.
- Revenue condition
In the last two calendar years preceding the year in which the application is made, the entrepreneur has not earned any revenue from non-agricultural economic activity or, in at least one of these last two years, their annual revenue from such activity did not exceed the equivalent of EUR 2 million (the amount of this revenue is not prorated on the basis of the number of days on which the non-agricultural economic activity was actually carried out)
- Condition of not providing services to a former employer
As an insured person, in the preceding calendar year and in the period from the beginning of the year in which the application is submitted to the date of submission of the application, the entrepreneur has not carried out any non-agricultural economic activity for their former employer for whom, in the year in which they started the economic activity or in the previous year, they carried out the same activities falling within the scope of their economic activity, but in an employment relationship or a cooperative employment relationship
- Condition of insurance
In the calendar month preceding the month in which the application was submitted, the entrepreneur, as an insured person, was subject to old-age pension, invalidity pension and accident-at-work insurance on account of running a non-agricultural economic activity
What does an entrepreneur need to do in order to benefit from a contribution holiday?
In order to benefit from a contribution holiday, an application must be submitted to ZUS. The entrepreneur must do this in the month preceding the month in which the exemption is to apply.
In accordance with the Amendment, applications will only be submitted electronically and no decision will be required to grant the application. The relevant information will be transmitted via the ZUS system.
The entrepreneur does not have to formally cease his or her business activities in order to take advantage of the tax holiday.
Moreover, he or she will remain a participant in the social security system during the period of the contribution holiday (unlike, for example, those who benefit from the so-called ‘start-up relief’).
This is fundamental in view of the potential consequences of non-participation, even temporary, in the social security system. For example, there is no risk of ‘dropping out’ of sickness insurance when taking a contribution holiday.
Are the changes positive or not?
In our view, the Amendment is a step in the right direction.
Indeed, the explanatory memorandum to the bill states that the increase in the amount of social security contributions paid by companies over the last ten years has been almost 109%, which is higher than the rate of inflation. This has had a negative impact on this group of market participants.
The proposed solution is an attempt to support businesses and at the same time, given the scale of the burden on the state budget, does not threaten the stability of the Polish social security system.
When will the changes take effect?
The Amendment will come into force on the first day of the month following the expiration of 4 months from the date of its announcement, with the exception of Article 8, which will come into force on the day following its announcement.
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