Accounting for Sole Proprietorships

The settlement of a sole proprietorship (JDG) in Poland focuses on several key areas:

• Business Registration: Before starting operations, you must register the company in the Central Register and Information on Economic Activity (CEIDG). This process is simple and can be completed electronically.
• Choosing the Form of Taxation: The entrepreneur must select the form of income taxation. Options include: the flat tax (19% of income), the progressive tax scale (12% and 32% of income), or the lump sum tax on registered income. There is also an option for some types of businesses to pay tax under the tax card scheme.
• ZUS (Social Insurance): The entrepreneur is obliged to register with the Social Insurance Institution (ZUS) and pay pension, disability, accident, health, and Labour Fund contributions. Discounted rates are available during the first years of operation.
• Accounting: Depending on the chosen form of taxation, the entrepreneur must maintain appropriate records (financial ledgers, tax ledger of revenues and expenditures, or lump sum register). This is essential for proper settlement with the Tax Office.
• Settlements with the Tax Office: Depending on the form of taxation, once a year (by the end of January, April, or May, depending on the form), the entrepreneur files the appropriate tax declarations (PIT-28, PIT-36, PIT-36L) and makes any necessary tax surcharges.
• Invoices and Receipts: The entrepreneur must issue invoices for sold goods or services and store copies of purchase documents, which serve as the basis for deductions and tax settlements.

The cost of accounting for a JDG depends on several factors, such as the number of accounting documents and the scope of services. Prices can range from approximately PLN 200–300 per month for small companies with a minimal number of documents, up to around PLN 400 net per month for online accounting for a sole proprietorship with a dedicated company accountant.

Yes, a sole proprietor (JDG) can handle their company’s accounting independently. This is certainly feasible, especially with a smaller number of transactions, but it requires knowledge of regulations and meticulous attention to detail. It is also worth investing in appropriate accounting software to simplify the management of your business finances.

In 2025, the full ZUS contributions for entrepreneurs running a sole proprietorship are:​

• Social Insurance Contributions (based on a contribution assessment basis of PLN 5,203.80, which is 60% of the forecasted average remuneration of PLN 8,673):

  • Retirement (Emerytalna): PLN 1,015.78

  • Disability (Rentowa): PLN 416.30​

  • Sickness (Chorobowa): PLN 127.49

  • Accident (Wypadkowa): PLN 86.90​

  • Labour Fund (Fundusz Pracy): PLN 127.49

• Health Contribution (Składka Zdrowotna): Its amount depends on the chosen form of taxation and the income earned.​

In total, the monthly ZUS social contributions (excluding the health contribution) amount to approximately PLN 1,773.96.

Please remember that the health contribution is calculated individually depending on the form of taxation and income.

A sole proprietorship can be operated without any income limit. There is neither a minimum nor a maximum amount of revenue at which you must start or stop operating it. However, exceeding certain financial thresholds may affect the obligation to maintain full accounting books or change the form of taxation.

In a business, various tax-deductible costs (costs of revenue) can be deducted from income, such as:

• Purchase of goods and materials directly related to production or services.
• Employee wages along with ZUS contributions.
• Costs of renting and operating premises used for business purposes.
• Utility fees (electricity, water, gas, internet).
• External services (accounting, marketing).
• Depreciation of fixed assets and intangible assets.
• Own social and health insurance contributions.
• Costs of business trips and delegations.
• Advertising and promotion expenses.

It is important that all deductions are properly documented and directly related to the business activity being conducted.

IMPORTANT! Under the lump sum tax scheme, you cannot deduct business expenses. You pay tax on the total revenue without taking expenditures into account. This simplifies the settlement process.

Dla jednoosobowej działalności gospodarczej w Polsce dostępne są cztery formy opodatkowania:

1. Four forms of taxation are available for a sole proprietorship in Poland:
   1. Flat Tax – 19% of income, regardless of the amount.
   2. Progressive Tax Scale – 12% up to an annual income of PLN 120,000, and 32% above that amount.
   3. Lump Sum Tax on Registered Income – The rate depends on the type of business activity, ranging from 2% to 17% of revenue.
   4. Tax Card – A fixed monthly tax amount, determined individually, available for selected types of business activity.

The choice of taxation form depends on the specifics of the business and your forecasted revenue.

Income in a sole proprietorship is calculated by subtracting all tax-deductible costs (costs of revenue) from your total revenue. The formula is as follows:

Income = Revenue – Tax-Deductible Costs

Revenue includes all inflows from the sale of goods, products, and services. Tax-Deductible Costs are expenses related to running the business that are eligible for deduction, such as the purchase of goods, operating costs, salaries, ZUS contributions, and rental expenses.

In a business, various tax-deductible costs (costs of revenue) can be deducted from income, such as:

• Purchase of goods and materials directly related to production or services.
• Employee wages along with ZUS contributions.
• Costs of renting and operating premises used for business purposes.
• Utility fees (electricity, water, gas, internet).
• External services (accounting, marketing).
• Depreciation of fixed assets and intangible assets.
• Own social and health insurance contributions.
• Costs of business trips and delegations.
• Advertising and promotion expenses.

It is crucial that all deductions are properly documented and directly related to the business activity being conducted.

IMPORTANT! Under the lump sum tax scheme, you cannot deduct business expenses. You pay tax on the total revenue without taking expenditures into account. This simplifies the settlement process.

When running a business, you must pay:

1. **Taxes** – depending on the chosen form of taxation (e.g., flat tax, progressive tax scale, lump sum)
2. **ZUS Contributions** – mandatory social and health insurance
3. **Bills** – for rent, utilities, and internet
4. **Business Expenses** – purchase of goods, materials, and external services
5. **Other Fees** – e.g., for accounting, licenses, or software

The ZUS contribution amount for a sole proprietorship depends on the income, but it is lower at the start thanks to available reliefs. For instance, in 2023, new entrepreneurs pay approximately PLN 650 per month for the first 6 months. After that, the standard contribution is around PLN 1,500 per month, but this can vary depending on income and the chosen calculation base.

The tax amount on an invoice depends on the VAT rate for the specific good or service. In Poland, the primary VAT rate is 23%, but there are also lower rates: 8%, 5%, and some products are exempt from VAT. For example, if the VAT rate is 23%, the tax on a PLN 100 invoice will be PLN 23.

You calculate gross profit from operations by subtracting the direct costs of producing or purchasing goods/services from the revenues (meaning all inflows from the sale of goods and services).

In short:

Gross Profit = Revenue – Direct Costs

For example, if you sold products for PLN 10,000 and the cost of their production was PLN 6,000, your gross profit is PLN 4,000.

The tax on an invoice is paid by the buyer—the individual or company that purchases the goods or service. The tax amount is included in the price shown on the invoice. The seller, in turn, remits the collected tax to the Tax Office.

The most frequently chosen form of accounting for a sole proprietorship (JDG) is the Tax Ledger of Revenues and Expenditures (KPiR). This is a simpler and less costly form of record-keeping that is well suited to smaller companies. Alternatively, with higher revenues or specific requirements, full accounting may be considered, but it is usually required for larger enterprises.

Typically, a sole proprietorship (JDG) does not maintain full accounting books (financial ledgers), but instead uses the Tax Ledger of Revenues and Expenditures (KPiR). Full accounting books are only required for larger companies that exceed specific financial thresholds.

Sole proprietorship (JDG) accounting involves maintaining the Tax Ledger of Revenues and Expenditures (KPiR), where all revenues and costs are recorded. The main goal is to calculate the income subject to taxation. It is also necessary to document and store invoices, receipts, and other accounting evidence, as well as settling taxes and ZUS contributions.

A sole proprietorship (JDG) can be operated without any revenue limit. There is neither a minimum nor a maximum amount of revenue at which you must start or continue running it. However, exceeding certain financial thresholds may affect the obligation to maintain full accounting books or influence the chosen form of taxation.