I would like to inform you that on Friday, 27 December 2019, the President of the Republic of Poland signed an amendment to the Act on the Social Insurance System and the Act on the National Revenue Administration, which extends the so-called Mały ZUS (“Small ZUS” – reduced social insurance contributions for small businesses).
The adopted amendment to the insurance act (the amending act), which will enter into force on 1 February 2020, will broaden the so-called “Mały ZUS” applied since 2019 and enlarge the group of entrepreneurs entitled to pay preferential contributions. Article 18c of the Act of 13 October 1998 on the Social Insurance System (consolidated text: Journal of Laws of 2019, item 300, hereinafter: the “System Act”) has been amended, which should be interpreted as meaning that “Mały ZUS” will be replaced by “Mały ZUS Plus”. The amended Article 18c of the System Act no longer sets the threshold for an entrepreneur’s revenue in the previous calendar year that makes it possible to benefit from the relief on the basis of the minimum wage applicable in December of the previous year multiplied by 30. Following the changes, the threshold entitling entrepreneurs to preferential contributions paid from February 2020 will be PLN 120,000 of the entrepreneur’s revenue for the past calendar year (i.e. 2019). The legislator has also determined that the contribution assessment basis will be established on the basis of the entrepreneur’s income.
Under the new provisions, the insured person will determine the contribution assessment basis for a given calendar year by multiplying the average monthly income from business activity earned in the previous calendar year, calculated in accordance with the provisions of the Act, by a coefficient of 0.5. In turn, in the case of entrepreneurs who in the previous calendar year were subject to the provisions on flat-rate income tax in the form of the tax card (karta podatkowa) and who did not benefit from the exemption of sales from goods and services tax:
- a) the annual revenue from business activity earned in the previous calendar year will be the value of sales referred to in Article 2(22) of the Act of 11 March 2004 on Goods and Services Tax (Journal of Laws of 2004, No. 54, item 535, as amended) that is subject to this tax, excluding the amount of the tax,
- b) the annual income from business activity earned in the previous calendar year will be the annual revenue multiplied by a coefficient of 0.5.
As for entrepreneurs who in the previous calendar year were subject to the provisions on flat-rate income tax in the form of a lump sum on registered revenue, the annual income from business activity earned in the previous calendar year will be the annual revenue multiplied by a coefficient of 0.5.
A condition for obtaining the right to “Mały ZUS Plus” is that the entrepreneur conducted business activity for at least 60 days in the previous calendar year. The reduced contributions will not be available to entrepreneurs who in 2019 settled their tax in the form of the tax card and at the same time benefited from the exemption of sales from VAT.
In addition to the existing obligation to submit information on annual revenue from business activity and on the contribution assessment basis, the entrepreneur should provide data on income and forms of taxation. Entrepreneurs will submit this additional information – as before – in the individual monthly report or in the settlement declaration.
Amendments to the bill on “Mały ZUS PLUS” were put forward by the Ombudsman for Small and Medium-sized Enterprises, and the Sejm (the lower house of the Polish parliament) adopted the proposed change obliging the Social Insurance Institution (ZUS) to obtain additional information confirming revenue and income directly from the National Revenue Administration, instead of requesting this information from the entrepreneur.
It will be possible to pay the reduced contributions for a maximum of 36 months (3 years) within 60 consecutive months (5 years) of conducting business activity.
The rules for determining the social insurance obligation where there are concurrent grounds for insurance remain unchanged. Likewise, the order in which entrepreneurs make use of the existing contribution reliefs will not change.
Example 1. An entrepreneur who was not entitled to “Mały ZUS” in 2019 (their business revenue for 2018 was higher than PLN 63,000) but will be entitled to it in January 2020 (their business revenue for 2019 will not exceed PLN 67,500) and who wishes to benefit from the relief in January 2020 under the existing rules will be obliged to register with ZUS within 7 days of acquiring this entitlement, i.e. by 8 January 2020 at the latest.
Example 2. A person who met the conditions for paying “Mały ZUS” in 2019 and will meet them in January 2020 under the existing rules does not need to register with ZUS again. However, they must submit the settlement documents for January 2020 under the existing rules, i.e. the reports and/or the declaration, by 10 or 15 January 2020. If they fail to do so, ZUS will take this to mean that they are giving up the relief.
Example 3. An entrepreneur who for 2020 determined the lowest contribution assessment basis for pension and disability insurance in accordance with the existing wording of the Act and makes use of the “Mały ZUS” entitlement will, once the new provisions enter into force, determine the contribution assessment basis for this insurance in accordance with “Mały ZUS Plus”, without submitting a deregistration form and re-registering for social insurance. In such a case, the entrepreneur will provide ZUS with information on the forms of taxation applied, annual revenue, annual income, etc., in the individual monthly report or in the settlement declaration, as appropriate, submitted for January 2020 and for February 2020 within the time limits specified in the System Act.
Example 4. Entrepreneurs who wish to exercise the right to pay contributions under “Mały ZUS Plus” from February 2020 and have not previously made use of the Mały ZUS entitlement (their revenue for 2019 was higher than PLN 67,500 but lower than PLN 120,000) should make the appropriate registration with the Social Insurance Institution by the end of February 2020.
The changes introduced will make it possible to cover a relatively broad group of entities for which paying social insurance contributions has so far been a significant barrier to running a business.
Entrepreneurs who will be using this form of settling social insurance contributions for the first time are required to make the appropriate registration with ZUS by the end of February 2020.
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