ZUS vs. Employers: a New Battle over Social Security Contributions on Free Employee Accommodation

Entrepreneurs in Poland are facing increasing legal challenges related to taxation and social security contributions (ZUS) on free accommodation provided to employees. Although administrative courts increasingly rule in favor of companies in disputes with the tax authorities, a new battle has emerged – this time with the Social Insurance Institution (ZUS).

Victories in Administrative Courts

Despite the fact that tax offices consistently maintain that the value of free accommodation constitutes income for seconded employees, more and more companies are winning cases before administrative courts. The courts confirm that the value of free accommodation is not subject to PIT (personal income tax).

A key ruling for taxpayers was issued by the Supreme Administrative Court on 1 August 2023 (case ref. II FSK 270/21). The Court held that EU regulations indicate that transport and accommodation costs cannot be included in wages – they should be borne by the employer, not the employee. In its reasoning, the Court emphasized that benefits provided to employees posted to another EU Member State cannot be regarded as part of remuneration, either under labor law or under Art. 12(1) in conjunction with Art. 11(2–2b) of the PIT Act. These are not “free-of-charge benefits,” as they are fully covered by the employer.

New Practice by ZUS Raises Concerns

Meanwhile, the Social Insurance Institution has launched a new practice that may significantly burden businesses. As a result of inspections, ZUS has been issuing decisions requiring employers to pay contributions on employee benefits, including free accommodation. These actions appear irrational. Since the contribution base is the employee’s income as defined by the PIT Act, and the taxation of such benefits has been rejected in recent court rulings, ZUS’s actions raise legitimate concerns. The contribution base is, after all, income within the meaning of the income tax law. This inconsistency between institutions could lead to absurd situations in which an entrepreneur wins a case against the tax office but loses against ZUS in an identical matter.

There are already  judgments favorable to employers. The District Court in Poznań, in a judgment of 3 December 2024 (case ref. VIII U 1936/24), ruled that the costs of accommodation and transport borne by the employer do not constitute a basis for social security contributions.

Impact on Businesses

The new practice of ZUS could mean significant financial burdens for entrepreneurs, particularly in the construction sector, where employee posting is common. Of course, companies can appeal ZUS’s unfavorable decisions to court, hoping for a favorable ruling in line with current case law. However, such proceedings are time-consuming and require legal and/or tax advisory support, adding unnecessary complexity to an already difficult business environment.

Given the favorable rulings regarding both taxation and social security contributions, entrepreneurs who, based on administrative decisions, have been charged these payments have a good chance of obtaining refunds for overpaid taxes and/or ZUS contributions.