Penalties for unregistered sales - it's worth knowing
Selling products without registering a business leads to criminal consequences. There are several definitions of economic activity in Polish law. Before starting the sale, it is worth learning more about the criteria for its registration and about penalties for unregistered sales.
The concept of economic activity in the light of Polish law
The definition of economic activity is not limited to one legal act, but it can be found in several acts. This definition is described in the following acts:
- the Entrepreneurs' Law,
- tax ordinance,
- the Income Tax Act,
- the act on tax on goods and services,
- the Social Insurance Act.
Pursuant to Art. 3 of the Entrepreneurs' Law, economic activity should be understood as organized gainful activity, performed on one's own behalf, on a continuous basis. On the other hand, the tax ordinance specifies the term in more detail. Pursuant to this legal act, economic activity should be considered any gainful activity within the meaning of the Entrepreneurs' Law, including the exercise of a freelance profession, as well as other gainful activities performed on one's own behalf and on one's own or someone else's account, even if other acts do not include this activity. for business.
To sum up, in order to register a business activity, three conditions must be met: the enterprise should be run in an organized and continuous manner and set up for profit. It should be noted that the amount of income does not matter - even generating a loss does not release you from the obligation to set up an enterprise. Pursuant to the Income Tax Act, an employment relationship based on civil law contracts, employment contracts, rental contracts and income from property rights is an exemption from the registration requirement.
On April 30, 2018, along with the Entrepreneurs Law Act, the possibility of running the so-called unregistered activity. Its operation is regulated in Art. 5 of the aforementioned Act, according to which, in order to be able to conduct undeclared activities, the following conditions must be met:
More on this topic is described in detail in the article: What is undeclared activity? What does the law say about it?
Unregistered sale - tax consequences
Regardless of the fact that the activity is registered, each person earning income is obliged to tax it. As taxpayers, we are obliged to pay fees in the appropriate amount and within the required time. The tax authorities have a wide range of means to persuade citizens to fulfill their obligations. Failure to pay income tax is equated with obtaining income from undisclosed sources. However, qualifying to this category results in the imposition of 75% of the tax. Subsequent attempts to defy the law and consistently fail to pay tax lead to the imposition of a fine or enforcement of tax arrears through a bailiff.
Negative legal consequences will also be incurred due to unpaid tax on goods and services. As a rule, the order to register as a VAT payer belongs to a strictly defined group of entrepreneurs. The legislator indicates entities operating in the field of: sale of precious metal products subject to excise duty, new means of transport, construction and development areas, as well as the provision of legal and advisory services and jewelery services. Moreover, the obligation to register as a VAT payer is imposed on each entity generating sales exceeding PLN 200,000 per year. Even if the entity does not meet the requirements of establishing a business, the regulations do not exempt it from paying the tax.
Penalties for failure to register a business
Taxation of income is not the sole responsibility of the entrepreneur. Running a business without registration involves a number of other requirements. Pursuant to the Entrepreneurs' Law Act, an entrepreneur may take it only after obtaining an entry in the relevant register in the Central Register and Information on Economic Activity or in the register of entrepreneurs of the National Court Register. An entity that conducts business without entry is acting unlawfully and is subject to the penalty of restriction of liberty or a fine (pursuant to Article 601 of the Code of Petty Offenses). Entrepreneurs who do not report changes to the register are also subject to penalty - within 7 days from the occurrence of the event (e.g. change of the company's registered office address).
An important obligation to run a business is registration with the Social Insurance Institution. For this reason, the entrepreneur is obliged to pay health and social contributions. Failure to comply with the obligations provided for in the Act on the social insurance system (e.g. failure to pay social security contributions, obstruction of inspections) results in the imposition of a fine of up to PLN 5,000. In addition, ZUS may demand payment of overdue contributions from the beginning of business, plus interest on tax arrears and an additional fee of up to 100% of the due contributions.
Illegal business activities usually involve a lack of accounting. This may imply further penalties for incorrect calculation of income tax or failure to submit a VAT return. In addition, the Penal Code provides for additional tax obligations due to the lack of a cash register, e.g. imposing a 30% sanction.