New Supreme Court resolution: Partner of a two-person company and social security
On 21st of February 2024, the Supreme Court issued a resolution, III UZP 8/23, which has generated much discussion and interest in the business and legal community. The resolution concerns issues related to the social insurance of partners of a two-person limited liability company. The key point of the resolution is that a partner holding 99 percent of the shares in such a company is not subject to compulsory social insurance.
The Supreme Court based the position expressed in the resolution on a literal interpretation of Article 6(1)(5) in conjunction with Article 8(6)(4) of the Social Insurance Act of 13th of October 1998. According to the court’s interpretation, a shareholder holding an overwhelming majority of shares in a two-person limited liability company is not treated as a person who conducts business activity and is therefore not subject to mandatory social insurance.
This is a significant change from the current practice of the insurance authorities, which allowed such a partner to be covered by obligatory social insurance. The Supreme Court’s resolution thus signifies a radical change to the position in this matter.
It is worth noting that the resolution was issued by three judges of the Supreme Court. As such, it is not binding on other trial courts of the Supreme Court. It is also not binding on other ordinary courts, however, due to the authority of the Supreme Court, decisions made by other courts may be shaped by the content of this resolution.
The consequences of this resolution are important for the business community, especially for entrepreneurs who are partners in two-person limited liability companies. If the position of the Supreme Court set forth in the resolution III UZP 8/23 is upheld in subsequent judgments, for such persons the decision of the Supreme Court will mean significant relief in issues related to mandatory social insurance contributions. Persons holding the vast majority of shares in the company will be able to avoid additional financial burdens on this account.
However, it should be borne in mind that each case needs to be individually analysed in terms of meeting the conditions set out in the Supreme Court’s resolution. Shareholders are requested to consult their legal advisors in order to carefully assess their situation and the possible benefits of this resolution.
It should be borne in mind that insurance authorities are not bound by the position of the Supreme Court and until a uniform line of jurisprudence is formed in this respect, it is impossible to be certain what decisions regarding the insurance obligation of partners of two-person companies will be taken by the Polish Social Security Institution ZUS.
In summary, the resolution of the Supreme Court, III UZP 8/23, constitutes a significant step forward in the interpretation of the provisions on social insurance for partners of two-person limited liability companies. Its effects may be felt by many entrepreneurs, as it sets a new direction for the interpretation of the law in this field.
Source: This article was prepared by Tomasz – Senior Tax Consultant at getsix® Tax & Legal
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