Register a Sole Proprietorship in Poland
A sole proprietorship in Poland, also known as “jednoosobowa działalność gospodarcza,” is a popular business structure that allows individuals, including both Polish citizens and foreign nationals, to start their own businesses.
Before initiating the registration process, individuals must verify their eligibility. Sole proprietorships are open to Polish citizens and foreign residents in Poland. Determine the scope of your business activities and select the appropriate classification codes using the Polish Classification of Activities (PKD).
Obtain a tax identification number (NIP) from the local tax office, which is essential for all entrepreneurs. Choose a business name, which can be your own name, or a unique name not already registered by another business entity. Prepare the necessary documents and submit your registration documents to the Central Register and Information on Economic Activity (CEIDG), either online or in person at a CEIDG office. Typically, the registration process for a sole proprietorship in Poland is free. However, additional costs may arise, such as translation or legal assistance fees if needed.
Starting a company via sole proprietorship in Poland offers a straightforward path to entrepreneurship for both citizens and foreign nationals.
Table of Contents
What is Polish Sole Proprietorship?
A Polish Sole Proprietorship, often referred to as a “sole trader” or “sole proprietor,” is a simple and common business structure in Poland where an individual operates a business independently. The sole proprietor has full ownership and control of the business. Registering a sole proprietorship involves submitting the CEIDG-1 form, obtaining a tax identification number (NIP), and adhering to legal requirements. For example, a freelance graphic designer, a small bakery owner, or a self-employed consultant can all operate as sole proprietors.
Over 90% of businesses in Poland are sole proprietors, demonstrating their prevalence. Sole proprietors are subject to personal income tax (PIT) based on their business profits. It is mandatory to maintain financial records and submit annual tax returns. Sole proprietors are subject to personal income tax (PIT) on their business profits, with tax rates ranging from 17% to 32% depending on income levels. They will also contribute to the Polish social security system (ZUS or Zakład Ubezpieczeń Społecznych) for health and pension benefits. The ZUS contribution rate for healthcare ranges from 9.76% to 9.99% of the base amount while the pension contribution rate ranges from 17.75% to 19.52% of the base amount
The registration process is easy and cost-effective, and you have full control over business decisions. Sole proprietors keep all business profits. However, unlimited personal liability exists for business debts with potential challenges in accessing financing for expansion. The sole proprietor also bears the full workload of the business.
What are the Obligations of Polish Sole Proprietors?
The obligations of Polish Sole Proprietors are taxation, bookkeeping, social security, and VAT reporting. Sole Proprietors must report and pay personal income tax (PIT) on business profits. Maintaining accurate financial records and submitting annual tax returns is their responsibility. For example, if a sole proprietor earns 50,000 PLN ($11,650) annually and falls within the 32% tax bracket, they will owe 16,000 PLN ($3,728) in income tax.
Sole Proprietors contribute to the Polish social security system (ZUS) for healthcare and pension benefits. If their revenue exceeds the threshold (85,000 PLN or $19,806 for small businesses or 150,000 PLN or $34,952 for certain services), they must register for VAT and report and remit value-added tax (VAT) to the tax authorities. VAT rates vary based on the nature of the job and the income level but it has the standard rate at 23%.
What are the advantages of Sole Proprietorship in Poland?
The advantages of Sole Proprietorship in Poland involve minimal bureaucracy and lower administrative costs compared to other business structures.
It typically takes a few days to a couple of weeks to finish registration with admin costs less than 100 PLN ($23.30). Sole proprietors retain full control over business decisions, allowing for quick responses to market changes. All business profits belong to the sole proprietor, offering the potential for greater personal income.
What are the limitations of Being a Sole Proprietor in Poland?
The limitations of sole proprietors in Poland are that in the event of business debts or legal liabilities, personal assets of the sole proprietor are at risk. This means that personal assets could be used to cover business debts to the extent necessary. Access to financing is challenging, as sole proprietors find it difficult to secure loans or investments from external sources.
Sole proprietors often rely on personal savings or microloans, which have higher interest rates compared to business loans. Sole proprietors typically handle all aspects of the business themselves, leading to long working hours and a substantial workload. The workload is particularly demanding when juggling administrative, operational, and marketing tasks without the support of a team.
How to register Sole Proprietorship in Poland?
To register a Sole Proprietorship in Poland, you need to follow the 10 steps indicated below.
- Choose a company name
- Find an accounting service
- Prepare the office address
- Choose a PKD code
- Select the form of income tax
- Check VAT requirements
- Decide how to pay PIT contributions
- Open a bank account
- Prepare the documents for registration
- File applications for registration
Registration of sole proprietorship is similar to the process of registering a company in Poland. A person should go through the process by themselves or inquire for help from a legal service provider.
1. Choose a Company Name
Select a unique business name that is not already registered in Poland. Ensure that the chosen name accurately represents your business. This step typically does not incur any direct costs, but you need to pay for a business name search if you want to check name availability in advance.
2. Find an Accounting Service
Consider hiring an accounting service or accountant to assist with financial record-keeping, tax filings, and compliance. Accounting service fees vary from 100 to 500 PLN per month, depending on the complexity of your business. Ensure that the accounting service you choose is experienced and knowledgeable about Polish tax regulations.
3. Prepare the Office Address
Provide a physical address for your business, which is a residential address if you work from home. No direct cost, unless you need to rent a separate office space. Ensure that the address you provide is accurate and able to receive official correspondence.
4. Choose a PKD Code
Select the appropriate Polish Classification of Activities (PKD) code that best represents your business activities. Understand your business activities thoroughly to choose the most accurate PKD code.
5. Select the Form of Income Tax
Decide whether you want to pay personal income tax (PIT) on a simplified basis or based on actual income and expenses. Obtain a crucial tax identification number (NIP) from the local tax office
6. Check VAT Requirements
Determine if your revenue exceeds the VAT registration threshold (85,000 PLN or $19,806 for small businesses or 150,000 PLN or $11,650 for certain services). No direct cost for checking, but VAT registration will involve additional administrative work and potential tax liability. Regularly monitor your revenue to ensure compliance with VAT regulations.
Launch your business operations, upholding precise record-keeping, and fulfilling your social security (ZUS) and VAT obligations
7. Decide How to Pay PIT Contributions
Choose whether to pay PIT contributions on a monthly or quarterly basis.
8. Open a Bank Account
Open a business bank account to manage your business finances separately from personal finances. Opening a basic business account costs around 20-50 PLN per month. Provide necessary identification and business registration documents to open the account.
9. Prepare the Documents for Registration
Gather all required documents, including your CEIDG-1 form, personal identification, proof of address, and any permits or licenses applicable to your business. Document preparation costs include notarization or translation fees. Ensure that all documents are complete and meet legal requirements.
10. File Application for Registration
Submit your complete registration documentation to the Central Register and Information on Economic Activity (CEIDG), either online or in person. Registering a sole proprietorship is free of charge, but you may incur costs for document notarization or translation. Follow the CEIDG guidelines and provide accurate information during the registration process.
What documents are required to open a sole proprietorship in Poland?
To open a sole proprietorship in Poland, it is required to have the following 7 documents.
- CEIDG-1 Registration Form
- Personal Identification Document
- Proof of Address
- Permits and Licenses
- Tax Identification Number (NIP)
- Bank Account Information
- VAT Registration
CEIDG-1 Registration Form is crucial, and this form is submitted for free. The cost of obtaining or renewing personal identification documents (e.g., a passport or ID card) varies from 60 PLN ($13.98) to 300 PLN ($69.9). Utility bills or rental agreements are needed as they serve as proof of address. The cost for permits and licenses vary widely depending on the type of business activity and the local regulations. For example, getting a customs number that allows you to conduct international business costs about 20 zlotys ($4.66). Payments for the issuance of a permit for the retail sale of beverages containing alcohol up to 4,5% and beer is 525 zł ($122.3), 4,5% to 18% except for beer is 525 zł ($122.3) and over 18% is 2100 zł ($489.3).
Obtain a Tax Identification Number (NIP) from the tax office which is typically free of charge. Opening a basic business bank account costs around 20-50 PLN ($4.66 – $11.65) per month, but costs vary depending on the bank and the type of account. Registration itself is usually free, but the potential costs arise when you need to hire an accountant to manage VAT-related paperwork, which ranges from 100 to 500 PLN per month or more. If required, notarizing, and translating documents incurs additional costs. Translation fees vary depending on the document’s length and complexity, but it ranges from 30 PLN ($6.99) to 100 PLN ($23.3) per page.
How Much Does It Cost to Register Sole Proprietorship In Poland?
The cost to register a sole proprietorship in Poland typically ranges from 0 PLN ($0) to 150 PLN ($34.95). There is no minimum share capital required to establish a sole proprietorship in Poland. It’s a cost-effective option for business formation.
Citizens of Poland, foreign residents, and individuals from other countries can open a sole proprietorship in Poland, making it accessible to a diverse range of entrepreneurs.
Citizens of which countries can register a sole Proprietorship in Poland?
Citizens of the following countries can register a sole proprietorship in Poland.
- Poland (Polish citizens).
- Permanent Residents: This includes spouses and other dependents of Polish citizens, spouses of EU Blue Card holders, holders of EU long term residency, as well as holders of the “Karta Polaka”.
- European Union (EU) and European Economic Area (EEA) member countries.
- Non-EU/EEA countries with specific bilateral agreements with Poland.
It’s important to note that while citizens of these countries can register a sole proprietorship in Poland, residence requirements vary based on the specific regulations and agreements between Poland and the respective countries.
Do owners of Sole Proprietorship receive a residence in Poland?
Owners of a Sole Proprietorship in Poland do not automatically receive residence in Poland. Registering and operating a sole proprietorship in Poland does not grant an individual permanent or temporary residence in the country. To reside in Poland for an extended period, one would need to apply for the appropriate residence permit or visa based on their specific circumstances and intentions, such as work or business-related reasons. Sole proprietorship ownership alone does not confer residence rights in Poland.