An instalment agreement (układ ratalny) with ZUS (Social Insurance Institution) is one of the most important support tools for businesses in financial difficulty. However, recognising it correctly in the accounting books and presenting it in the financial statements requires detailed knowledge of the Accounting Act. The way a ZUS instalment agreement is presented in the balance sheet directly affects how stakeholders assess the entity's financial position.
The key point is to split the liability correctly into its short-term and long-term parts, which affects the analysis of the business's liquidity. Spreading a ZUS debt into instalments does not eliminate it; it only changes the due dates of individual parts of the liability. Reflecting this correctly in the balance sheet is essential to give a true picture of the entity's financial position.
A ZUS instalment agreement is a formal agreement between the Social Insurance Institution and the debtor that sets out the detailed terms of repaying the debt, together with an instalment schedule. Concluding such an agreement requires filing an application and showing reasons that deserve to be taken into account by ZUS
Legal basis for a ZUS instalment agreement
The possibility of concluding an instalment agreement with ZUS follows directly from the Social Insurance System Act. Under Article 29(1) of this Act, for economic reasons or other reasons deserving consideration, ZUS may, at the debtor's request, defer the payment deadline for contribution receivables and spread them into instalments, taking into account the debtor's ability to pay and the state of social insurance finances.
The decision to grant relief in repaying a debt is not automatic. ZUS assesses the applicant's financial situation each time, analysing its ability to pay current liabilities and to repay arrears under the proposed schedule. Particular attention is paid to the reasons the debt arose and to the steps the business owner has taken to improve the financial situation.
Deferring the payment deadline for contribution receivables and spreading them into instalments takes the form of an agreement (Article 29(1a)), commonly called an instalment agreement (układ ratalny). The agreement sets out the detailed repayment terms together with the agreed instalment schedule, and if instalments are not paid on time, the remaining amount becomes immediately due together with late-payment interest (Article 29(3))
An important benefit of concluding an instalment agreement is that no late-payment interest is charged on the contributions covered by the agreement. No interest is charged on contributions spread into instalments from the day after the day the application for debt relief is received (Article 29(2)). Remember, however, that if the instalments set by ZUS are not paid on time, the remaining amount becomes immediately due together with late-payment interest calculated under the Tax Ordinance Act (Ordynacja podatkowa).
It is particularly important to understand that where the payment deadline for contribution receivables is deferred or the receivables are spread into instalments, the contribution payer is deemed to have no debt in respect of contribution receivables (Article 29(5)). The condition, however, is that the contribution receivables are paid on the dates and in the amounts set in the agreement and that there is no debt in respect of contribution receivables not covered by the agreement.
Booking a ZUS instalment agreement
Booking a ZUS instalment agreement correctly requires an understanding of the basic accounting principles set out in the Accounting Act. Under Article 20(1) of the Act, every event that occurred in a reporting period must be entered in the accounting books of that period. Concluding an instalment agreement with ZUS is such a business event and must be properly reflected in the accounting books. Recording an instalment agreement in the books and the balance sheet is part of the work covered by our accounting services.
The accrual principle under Article 6(1) of the Accounting Act is also key: the entity's accounting books must include all income earned and attributable to it, and the costs related to that income, for the financial year concerned, regardless of when they are paid. As a result, the booking of employer-funded ZUS contributions in costs, and the deduction of employee-funded ZUS contributions, remains unchanged.
Concluding an instalment agreement with ZUS does not affect how contributions are booked in the entity's operating costs. Only the due date of the liability to ZUS changes: it is spread into the instalments set in the agreement in line with the agreed repayment schedule
As a result of concluding an instalment agreement with ZUS, the liability to ZUS is spread into the instalments set in the agreement, so its due date is deferred in line with the repayment schedule. The entity books the instalment repayments under the agreement as follows:
- Debit account 223 "Public law settlements", sub-account: Settlements with ZUS
- Credit account 130 "Current account"
This booking correctly reflects the cash flows related to repaying the instalments and the systematic reduction of the balance of the liability to ZUS in line with the repayment schedule set in the agreement.
Presenting the instalment agreement in the balance sheet
As a rule, the liability to ZUS spread into instalments, in the amount of the credit balance of account 223 "Public law settlements", sub-account: Settlements with ZUS, is shown in the liabilities side of the balance sheet, split into the long-term and short-term parts. This split is key to a correct assessment of the entity's financing structure and liquidity.
Short-term liabilities include the part of the liability to ZUS that is due for repayment in the year following the balance-sheet date. Long-term liabilities include the remaining part of the liability to ZUS, that is, the part payable in the years after the year following the balance-sheet date.
The liability under a ZUS instalment agreement must be split into its short-term and long-term parts on the basis of the repayment schedule set in the agreement. The short-term part covers the instalments due within 12 months of the balance-sheet date; the remaining part is a long-term liability
How the instalment agreement is presented in the balance sheet depends on which annex to the Accounting Act the entity uses to prepare its financial statements. The annexes provide for different levels of detail in presenting liabilities in the balance sheet. Alongside presentation, the valuation of liabilities in the balance sheet is just as important.
Presentation in the balance sheet under Annex 1
If the entity prepares its balance sheet under Annex 1 to the Accounting Act, the liability under the ZUS instalment agreement is presented in the liabilities side of the balance sheet in the following items:
- Short-term part: B.III.3 letter g "Short-term liabilities to other entities in respect of taxes, customs duties, social and health insurance and other public law titles"
- Long-term part: B.II.3 letter e "Long-term liabilities to other entities – other"
This presentation clearly shows the time structure of the liability and allows users of the financial statements to assess the entity's liquidity properly.
Presentation in the balance sheet under Annex 5
For entities preparing their balance sheet under Annex 5 to the Accounting Act, the liability under the ZUS instalment agreement is presented in the liabilities side of the balance sheet in the following items:
- Short-term part: B.III. "Short-term liabilities"
- Long-term part: B.II. "Long-term liabilities"
Presentation in the balance sheet under Annex 4
Entities preparing their balance sheet under Annex 4 to the Accounting Act, on the other hand, present the entire liability under the ZUS instalment agreement in the liabilities side of the balance sheet in item B. "Liabilities and provisions for liabilities", without splitting it into short-term and long-term parts.
Which annex to the Accounting Act to use depends on the size of the entity and its legal form. Small entities can use simplified financial statement templates, while larger entities must use the full templates with more detailed presentation
Interest and the prolongation fee in an instalment agreement
An instalment agreement with ZUS can cover not only contribution arrears but also other parts of the debt to ZUS. It can cover arrears of contributions funded from the payer's own resources as well as contributions funded by insured persons who are not contribution payers.
In addition, the instalment agreement can also cover late-payment interest accrued up to the date of the application, the additional fee or the costs of a payment reminder. Where the instalment agreement also covers late-payment interest accrued up to the date of the application to spread the debt into instalments, then on concluding the agreement to spread the arrears into instalments, the full amount of this interest is recognised as finance costs, if this has not been done earlier.
Late-payment interest accrued up to the date of the application for an instalment agreement becomes part of the debt covered by the agreement and is spread into instalments in line with the repayment schedule. This interest should be recognised in finance costs no later than on concluding the agreement granting the relief
Late-payment interest covered by the instalment agreement is booked as follows:
- Debit account 751 "Finance costs"
- Credit account 223 "Public law settlements", sub-account: Settlements with ZUS
Concluding an instalment agreement with ZUS involves ZUS setting a prolongation fee on the terms and in the amount provided for in the Tax Ordinance Act for taxes that are state budget revenue (Article 29(4)). The prolongation fee rate equals the reduced rate of late-payment interest (Article 57 § 2 of the Tax Ordinance Act). The prolongation fee is the cost of using the debt relief and is charged on the entire amount covered by the instalment agreement.
Booking the prolongation fee
The prolongation fee charged by ZUS in the amount resulting from the agreement concluded is also charged to finance costs. Bear in mind that the prolongation fee is charged to finance costs in the part relating to the given reporting period.
Booking the prolongation fee for the given reporting period:
- Debit account 751 "Finance costs"
- Credit account 223 "Public law settlements", sub-account: Settlements with ZUS
If the agreed payment dates go beyond the financial year, the entity should book the prolongation fee using account 651 "Other prepayments and accruals". This ensures that costs are allocated over time correctly, in line with the matching principle.
The prolongation fee is allocated over time in proportion to the period during which the debt relief is used. The part of the fee relating to future reporting periods must be recognised in prepayments and accruals until it is actually realised
Practical example of presenting an instalment agreement
To better understand how a ZUS instalment agreement is presented in the balance sheet, it is worth analysing a practical example. Because of financial difficulties caused by the loss of a key customer and worsening liquidity, a sp. z o.o. (limited liability company) concluded an agreement with ZUS to repay its contribution arrears in the form of an instalment agreement.
At the balance-sheet date, part of the liability covered by the instalment agreement is due for repayment in the next financial year and the rest in later years. The entity prepares its balance sheet under Annex 1 to the Accounting Act, which means that liabilities must be split in detail into short-term and long-term parts.
A manufacturing company had been operating for 15 years and employed 50 people. As a result of the pandemic it lost its main customer, which accounted for 60% of its turnover. Despite cutting costs, it was unable to pay its current ZUS contributions. It concluded an instalment agreement for PLN 180,000, spread into 24 monthly instalments. In the balance sheet as at 31 December, the part of the liability due in the following year was shown as a short-term liability and the remaining part as a long-term liability.
Under the Accounting Act, a liability to ZUS spread into instalments under an instalment agreement should be shown in the liabilities side of the balance sheet, split into short-term and long-term parts depending on the repayment date.
The part of the liability due for repayment in the year following the balance-sheet date should be classified as a short-term liability and shown in the liabilities side of the balance sheet in item B.III.3 letter g "Short-term liabilities to other entities in respect of taxes, customs duties, social and health insurance and other public law titles".
The remaining part, repayable in later years, is shown as a long-term liability and presented in the liabilities side of the balance sheet in item B.II.3 letter e "Long-term liabilities to other entities – other".
Impact of the instalment agreement on financial analysis
How a ZUS instalment agreement is presented in the balance sheet matters for the financial analyses carried out by the entity's various stakeholders. A correct split of the liability into short-term and long-term parts allows a proper assessment of the business's liquidity and financing structure.
Financial analysts, lenders and investors pay particular attention to the time structure of liabilities, as it directly affects the assessment of the entity's financial risk. Short-term liabilities require funds to be available to repay them soon, which can affect the business's liquidity.
A ZUS instalment agreement can improve the entity's liquidity ratios by spreading liabilities over time. The part of the debt moved to long-term liabilities does not burden current liquidity, which can have a positive effect on how lenders assess the financial situation
It is particularly important that, under the rules, after an instalment agreement is concluded the contribution payer is deemed to have no debt in respect of contribution receivables, provided the instalments are paid on schedule and there are no other arrears to ZUS. This matters when applying for various certificates required in public procurement procedures.
Controlling and monitoring instalment repayments
For an instalment agreement to work properly, the timeliness of repayments and compliance with the terms of the agreement must be monitored systematically. The entity should put in place control procedures to ensure that instalments are repaid regularly in line with the schedule set in the agreement with ZUS.
The key elements of the control system include:
- Systematic monitoring of instalment payment dates
- Checking that the amounts of instalments paid match the schedule
- Ongoing tracking of the balance of the liability to ZUS
- Verifying that instalment repayments are booked correctly
- Checking that current ZUS contributions are paid on time
Failure to pay even one instalment on time makes the entire remaining debt immediately due together with late-payment interest. That is why it is key to put in place effective control procedures to ensure all instalments are paid on time
The entity should also keep detailed analytical records allowing ongoing monitoring of the status of the instalment agreement. These records should include information on:
- The original amount of the debt covered by the instalment agreement
- The repayment schedule broken down into individual instalments
- The due dates of individual instalments
- The amount and date of actual repayment of each instalment
- The current balance of the debt to ZUS
End of the instalment agreement
A ZUS instalment agreement ends when the last instalment is paid in line with the schedule set in the agreement. This moment matters for the books and for presentation in the financial statements, because the liability to ZUS in respect of the contributions covered by the agreement is fully extinguished.
After the instalment agreement ends, the entity should verify that the books are correct and make sure that the balance of account 223 "Public law settlements", in the sub-account for settlements with ZUS, shows no debt in respect of contributions covered by the instalment agreement.
| Stage of the agreement | Balance-sheet presentation | Accounting notes |
|---|---|---|
| Conclusion of the agreement | Split into short-term and long-term parts | No change in how contributions are booked |
| Repayment of current instalments | Reduction of the short-term liability | Entry: Dr 223 / Cr 130 |
| Transfer of instalments from long-term to short-term | Reclassification between balance-sheet items | Adjustment at the balance-sheet date |
| End of the agreement | Zero balance of the liability | Check that the settlement is correct |
It is also important to remember that the end of an instalment agreement does not automatically end all liabilities to ZUS. The entity is still required to pay current contributions and all other public law liabilities to ZUS on time.
