Social security paid the years after - How to account for it


In my country, when you start a company and you are the director, the first year you do not pay social contributions, but the year after, you start paying quarterly the contributions from the previous year of salary. I am classified as part time self occupied, therefore the 15% are paid by the company as a whole,(not half/half employee/company like you see when it is an employee)

in 2018 you make a total of 20 000 Euro.
In 2019, you are required to pay (previous year * 15%) / 52

I understand that Manager has a payslip area but this is good when you pay monthly someone, how would it works in my case?

How can I add this in manager please as I am a bit confused?
I added the 20 000 as director drawings in 2018 into an equity account, and I am wondering if, on the first of January 2019, I should have added the social security contributions as a whole(15% of 20 000 Euro) and gradually credit this account each quarter from the bank account.

Would this works in manager please?

Thank you.

The question is whether this is a current expense based on last year’s income or last year’s expense paid on a deferred schedule. That depends on local law.

Treatment could also depend on whether you are using accrual or cash basis accounting.

Hi Tut,

wow you are quick!
It is an current expense based on last year income
I use cash basis.

Thank you.

You mentioned payslips being used when paying someone monthly. Just to be clear, there is no requirement that payslips be used only for regularly scheduled payroll periods. They can be used any time there are payroll transactions for employees.

In your case, since you are not an employee, you will not use payslips at all. According to your explanation, this is a direct contribution by the company based on your director’s compensation last year. So just enter a payment. Post it to an expense account set up for the purpose, Social Security Contributions. If you also have employees, the contributions you make for them could be posted to the same expense account.

Thank you so much for the help.
So in fact, when SSC is a direct contribution from the company(for a self-occupied person), it is an expense but let’s say you have an employee, the 10%/10% will be divided as a basis of 10% as a liability and 10% as an expense if I am correct.

This is true when your local tax law says so. You have implied that to be the case in your situation. Understand that I am not telling you it is so, as I don’t know where you are. In some jurisdictions, such contributions are not company expenses, but are tax obligations of the self-employed individual. A local accountant or tax authority can answer this question for your location.

Again, this depends on local tax law and the exact nature of the two portions. Frequently, the employee pays a portion, which would be recorded as a deduction payslip item in Manager. And the company pays a portion. The company’s portion is an expense, but is also recorded as a liability until remitted to the tax authority. At that point, that credit is transferred to the bank account from which the remittance is paid.