To explain what unregistered business activity in Poland is, it’s first necessary to understand what registered business activity is—namely, non-agricultural economic activity.
Economic Activity in Poland
Economic activity refers to organized profit-making activities conducted in one’s own name and on a continuous basis. A profit-making activity is one that is conducted with the intent of generating profits. The organized nature of the activity is demonstrated by its execution using specific material or immaterial resources.
An activity is considered to be conducted in one’s own name when the entity organizing it does so for their own benefit and bears responsibility for any obligations incurred. An activity is considered continuous when it is carried out regularly and repeatedly.
Entrepreneur in Poland - Legal Definition
An entrepreneur is a natural person, a legal entity, or an organizational unit without legal personality to which a separate law grants legal capacity, engaged in economic activity. Partners in a civil law partnership are also considered entrepreneurs in the scope of the business activities they conduct.
What is Unregistered Business Activity?
Unregistered business activity is not considered economic activity if it is conducted by a natural person whose monthly revenue from this activity does not exceed 75% of the minimum wage, and who has not conducted economic activity in the last 60 months.
The regulations concerning unregistered activity do not apply to activities carried out under a civil law partnership agreement. Additionally, unregistered activity cannot involve activities that require a license, permit, or registration in a regulated activity registry.
It’s important to note that this refers to the revenue due in a given month, not necessarily the amount actually received that month. Revenue from economic activity is considered to include amounts due, even if not yet received, excluding the value of returned goods, discounts, and rebates.
Unregistered Business Activity - Foreigners’ Rights
There are no regulations prohibiting or restricting foreigners who are legally residing in Poland from conducting unregistered business activity, provided they meet the general conditions for this activity (the same as for Polish citizens).
However, once the revenue limit is exceeded, the foreigner has to register sole proprietorship and therefore must meet the conditions to do so.
Third Country Nationals Restrictions
Citizens of countries that are not members of the European Union and the European Economic Area may set up their own sole proprietorship in Poland if they have a residence title that entitles them to do so.
Is a Person Conducting Unregistered Business Activity Considered an Entrepreneur?
Since this activity is not considered economic activity, the entity conducting it is not an entrepreneur. If the conditions specified in the regulations are met, a natural person conducting an activity that does not constitute economic activity under the law is not required to apply for registration in the Central Registration and Information on Economic Activity (CEIDG).
Does Unregistered Business Activity Entitle One to Social and Health Insurance?
Unregistered business activity is not considered economic activity and therefore does not entitle one to social or health insurance. A natural person conducting unregistered activity is not required to:
- Register for social and health insurance or health insurance alone
- Register as a payer of contributions for their insurance under social insurance regulations.
What Happens if a Person Conducting Unregistered Business Activity Exceeds the Revenue Limit?
If the limit of 75% of the minimum wage is exceeded in any given month, the person is required to submit an application for registration in CEIDG within 7 days of the day the limit was exceeded. In this case, the activity becomes economic activity starting from the day the revenue limit was exceeded.
Tip: From 1 July to 31 December 2024 the limit equals PLN 3,225 per month. Starting 1 January 2024 the limit will be PLN 3 469,50.
Unregistered Business Activity - Legal Obligations
When conducting unregistered business activity, one is required to:
- Keep a simplified sales record
- Settle the revenue from unregistered business activity (after deducting costs) in the annual PIT-36 tax return according to the tax scale
- Issue invoices or receipts upon the buyer’s request
- Adhere to consumer rights, including the right to withdraw from a distance contract within 14 days and to fulfill obligations related to complaints, returns, or repairs.
Settling Unregistered Business Activity
It will not be possible to settle unregistered activities if you have not kept appropriate records of income.
You do not have to report the start of your business to the tax office, but keeping simplified records is your responsibility. Sales documents or incurred costs, issued invoices, transfer confirmations – these will be the basis for submitting a declaration and calculating the personal income tax on unregistered activities that must be paid. This is important because without records, the tax office will independently determine the sales value and may calculate a higher tax on the determined amount.
Unregistered Business Activity - Taxes
Conducting unregistered activities is not exempt from the obligation to pay income tax on the income earned, as revenues from such activities are not exempt from tax.
Unregistered Business Activity – which PIT?
One of the privileges of running an unregistered business is the frequency of tax settlements. It is not conducted on a monthly or quarterly basis, but only once a year. Income from running a small business must be reported in PIT-36 return.
Unregistered activities do not have to be reported to any office. The Tax Office will learn about your business from your tax return.
Unregistered Business Activity and VAT
According to the VAT Act, unregistered business activity is also considered economic activity. In practice, this means that a natural person who decides to run a business in this form is a VAT taxpayer.
The essence of unregistered business activity is its small scale. Those conducting such activity, like any entity earning income not exceeding PLN 200,000 per year, have the right to benefit from VAT exemption.
Who Doesn’t Qualify for VAT Exemptions?
However, it should be noted that some entities are excluded from benefiting from VAT exemptions regardless of their revenue level. This includes suppliers of precious metal products, most goods subject to excise tax, new means of transport, as well as computers and electronic devices.
Additionally, persons providing advisory, legal, jewelry, and bailiff services are also excluded from the VAT exemption.
Furthermore, individuals without a business seat in Poland must register as active VAT taxpayers.
Obligations for VAT-Exempt Unregistered Businesses
Those who conduct unregistered business activity and benefit from VAT exemption are required to maintain a daily sales record. This document should be updated systematically, no later than before the first sale on the following day. Its content is very simplified compared to records kept for VAT purposes. The document includes a serial number, date, and value of sales, as well as cumulative sales value.
Owners of unregistered businesses exempt from VAT are not required to issue invoices (unless requested by the client, no later than 3 months from the end of the month in which the transaction was completed).
Can Unregistered Business Activity Include Online Sales?
Unregistered business activity is an excellent solution if your online store is intended only as an additional source of income or if you want to grow your business slowly without initially aiming for high sales figures. Sales do not have to be limited to the form of an online store, though. Marketplace platforms like Amazon, Allegro, or eBay are also convenient, allowing sales by individuals who do not operate a registered business, as detailed in the regulations of these portals.
DAC7 Directive - Online Trade Reporting Rules Effective from July 2024
Starting 1 July 2024 regulations implementing the DAC7 directive, which regulates the issue of online trade reporting, entered into force in Poland.
The reporting obligation covers platforms enabling the rental of real estate or parking spaces, personal provision of services, sale of goods and rental of means of transport. Reports to the Head of the National Tax Administration will include users of e.g. Vinted, OLX or Airbnb who made at least 30 transactions or whose revenue from sales on the platform exceeded EUR 2,000 annually.
Seller Responsibilities Under DAC-7
The DAC-7 directive brings new obligations for sellers, particularly those using marketplace platforms, requiring them to be aware of updated rules. While these changes do not introduce additional taxes, they do increase transparency in online sales, potentially drawing more attention from tax authorities.
Clarifying Misconceptions: What DAC-7 Doesn’t Mean for Sellers
Sellers should note that DAC-7 does not create new tax burdens. Moreover, even if a platform reports data for sellers who exceed 29 transactions or earn more than EUR 2,000 annually, this does not automatically require registering as a business. Sellers should understand that platforms are required to request necessary data, but they are not obliged to proactively provide it unless asked.
Consequences of Non-Compliance
Non-compliance with DAC-7 regulations can lead to financial penalties for platforms and restrictions for sellers. Sellers should be aware of potential risks and prepare accordingly. The penalties for sellers have been moderated, with a phased approach now in place. If sellers fail to provide requested data in time, the platform will first withhold payouts. Only if further non-compliance occurs will sales activities be suspended. Initially, both sanctions were to be imposed at once, which would have made it difficult for sellers to continue operating smoothly.
Summary
- Foreigners Can Also Start Small – if you’re a foreigner legally residing in Poland, you can engage in unregistered business activity under the same conditions as Polish citizens. However, exceeding the revenue threshold requires you to register as a sole proprietor.
- Revenue Limits – if you’re conducting unregistered business activity, make sure your monthly revenue does not exceed 75% of the minimum wage. Keep track of this carefully, as exceeding the limit requires you to register your business within 7 days.
- Simplified Record Keeping – keep a daily sales record with basic details like serial numbers, dates, and sales values. It’s a simplified version compared to registered businesses, but necessary for accurate reporting.
- Tax Obligations – even though you’re not required to register as a business, you still need to report your income annually via the PIT-36 tax return.
- Invoice Requirements – you’re not required to issue invoices unless a client requests one. If they do, you have up to 3 months after the end of the month in which the transaction occurred to issue the invoice.
- VAT Exemptions – you can benefit from VAT exemption if your revenue stays under PLN 200,000 annually. However, certain sectors, like precious metals or excise goods, do not qualify for this exemption.
- E-Commerce – unregistered business activity is ideal if you’re starting small or testing the waters, particularly for online sales through platforms like Amazon, Allegro, or eBay.
- DAC7 Directive – if you sell on platforms like Vinted or Airbnb and exceed 30 transactions or EUR 2,000 annually, be aware of reporting obligations these platforms have from July 2024.
Conclusion
Remember: The information provided in this article is for general informational purposes only and does not constitute legal advice.
If you have any doubts or questions regarding unregistered business activity or want to develop your business into a registered sole proprietorship or company – contact us!
We offer you our experience and professional support that will help you go through all legal processes smoothly and hassle-free.
