How to settle entrepreneur's health contribution in taxes?
Health insurance is mandatory when you carry out activity. Remember that you can take into account health insurance contributions when calculating the tax. Unlike the social security contributions (depending on the form of taxation, you can take them into account in calculating the taxable amount or,include them in costs) health contributions paid can only be deducted from income tax for the year in question. You have the right to deduction both when you settle according to the tax scale, linear tax, as well as a lump sum on registered income or using a tax card.
The amount of health insurance contribution, by which the tax is reduced, may not exceed 7.75 % of the basis of assessment of this contribution!
Settlement of part of contributions in the coming months
For example, if you lost and you were unable to fully deduct health contributions in the given the month (you may deduct them only up to the amount of tax), you can do this in the following months of the calendar year, that is "transfer" the unused part of contribution. If there is no automatic full health insurance to deduct tax rules give you another possibility. If you have income from other sources e.g. full-time work, paid but not yet settled health contributions can be deducted when the calculating income tax from another source (e.g. full-time work). In another case, these contributions are lost, because it is impossible to settle them in the coming years.
Examples of the deduction of health contribution
Jan Kowalski from 1 January 2016 to 30 June, 2016. an economic activity. This activity requires compulsory health insurance. In the course of 2016, Jan Kowalski paid monthly health contributions from the minimum base required by provisions (PLN 3.210,60) amounting to PLN 288,95. In total, in 2016 he paid PLN 1733,70, including PLN 1492,92 deductible from income tax. He incurred loss from economic activity and thus is not obliged to pay income tax and cannot in any way account for tax (in the settlement of activity) paid health insurance contributions.
At the same time, Jan Kowalski was employed from 1 June 2016 to 30 June 2016 under a contract of employment in company"A" with basic salary of PLN 3000 per month. He did not have any other revenues in 2016. Based on the employment, the employer as a payer withheld from remuneration of Jan Kowalski and transferred to the social security institution during the period of his employment health insurance contributions in the total amount of PLN 1.397,88 (PLN 232,98 per month), including deductible from income tax PLN 1.203,72. The income tax due for 2016 on income derived from an employment contract at the company ‘A', before deduction of health insurance amounted to 2.397,18 PLN. Total health insurance contribution deductible from tax for 2016 paid by Jan Kowalski in 2016 for business activity and full time work in another company amounted to PLN 2.696,64 (PLN 1492,92 + PLN 1.203,72).
As indicated above, the income tax due in respect of income received in the 2016 amounted before deducting health insurance contribution to PLN 2.397,18. It is possible to deduct from tax deductible amounts of health insurance contributions paid in 2016 in a total amount of PLN 2.696,64. However, this amount exceeds the amount of tax due. The amount of the health insurance contribution amounting to PLN 2.397,18 (up to the amount of income tax due) can be deducted from income tax. However, there remains the amount of paid health contributions not deducted from tax, in the amount of PLN 299,46, which exceeds the amount of tax due in 2016. Unfortunately, it will not be deducted, since there is no legal possibility to deduct it from income tax in the years to come.
When I do not have to pay health insurance contribution?
If you established a company and register it in the Social Insurance Office, you should know that the health contribution shall be paid by persons who conduct economic activity or persons cooperating with them (except for the suspension of activity). Base for health insurance contributions for such persons is declared, but not less than 75 % of the average monthly salary in the enterprise sector in the fourth quarter of the previous year, including payments from profits. For example, in the fourth quarter of 2015 salary stood at PLN 4.280,80). The basis of this contribution in 2016 amounted to PLN 3.210,60 (75 % of the amount of 4.280,80 PLN), and the value of the single contribution amounted to - PLN 288,95 per month (9 % of the amount of 3.210,60 PLN). In the fourth quarter of 2016 the average monthly salary in the enterprise sector amounted to PLN 4404,17, in 2017, the basis of assessment is 3303,13 (75 % of the amount of 4404,17 PLN), while the 2017 contribution is PLN 297,28 per month (9 % of the amount of 3.303,13 PLN).
Not all entrepreneurs have to pay for themselves health insurance contributions or to pay them in full amount. These preferences are granted to:
entrepreneurs receiving maternity allowance in a small amount,
persons who hold a moderate or significant degree of disability.
From the obligation to pay health insurance contributions is exempt an entrepreneur who:
is a pensioner whose pension does not exceed the minimum wage (in 2016 - PLN 1850 and in 2017 PLN - 2000) provided that his income from economic activity do not exceed 50 % of the amount of the lowest old-age pension per month (from 1 March 2016 the minimum pension is PLN 882,56 per month, from 1 March 2017 - PLN 1000) or settles income tax in the form of a tax card
is a person with moderate or severe disability, provided that his income from economic activity does not exceed 50 % of the lowest monthly old-age pension or he settles his income tax in the form of a tax card.
is on maternity leave where maternity allowance does not exceed the monthly amount of parental benefit (in 2016 and 2017 it is PLN 1000 net). Exemption from payment of contributions have, irrespective of what title is acquired entitlement to maternity allowance. For example, to women, who carry out an economic activity, but acquired the right to benefit by virtue of other circumstances, (such as full time work) exemption from payment of health contributions resulting from business.
Importantly, the person benefiting from exemption from payment of health insurance contributions, is liable to health insurance and at the same time retains the right to health care services. The right to exemption from payment of health insurance contributions is granted in the month in which the above conditions are satisfied for the exemption.
Jan Kowalski is a pensioner with a monthly pension of PLN 1700. At the same time, since June 2016 he has conducted economic activity, he settles tax according to general rules. In June 2016 he received revenue from economic activity in the amount of PLN 350, PLN 400 in July 2016, and in August 2016 PLN 600, PLN 380 in September 2016.
Jan Kowalski fulfils the first of the conditions for exemption from payment of health insurance contributions, since his pension in the amount of PLN 1700 is below the minimum salary. The second condition is fulfilled when the revenues from economic activity shall not exceed 50 % of the amount of the lowest old-age pension (i.e. 441,28 PLN). This condition was met in June, July and September 2016, In view of the above, during this period Jan Kowalski was exempt from the payment of health insurance contributions by virtue of conducting economic activity. However, in August 2016, the amount of revenue (PLN 800) was more than half of the lowest old age pension and therefore Kowalski in September 2016 was not entitled to the exemption from health insurance contribution.
Exemption from the payment of health insurance contribution would be Mr Kowalskiemu irrespective of revenue from economic activity in each of the months, Jan Kowalski has income from economic activities in the form of a tax card.
If you have a moderate or severe disability you may pay health insurance contributions at a lower rate, i.e. up to the amount of income tax payable. Provided that the non-agricultural economic activity is the sole source of income for you. This reduction does not apply in the case of entrepreneurs who settle income tax from their economic activities in the form of a lump sum on registered income or in the form of a tax card. The exemption may therefore benefit disabled clearing business income tax on their activities under the general rules.
The shareholders of limited liabilty companies and SA
The problem of payment of health insurance contributions does not apply to shareholders in limited liability companies or public limited liability companies. However, this concerns multi-persons companies. A person who is sole member(with 100 % of the shares) is treated in the same way as a person who conducts activity, and then is subject to compulsory health insurance. Please note that the consequence of non-payment of health insurance contributions by a member of multi-persons company is the absence of a right to public(free of charge) health services .
See the explanations regarding the deduction of health insurance contribution