The topic of taxation of civil contracts returns. The ministry is analyzing the issue

The Ministry of Family, Labor and Social Policy admitted in response to questions asked by praw.pl that it is conducting analytical work on a possible draft law that will force the payment of social security contributions for every civil law contract. This will require eliminating overlapping social security titles.

Conflicting titles to social security

The overlapping of insurance titles occurs when a person meets the conditions to be covered by ZUS insurance under two or more titles, for example a contract of mandate and non-agricultural activity, an employment contract and a business activity, a pension received and a contract of mandate.

For example, a person employed under a contract of employment, which guarantees at least the minimum wage, and who also performs duties under a contract of mandate, is not obliged to pay social contributions under a civil contract. This solution seems to be beneficial for employees because their remuneration under the second contract is higher, but they collect lower pension capital.

Low contributions mean low pensions

A particularly striking situation is when a person performs two contracts for the same form: a mandate contract and a contract for specific work. Contributions are paid only for the former. In such an arrangement, the company often sets a low remuneration for a commission and a much higher remuneration for a specific work contract. The employee pays contributions for years, e.g. starting from PLN 600 for an assignment, and receives several thousand zlotys from the second contract. His pension capital is at a very low level, and the bill for this “savings” will be issued only after exceeding retirement age.

– We are the only system in Europe in which the highest income is not automatically subject to contributions. Because it may be that I have two mandate contracts: one for PLN 4.5 thousand. PLN and the second one for PLN 20,000. zloty. No system in Europe will allow you to bypass the premium for a contract worth PLN 20,000. PLN, satisfying contributions from PLN 4.5 thousand. PLN – commented for praw.pl Dr. Tomasz Lasocki from the Department of Insurance Law, Faculty of Law and Administration, University of Warsaw.

Contributions for contracts were one of the milestones

Previous governments also talked about abolishing civil contracts, but the only change was that mandate contracts were covered by social and health insurance contributions. One of the milestones on which the payment of money from the KPO depends is the payment of contributions for civil law contracts by March 2023 at the latest, including the sickness contribution. In the face of difficulties in meeting other milestones, this one was completely ignored in the public debate.

Why did the European Commission decide to take up our regulation in this area? It was about social security for people working under civil contracts – often forced by employers to take up such contracts. A permanent contract is rarely an employee's dream, it is rather a condition set by the company: activity or a civil contract. Very often, the scope of duties and the method of performing them meet the terms of the employment contract.

“To achieve this, all civil law employment contracts will be subject to social security contributions, with the exception of mandate contracts concluded with secondary school students and students up to 26 years of age. The reform will be introduced by a legal act that will guarantee that employment based on civil law contracts will be subject to social security contributions: retirement, disability, accident, occupational and sickness insurance contributions,” wrote the working translation of the KPO.