I understand that social security is calculated differently between countries and here is how it works where we live.
When you are self occupied(and own your own company), in the first year you perceive your earnings but pay zero social security. You are basically self-employed but employed by your own company.
On the second year, you sum all the earnings you received from year 1, divide this by 52 weeks and calculate a contribution of 15% to be paid every 4 months.
Right now, my wife is starting year 2 and her first social security contribution payment has been done.
Our accountant also told us that these contributions were not company expenses.
Based on this above, we tried to look into the payslip module but were not sure about a few things and decided to create a new account called “Director drawings”(set as an expense).
If this is not an expense for the company, and she pays today ie: 145 Euro of social security, what other possibilities we have as we now have 145 Euro missing from the account.
I believe that we should create a new account called “Social security Contributions” and on the first of each year calculate what we own from the previous year and then deduct from this account each future payment.
Would this make sense? As we cannot find an easy way to do this otherwise.
What I am a bit confused with is that liabilities are in fact “Future expenses”, therefore if I add this as a liability, would this not makes it an expense still?