What is the cash transaction limit?
The cash transaction limit determines the maximum amount of a single transaction that businesses can carry out between themselves bypassing payment accounts. Importantly, this limit is independent of the number of payments – this means that even if the amount of the transaction has been divided (for example, part of the amount due was paid by wire transfer and part by cash, or the whole amount was paid in installments), all payments will be included in the transaction limit.
EXAMPLE
ABC company purchased goods from XYZ company for the amount of PLN 18,000. Since the current limit for business-to-business cash transactions is PLN 15,000, ABC’s representative decided to pay PLN 15,000 in cash and PLN 3,000 by wire transfer. Note: this solution does not change anything! The total amount of transactions exceeds the limit amount, so both payments are treated as not adhering to the cash transaction limit.
What is the penalty for exceeding the cash transaction limit?
Polish law does not provide for any sanctions if the limit is exceeded – so the entrepreneur will not face any penalty. The only, albeit severe, consequences of exceeding the limit are tax consequences. What do they consist of?
Important!
If an entrepreneur exceeds the limit of a non-cash transaction, the entire payment made in cash cannot be recognized as a deductible business expense.
What’s more, if a taxpayer already manages to erroneously credit the amount paid (and it is higher than the current cash transaction limit amount), it is his responsibility to reduce his deductible expenses. However, if he does not have the option to reduce his PPC in the month in which he made payments in excess of the limit with the omission of payment accounts, ordered a transfer or made a payment with the omission of split payment, he will have to increase revenue to offset the amount of tax.
What cash transaction regulations are in effect now?
Although the package of laws introduced in 2021 known as the Polish Deal is already in effect, not all of its provisions have come into force. The current regulations on B2B cash transactions do, admittedly, take into account future changes, but are annotated to indicate when the new cash transaction limit will take effect.
Important!
Currently, the limit for cash transactions between businesses is PLN 15,000. At this point, there is still no limit for cash transactions between consumers.
How will the regulations change with the next reduction in the limit?
The change in the limit on cash transactions, announced as early as 2021, will severely restrict the ability to conduct transactions bypassing bank accounts, and not just for businesses. Here are some of the most important changes that await us after the implementation of the October 29, 2021 law. on Amendments to the Personal Income Tax Act (updof), the Corporate Income Tax Act (updopdop) and Certain Other Acts (i.e., the so-called ” Polish Deal“). :
First: the limit on B2B cash transactions will be reduced from PLN 15,000 to PLN 8,000 (Art. 22 point 1 of the aforementioned. The law amends Art. 19 Law of March 6, 2018. – Law of entrepreneurs).
Second: an obligation is introduced for entrepreneurs, under which they are required to ensure that payment can be made at any place where business is actually conducted (the change is described in detail in Article 19a in the Law of March 6, 2018. – Entrepreneurs’ Law).
Third: a cash transaction limit will be introduced for transactions between a trader and a consumer – although there is currently no such limitation, once the new regulations come into force, the consumer will be required to make payments via a payment account in a situation where the value of the transaction to which the trader is a party exceeds PLN 20,000, regardless of the number of payments associated with it. For a detailed scope of the changes, see Art. 18 of the Polish Deal Act.
Important!
According to current information (as of December 2022), the new cash transaction limit will take effect on January 1, 2024, instead of 2023, as previously agreed. This is the result of the introduction of a 12-month vacatio legis – a period designed to give businesses time to adjust to the new regulations.
How to comply with the new regulations? Examples
The introduction of new regulations often raises questions about how to comply with the new rules. Here are some examples that you may find helpful in interpreting both current and upcoming obligations regarding cash transaction limits.
Example 1 – B2B cash transaction in 2022 and 2023
Ms. Kalina purchased an espresso machine for her business for $9,500 in December 2022. She paid for the purchase in full in cash. Under current regulations, there is nothing to prevent her from claiming the purchase as a tax-deductible expense, as she is within the limit, which until December 31, 2023, is PLN 15,000.
If Ms. Kalina had decided to make the same move in 2024, she would not have been able to recognize even a portion of the purchase as a tax-deductible expense, since she paid the entire payment in cash. The solution in such a situation would only be to make payment by wire transfer to the seller’s account.
Example 2 – B2B cashless transaction in 2024
Let’s go back to Ms. Kalina. If we assume that she has held off on her decision to buy a coffee machine until 2024, and the amount has not changed, we are faced with a situation in which Ms. Kalina can:
- pay for purchases in full in cash (PLN 9,500). In this case, the purchase cannot be counted as a deductible expense.
- pay for purchases in part in cash and in part by wire transfer – for example, PLN 6,000 in cash and PLN 3,500 by wire transfer. In this case, Ms. Kalina can only recognize as a BUI the portion of the transaction paid by wire transfer, i.e. PLN 3,500. The remainder is a cash payment in a transaction that exceeds the cash transaction limit.
- Pay for purchases in full by wire transfer. The effect of such an operation is that the entire transaction can be included in the company’s deductible expenses, since there was no cash payment. Thus, this will be the most optimal solution for the entrepreneur in terms of tax consequences
Example 3 – B2C cashless transaction in 2024
Mr. Wojciech is going on a car tour of Western Europe, and as a result he has ordered a service to convert his existing vehicle into a campervan. Such a service costs PLN 25,000, and therefore exceeds the limit for non-cash transactions between a consumer and a business. In such an arrangement, Mr. Wojciech is obliged to pay the entire amount non-cash.
