Polish unregistered business, designed to help startups, is growing rapidly, creating unfair competition and shrinking tax revenues.
Evolution or Erosion of the System? The Trap of “Trial Business”
Polish law allows legal business activity without registering in the Central Register of and Information on Business Activity (CEIDG) or the National Court Register (KRS), and without paying monthly social security contributions to ZUS and income tax advances, as long as quarterly revenues do not exceed PLN 10,813.50, which corresponds to 225% of the minimum wage applicable in 2026. Another condition is that this solution can be used by individuals who have not run a business in the last 60 months, including those who did not have their business suspended during this period.
Unregistered business activity was introduced as a solution facilitating minor economic activities and lowering barriers to market entry for people who are just testing their business idea. From this perspective, it plays an important pro-development function and can be the first step to formally running a business, says Dagmara Rybicka from the press office of the SME Ombudsman.
Cost Asymmetry: Unregistered Business as a Challenge for Micro-Enterprises
Although the legislator’s intention was clear, practice shows that unregistered business activity is beginning to serve as a permanent business model, not just a transitional stage. There are also voices suggesting that it contributes to pushing part of economic activity outside the tax and insurance system. This translates into lower revenues to the state budget.
In my opinion, pushing part of economic activity outside the tax and insurance system through unregistered business activity is actually happening and to some extent contributes to increasing the gray zone in the economy and the tax gap. We observe a dynamic growth in the number of such activities, from 20,000 in 2019 to 79,000 in 2023 – and these are only the people who declared in their PIT that they derive income from this source – believes Łukasz Kozłowski, chief economist at the Federation of Polish Entrepreneurs.
Growth Dynamics of the Gray Zone
The scale of unregistered business activity remains largely outside the knowledge of public administration. Additionally, as market observations show, some people using this solution have no plans to register a company at all, and the mechanism created to support entrepreneurship is increasingly becoming a threat to micro-enterprises.
One must be aware that unregistered business activity, if used in a permanent or non-compliant manner, can lead to distortion of competition conditions. Lower costs resulting from the obligation to pay contributions or maintain full formal service encourage offering lower prices, which poses a real challenge for companies operating legally and bearing all burdens. The role of the SME Ombudsman is to draw attention to the need to maintain balance between supporting entrepreneurship at an early stage and ensuring fair and equal competitive rules – notes Dagmara Rybicka.
Ewelina Zawiślak, a lawyer running her own law firm, shares a similar view. She points out that although unregistered business activity itself does not pose a systemic threat to the smallest entrepreneurs, it is sometimes perceived as price competition in selected market segments. Like Dagmara Rybicka, she believes that the danger to companies is its abuse.
Legal Boundaries: Evidentiary Challenges in Controlling Revenues
It’s about situations where a full-scale activity is actually being conducted, with regular services, advertising, and a customer base, while simultaneously avoiding tax and contribution obligations. In such cases, we are not dealing with minor activity, but with unfair competition that violates market equality principles and may have serious legal consequences. The key, therefore, is not its existence, but the effective enforcement of the limits clearly set by the legislature – believes Ewelina Zawiślak.
The institution of unregistered business activity is therefore not a problem in itself. In practice, however, there is a lack of effective oversight mechanisms over its scale and actual utilization. The National Revenue Administration (KAS) does not conduct separate, systemic controls on revenues earned in this form. Verification only applies to data voluntarily reported in annual tax returns by individuals running unregistered business activities.
An employee working without a contract, in case of control, can always claim that they are only conducting unregistered business activity. Proving that such cooperation is not incidental and that income from this source significantly exceeds the limits allowing the use of unregistered business activity is often difficult in practice – points out Łukasz Kozłowski.
Legislative Proposals: Control and Redefinition of the Unregistered Business Model
In such situations, the risk of using unregistered business activity as a tool to avoid taxation and payment of social security contributions increases. It increasingly ceases to serve a transitional function and begins to be treated as a permanent model of operation on the market. The lack of a time limit for conducting such activities and the lack of an obligation to register after a certain period only reinforce this phenomenon.
This phenomenon is of particular importance in industries with a low entry threshold, where business can be conducted without major investments and where it is relatively easy to hide the actual scale of turnover. Under such conditions, unregistered business activity begins to play the role of a mechanism pushing out market entities operating in accordance with existing regulations.
A response to this could be to clarify the rules for conducting business without registration. This could primarily include setting a maximum period for running unregistered business activity and introducing an obligation to register after its expiration. Every solution that potentially affects the stability of public finances and the situation of honest entrepreneurs should be monitored and evaluated in terms of abuse risk – summarizes Dagmara Rybicka.