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In the age of the Internet, the whole world is within reach. It is no wonder that online shopping has become a prominent way of purchasing various goods. According to the report “E-commerce in Poland 2022” the percentage of Internet users who declare buying online has stabilized at 77%, with significantly more people making purchases on Polish websites (75%) than on foreign ones (32%). This trend has led to the increasing popularity of online sales among Polish entrepreneurs. Online sales have numerous advantages – they do not require a high initial investment, provide access to millions of customers worldwide, and offer flexibility in terms of time and location for conducting business. Additionally, technically, online sales are relatively straightforward; one can utilize existing sales portals without the need to create custom websites. It can also be conducted as a sole proprietorship.
Business Activity in Poland – Legal Definition
Does online sales require us to establish a business activity? The answer depends on the specific situation.
First and foremost, we need to clarify what constitutes a business in Poland. According to Article 3 of the Act of 6 March 2018 on entrepreneurs (hereinafter: ‘Entrepreneurs Act’) a ‘business’ refers to an organized economic activity conducted for profit and performed continuously on one’s behalf. Business activity, to be considered as one, should have four essential features: professional and permanent nature, repeatable actions, adherence to principles of rational management, and participation in economic operations. It is emphasized that to recognize business activity as one, the joint presence of three functional features is necessary: profit-making, organization, and continuity. Therefore, business activity is, by definition, an organized, continuous, and profit-oriented endeavor that entails assuming entrepreneurial risk. The form of conducting business is irrelevant; it can be a sole proprietorship or commercial partnership (e.g., civil law partnership or limited liability company). The only requirement is registration with the tax office. It is also possible, though more challenging, to conduct unregistered business, which may reduce business costs, including income tax.
Navigating the Boundary: Is Running an Online Store a Business Activity in Poland?
Does running an online store fall within the aforementioned definition of business activity?
Yes, selling in an online store meets the criteria for business activity. It involves profit-oriented conduct as it aims to generate revenue. It also constitutes organized activity, as specific actions need to be taken to establish and run an online store – such as creating a website or setting up an account on a particular sales portal, ordering and purchasing goods (or making them, as in the case of handicrafts, art, or e-books). Running an online store also qualifies as continuous sales. Online sales do not have an incidental or occasional character and are carried out repetitively. If we, as sellers, conduct the sales in our name and are not mere employees serving customers, then it qualifies as a sole proprietorship. In such a case, it becomes a form of business activity.
What Can We Sell through an Unregistered Business?
In principle, unregistered business allows for the sale of practically anything except for products and services that require permits or licenses.
Exceeding the Limit for Non-Registered Activities as a Criterion for Business Activity Qualification
Furthermore, in accordance with Article 5 of the Entrepreneurs Act, a business activity performed by an individual whose income from this business does not exceed 50% of the monthly minimum wage stipulated in the Act on the minimum wage for work, October 10, 2002, (Journal of Laws of 2018, item 2177, and 2019, item 1564) in any month and who has not conducted business activity in the last 60 months cannot be considered a business activity.
According to the regulation mentioned above, to avoid being classified as a business activity in Poland, two cumulative criteria must be met. First, the income from our online store (amounts receivable, even if not actually received) must not exceed 50% of the statutory minimum wage for work in any given month. Second, in the 60 months preceding the commencement of our online store activity, we must not have conducted any business activity. This business activity must also be carried out independently.
Advantages of Unregistered Business in Online Sales
Unregistered business is a good solution when our online store is intended only as an additional source of income or when we want to gradually grow our business without initially aiming for high sales figures. Online sales are not limited to an online store; convenient options include marketplaces like Amazon, Allegro, or eBay. These platforms allow sales even for individuals not engaged in business activity, as explicitly explained in their terms and conditions.
Not having an assigned PKD (Polish Classification of Activities) number in the Central Register and Information on Economic Activity (CEiDG) means that changing our product range will not involve formalities. An additional advantage is that an individual engaged in unregistered business does not have to pay any social security (ZUS) contributions or health insurance.
Unregistered Business and Taxation Matters
However, it is essential to note that business activity is subject to taxation, but only if a specific criterion is met – if we also earn income from another source that increases our annual income above the tax-free amount. The reason is simple: assuming that in each month of the tax year, we achieve the maximum income allowed for unregistered business, the total annual income will amount to 20,940.00 PLN (calculated using the minimum wage provided for in 2023). This amount will not exceed the tax-free threshold of 30,000.00 PLN. If the tax-free threshold is exceeded, the individual conducting such business must file an income tax return at the end of the tax year. The tax in Poland is calculated based on the standard progressive tax scale of 17% and 32%. Individuals engaged in unregistered business are not required to make monthly tax advances. The tax will be paid after the end of the tax year upon submission of the appropriate tax return.
As a business, we can benefit from the exemption from VAT for individuals whose annual sales value does not exceed 200,000 PLN. An exception is the sale of goods subject to mandatory VAT, such as electronics or cosmetics.
Limitations and Drawbacks of Online Sales
In addition to numerous advantages, online sales have drawbacks and limitations. It is essential to consider the issue of applicable law in disputes with customers from different countries. For businesses within the European Union, this matter is regulated by Regulation (EC) No 593/2008 of the European Parliament and of the Council of June 17, 2008, on the law applicable to contractual obligations (Rome I). According to this regulation, in the case of business-to-business transactions, parties have the freedom to choose the applicable law. The law of the consumer’s habitual residence is generally applicable for business-to-consumer transactions.
Under Article 8(1)(1) of the Act of July 18, 2002, on Providing Services by Electronic Means, the seller must also define the terms of providing services electronically in the regulations. If the online store is addressed to consumers, the provisions of the Act of May 30, 2014, on Consumer Rights must be considered. This law imposes an obligation on online stores to provide specific information to consumers within certain timeframes. It also requires the inclusion of a button informing about the submission of an order with an obligation to pay or equivalent.
Online Sales via Dedicated Portals – Potential Issues and Constraints
What potential issues might arise when conducting unregistered business on Allegro?
Strict compliance with the portal’s terms and conditions is necessary. Complaints and returns must be handled independently, as the portal does not deal with them on our behalf. The portal also does not assist in fulfilling GDPR obligations. Sellers must present their own sales regulations to customers.
As an individual, we are unable to create a business account on Allegro and utilize its features, which may result in our offers being displayed lower than those of registered businesses.
Allegro aims to professionalize its services, making it more challenging for unregistered individuals to sell on the platform. Allegro has introduced the Allegro Smart program for sellers and buyers, “productization” (grouping offers with the same product from various sellers), and a commission on shipping costs. Allegro Lokalnie has become a place for individuals without registered business activity, and currently, offers placed on Allegro Lokalnie are also visible on the main Allegro portal. However, this convenience is expected to be removed in the future.
These factors can lead to constricting unregistered business. Therefore, when considering such an approach, it may be worth considering alternative sales methods through other platforms or establishing a custom online store, which can be quickly set up using available templates without requiring programming knowledge.
Registering an Unregistered Business
Finally, it should be noted that an individual engaged in unregistered business in Poland can apply for registration in the Central Register and Information on Economic Activity. Business activity will be considered as one from the date specified in the application. Suppose the revenue from the business exceeds a certain level in a given month. In that case, it will be regarded as a business activity starting from the day when the threshold is exceeded. In such cases, the individual engaged in a business activity must file an application for registration in the Central Register and Information on Economic Activity within seven days from the date of exceeding the threshold. Income revenue is understood as amounts receivable, even if not actually received, excluding the value of returned goods, granted discounts, and rebates.