Employees often face the issue of transitioning from an employment contract to a B2B relation. Let’s consider the implications in ZUS (Social Security Institution) when providing services to the former employer.
Self-employment?
The debate on the permissibility of self-employment (or cooperation within B2B) resurfaces in public discourse from time to time. Although the so-called entrepreneur’s test is not yet mandatory, authorities have tools to question such arrangements. However, this post does not concern whether we are indeed dealing with a B2B contract.
Providing services to the former employer – ZUS benefits
Cooperating within a B2B framework with a former employer, albeit tempting, entails certain consequences.
Article 18 of the Entrepreneurs Law
1. An entrepreneur who is a natural person, starting a business for the first time or resuming it after at least 60 months from the day of its last suspension or termination, and does not perform it for a former employer for whom, before starting business activity in the current or previous calendar year, performed duties within the scope of the business activity being conducted, is not subject to mandatory social insurance for a period of 6 months from the commencement of business activity. (…)
Thus, providing services to the former employer with whom there was an employment contract in the same or previous tax year deprives one of the right to benefit from the so-called startup relief in ZUS.
This limitation applies not only to specific activities performed within a given cooperation but to all activities within the scope of the conducted business activity. Therefore, it is a rather broadly formulated exclusion.
Article 18a paragraph 2 point 2 of the Social Security System Act
2. The provisions of paragraph 1 [here: regulating the so-called small ZUS] do not apply to persons who:
(…)
2) conduct business activity for a former employer for whom, before starting business activity in the current or previous calendar year, they performed duties within the scope of the business activity being conducted as part of an employment or cooperative employment relationship. (…)
Thus, transitioning to B2B with an employer with whom there was an employment contract in the same or previous tax year deprives one of the right to benefit from the so-called small ZUS. This exclusion also has a very wide scope.
Similar restrictions apply to the so-called small ZUS plus.
Providing services to the former employer – foreign affairs?
Do these regulations apply if the previous contract took place outside the country, and the person was insured in another country?
Letter from ZUS dated May 5, 2017, ref. WPI/200000/43/495/2017
The term “former employer” mentioned in Article 18a paragraph 2 point 2 of the Social Security System Act refers to any employer for whom work was performed prior to the commencement of business activity, including the employer with whom the business operator did not terminate the employment contract.
The scope of activities performed for a former or current employer for whom business activity is carried out cannot overlap with the scope of activities performed under an employment relationship. By the term “activities within the scope of the business activity”, we understand activities assigned by the employer and performed by the employee within the scope of employment.
The Social Security Institution Branch in Lublin emphasizes that working for a foreign employer allows the entrepreneur to declare a contribution base for social insurance not less than 30% of the minimum wage, provided that throughout the period of such work (within the scope of employment), Polish legislation was not applicable to the entrepreneur.
In other words, if the employment contract did not oblige the employer to contribute to the employee’s social security in Poland (or the employee did not have such an obligation), they may benefit from the discussed reliefs.
The end ot the b2b cooperation with the former employer and ZUS
Can I return to enjoying reliefs if I resign from B2B cooperation with a former employer?
Letter from ZUS dated July 22, 2020, ref. DI/100000/43/410/202
„However, from the day of ceasing business activity for a former employer, this person again has the right to pay contributions based on a lower contribution base. It should only be remembered that the right to pay contributions based on a contribution base not lower than 30% of the minimum wage is granted during the first 24 calendar months from the day of commencing business activity by this person.
Therefore, in a situation where a person commencing business activity performs duties for a former employer within its framework, for whom, before commencing business activity in the current or previous calendar year, they performed duties within the scope of employment, ceasing cooperation with the former employer, for example, after several months, entitles them from that day to pay contributions for pension and disability insurance based on Article 18a paragraph 1 of the Social Security System Act until the expiration of 24 months from the day of commencing business activity.”
In other words, upon resigning from such cooperation, we can benefit from the aforementioned reliefs. However, it should be remembered that the deadlines for their use run from the establishment of the business activity.
Providing services to the former employer – summary
In this regard, it should be noted that, fundamentally, transitioning to B2B within cooperation with a former employer (within the last 2 years) deprives the taxpayer of the right to the so-called startup relief, small ZUS, or small ZUS plus. Of course, there are exceptions to this rule, but this exclusion is very broadly shaped, and every entrepreneur must exercise particular caution here.
This post discussed the main consequences associated with such a configuration in the context of ZUS. There are still consequences in personal income tax (PIT), but those will be discussed in a subsequent post.
If you have any questions regarding settlements within B2B cooperation with an employer or how to protect yourself in case of an audit, feel free to visit www.outsourced.pl .
