I’ve been asked about a possibility of payments to the employee without social insurance contributions. Here is an explanation of the tax implications and rules regarding the use of a private car of an employee for business purposes, with a distinction between the local trips and the business trips to another municipality:
The refunds incurred by an employee for using a private car for business purposes in local trips are exempt from ZUS. That’s the most common possibility for payments to the employee without ZUS.
The amount of these refunds is determined on the basis of:
- lump sum
- records of the vehicle’s mileage filled in by the employee.
The simplest option, which doesn’t require writing down each kilometer of the private car use for business purposes, is solution 1: The lump sum.
The lump sum solution requires establishing by the employer a monthly mileage limit for local driving. That limit must be multiplied by the rate for 1 km of mileage – these rates result from the provisions of the Minister Regulation:
– for a vehicle with an engine of 900 cc – 0.5214 zlotys,
– for a vehicle with an engine exceeding 900 cc – 0.8358 zlotys.
The limit of km is set depending on the number of residents in a given municipality or city where the employee is employed, it can not exceed:
– 300 km – up to 100,000. inhabitants,
– 500 km – over 100 thousand up to 500,000 inhabitants,
– 700 km – over 500 thousand residents.
The employee uses a private passenger car with an engine capacity above 900 cm3 for business purposes in local driving. The employer has set a monthly maximum possible mileage limit of 300 km – since there are less than 100 000 inhabitants in the city, where the employee is employed. The employee receives a lump sum in the amount of PLN 250.74 (300 km x PLN 0.8358).
In another month the employee stayed for 6 days on vacation. The monthly lump sum has been reduced by 1/22 for each day of absence, i.e. a total of PLN 68.38, as calculated: 1/22 x PLN 250.74 x 6 days. Thus, this month, the employer paid the lump sum employee PLN 182.35, which is PLN 250.74 – PLN 68.38. The lump sum is excluded from ZUS.
The amount of the lump sum is reduced by 1/22 for each working day of the employee’s absence in the workplace and for each working day in which the employee did not have a vehicle for business purposes (paragraph 4 (2) of the Minister Regulation).
In order to be able to refund the costs of a private car use, an employee must submit a written statement on the use of his private car for business purposes. Such statement should include information about the vehicle – ie engine capacity, brand, registration number and specification of the number of days in which the employee was absent from the workplace in a given month (due to illness, holidays, business trip or other absence), and the number of days when the employee did not have a vehicle for business purposes.
Another option, in practice giving more potential for larger payments to the employee, is a refund for the use of private car for business trips outside the municipality where the employee is employed. If a special form for a business trip to another city is filled in, the employer may refund the employee the distance in km multiplied by the abovementioned rate for 1 km of mileage. This refund is excluded from ZUS, but also excluded from the income tax for the employee.
The employee uses a private passenger car with an engine capacity above 900 cm3 for business trip from Poznan to Warsaw. The distance is 600 km to Warsaw and back to Poznan. The employee receives a refund in the amount of PLN 501.48 (600 km x PLN 0.8358), excluded from ZUS, but also excluded from the income tax.
However, in case of a business trip some attention must be paid to the formal side – the employee is obliged to prepare a small table with the vehicle mileage, the elements of which have been specified in art. 23 sec. 7 of the PIT Act. It should contain at least: surname, first name and address of the person using the vehicle – employee, registration number and vehicle engine capacity, next entry number, date and purpose of the trip, route description (from where to where), the actual vehicle mileage, accepted rate for 1 km of mileage, the amount resulting from the multiplication of the number of kilometers actually driven and the rate for 1 km of the mileage signature and the taxpayer’s (employer’s) data.
Other possibilities of payments to the employee without ZUS
The other possibilities of payments to the employee without ZUS contributions are more difficult to implement and may be subject of a potential dispute with ZUS, for example:
– Exclusion from the ZUS contribution for a benefit paid to an employee in case of a specific event (eg illness). The condition is that this disease must be long-lasting.
– The basis for calculating ZUS contribution are not jubilee awards (gratuities), which according to the rules determining the conditions for their granting are not entitled to an employee more often than every 5 years. The release of the anniversary jubilee award is therefore subject to the conditions of its granting of labor law contained in the company’s regulations of labor, for example in the remuneration regulations, the jubilee awards regulations.
I hope this explanation was helpful and clear 🙂