On October 24, 2011 the Supreme Administrative
Court (hereinafter the “NSA”) adopted a resolution
on the taxation of employer funded medical policies
(court file no II FPS 7/10). NSA concluded that the
employer is required to plus the value of medical
subscriptions to employee’s revenues from
employment, which constitutes base for personal
income tax contributions.
According to the NSA a medical policy constitutes a
free service which has a significant financial impact.
The revenue from this account is created on receipt
of permission to use the medical policy, regardless of
whether the employee will benefit from a specific
medical service. In determining individualized
revenue attributable to one employee, the purchase
price of the package should be taken into account. If
the company medical policies are paid for all
employees in a lump sum, the easiest way is to
divide the overall lump sum paid by the employer by
the number of employees authorized to use the
policy.
Arrears apply to entrepreneurs who have not yet paid
the tax for employee medical packages. The business
owner should adjust the PIT-4R and PIT-11
declaration and remit unpaid income tax for the
account of the applicable tax authority along with
backed interest. Failure to comply may result in the
initiation of tax proceeding and the issuance of a tax
liability decision. However, at the request of the
taxpayer, the tax office may in qualifying
circumstances defer the tax payment, order its
apportionment or forgive the backed taxes in whole
or in part, including the interest on arrears. At the
same time, the liability of the payer for the tax
liability ceases after five years from the end of the
calendar year in which the payment was due.
The resolution adopted by the NSA on the taxation
of medical packages is also important for social
insurance contribution since the base for social
insurance contribution is employee’s revenue within
the meaning of the Personal Income Tax Act. Since
the NSA held that medical policies taken out by an
employer constitute revenue, they will be included in
the calculation of contributions to social and health
insurance. The payer must therefore add the value of
the policy to other revenues of the employee, then
from that sum deduct and pay the applicable
contributions.
These contributions must be
documented in an itemized monthly ZUS RCA
report for the month when the fee for the employee
policy was paid. If the employer did not include the
paid medical packages in the amount of base for
social contributions, it should prepare and send
corrections to the Social Insurance Institution.
Arrears are applicable for the last 10 years.
It is worth mention that there are exceptions to the
contribution requirement. First, according to par. 2
section 1 point 24 of the Regulation Minister of
Labour and Social Policy dated 18.12.1998 which
details the rules for determining the basis of
contribution to the pension and social security fund, policy contributions do not need to be paid if, under
the provisions of collective bargaining agreements or
pay provisions the employee retains the right to the
policy and at the same time is entitled to receive the
remuneration for disability leave, sickness benefit,
maternity
benefit,
care-taking
benefit
or
rehabilitation benefit. This of course, provided that
during the paid period the employee can actually use
the policy. The collective bargaining agreement or
pay provisions must explicitly provide for the use of
the medical package while the employee is entitled
to receive the aforementioned remuneration or
benefit. Secondly, par. 2 section 1 point 26 of this
Regulation provides that the payer is not required to
contribute from the financial benefits of collective
bargaining agreements, pay rules or pay provisions,
which gives a right to buy goods or services for less
than the retail prices.
MILLER, CANFIELD,
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Disclaimer: This publication has been prepared for clients and professional associates of Miller Canfield. It is intended to provide only a summary of certain recent legal
developments of selected areas of law. For this reason the information contained in this publication should not form the basis of any decision as to a particular course of
action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in individual cases. The services of a competent professional adviser
should be obtained in each instance so that the applicability of the relevant legislation or other legal development to the particular facts can be verified.