When was the unregistered activity introduced and to whom we can apply it to?
Conducting business activity not registered in the Central Register and Information on Economic Activity (CEIDG) is possible from April 30, 2018. In art. 5 paragraph 1 of the Entrepreneurs Law we can read:
Art. 5. 1. An activity carried out by a natural person whose due revenue from this activity does not exceed 50% of the minimum remuneration referred to in the Act of 10 October 2002 on the minimum remuneration for work does not constitute an economic activity. (Dz. U. z 2017 r. poz. 847 oraz z 2018 r. poz. 650), and which has not conducted any economic activity during the last 60 months.
Let’s take a closer look at the provision above.
The minimum salary in Poland in 2019 is PLN 2,250. gross. Revenue may not exceed PLN 1125 in any month (gross).
What is the due revenue? These amounts are due to the person, even if they were not actually received, excluding the value of returned goods and discounts.
As for the time criterion, according to the above-mentioned provision, you can conduct non-registered activity if you have not conducted business activity in the last 5 years. However, in accordance with the transitional provisions, the legislator also gives such an opportunity to those who conducted business, but before April 30, 2017 (12 months before the Entrepreneurs Law came into force) such activity was removed from CEIDG and was not registered again.
Importantly, unregistered activity does not apply to civil law partnerships and activities that require special permits or concessions, e.g. operations in the field of air transport, security of property and persons or production, trade of explosives, weapons and ammunition. We also remember that non-registered activity can only be carried out alone.
Benefits of conducting unregistered activities
• no need to report it in the Central Register and Information on Economic Activity;
• as a rule, no need to obtain NIP and REGON numbers, unless there is an obligation to register transactions using a cash register. The obligation to have a cash register arises after exceeding the amount of PLN 20,000 per year from sales to ordinary consumers, which means PLN 1666.67 per month. As we have already mentioned, your limit is PLN 1125 per month, so it may seem like a problem. Remember, however, that the aforementioned amount of PLN 20,000 is limited by certain exceptions, which you can read about in § 4 of the Regulation of the Minister of Finance on exemptions from the obligation to keep records using cash registers;
• as a rule, there is no need to pay contributions for compulsory social insurance and health insurance for non-agricultural activities. However, this does not apply to general rules for being subject to insurance in connection with an employment contract or civil law contracts;
• exemption from VAT (exception – Article 113 (13) of the Act on value added tax, which indicates the types of activities which are connected with the obligation to register as a VAT payer, irrespectively of the amount of revenue generated, it enlists e.g. legal, consultancy and jewellery services);
• unregistered activity can be carried out intermittently, as long as the monthly income threshold is not exceeded.
Obligations of the person conducting non-registered activity:
• keeping simplified sales records, in which sales for a given day should be recognized, not later than before the sale on the next day;
The records are kept to determine whether a person does not exceed the limit set for taxpayers benefiting from VAT exemption due to the amount of income. Failure to keep such records or to keep them improperly may lead to problems in case of a possible inspection.
It should be remembered that in the case of non-consumer sales, entrepreneurs and other institutions record accounting documents. In the event that the invoice issued by a person conducting non-registered activity for such an entrepreneur or institution indicates that the limit has been exceeded, such a fact may be noticed in the event of an audit. This may seem difficult to detect, but in the near future, with such an extremely fast digitization, the transfer of such data to the Tax Office will probably become automatic.
It should also be borne in mind that auction services are required to disclose transaction data in the form of appropriate statements upon request of the Tax Office.
- revenues from non-registered activities are taxed on general principles according to a tax scale. The taxpayer settles them in the annual tax return PIT-36, they should be placed in the column “from other sources”. The taxpayer does not have to pay advance income tax payments, and the costs of unregistered activity can be deducted from its revenues;
- the non-registered activity doesn’t lead to an exemption from applying consumer protection regulations, e.g. regarding complaints or returns;
- as we have already mentioned – customers of people who conduct non-registered activity have the right to expect a bill for goods sold – a request may be submitted up to three months from the end of the month in which the goods were delivered.
Dropshipping and unregistered activity
In dropshipping sales it is worth to pay attention to the fact that you can easily achieve revenues above PLN 1,125.00 gross.
In accordance with applicable restrictions resulting from the limit of income from the unregistered activity, an entry should be done in the Central Register and Information on Economic Activity (CEiDG). You have 7 days to submit an application with CEIDG from the day when the income exceeded the limit indicated above.
You might be wondering if the registration activity will work in your case?
It all depends on what dropshipping sales are to you – low income related to your hobby or the first step on the way to a business activity that generates opportunities to leave your current full-time job that frustrates you.
What options may seem noteworthy? Dropeo suggests.
- Make a simple financial analysis that will help you pre-determine your expected revenue. If it turns out that such revenues are likely to exceed PLN 1,125.00 gross, then it is worth considering establishing a regular business and using the so-called ,,advantages for starters”. Then, for a period of six months, your health insurance premium will be lower, as it will not exceed PLN 342.32 per month. In this way you will gain time to promote your business, check how you are doing as a dropshipping seller and what profits your business really generates and whether it is profitable. However, you must remember that if the registration business model does not work for you, you will not be able to start non-registered business after closing it.
- A reasonable solution also seems to be starting from non-registered activities, and in case of exceeding the magic threshold, registering the activity in CEIDG and using the aforementioned ”advantages for starters”.
Do you have more questions about non-registered activities? Let us know.