Cash payment limit - what is the limit amount?
Most small entrepreneurs prefer to settle transactions in cash because it is simply more convenient for them. However, when making cash transactions, traders must be careful about the limit of this type of transaction. Check how much is the cash payment limit!
Cash payment limit
As mentioned above, cash transactions are subject to a limit.
Pursuant to Art. 19 of the Entrepreneurs' Law Act:
Making or accepting payments related to the conducted business activity takes place via the entrepreneur's payment account, in each case when:
another entrepreneur is a party to the transaction from which the payment results,
the one-off transaction value, regardless of the number of payments resulting therefrom, exceeds the equivalent of PLN 15,000, while transactions in foreign currencies are converted into zlotys at the average exchange rate of foreign currencies announced by the National Bank of Poland on the last business day preceding the transaction date.
Therefore, entrepreneurs have a lower limit of cash payments, which is PLN 15,000. zlotys. The parties to the transaction must be entrepreneurs. If the transaction is made between an entrepreneur and a natural person, this limit will not apply. The limit also applies to transactions between domestic and foreign entrepreneurs. Therefore, if the invoice amount is shown in a foreign currency, it should be converted in accordance with the average foreign exchange rate announced by the National Bank of Poland on the last business day preceding the transaction date.
As part of the Polish Deal, the government wants to reduce the limit of cash payments from 15,000. up to 8,000 According to the assumptions, this limit is to change in 2022.
It is worth noting that this limit applies to the amount of the entire transaction, not a single payment. Therefore, even if payment in installments or in the form of advances has been agreed with the supplier, the method of payment should depend on the total amount of the transaction (gross amounts). Therefore, if the total value of the transaction exceeds PLN 15,000, it cannot be settled in cash in order to include this expense in costs.
In April 2020, the entrepreneur bought a computer in installments in the amount of:
PLN 18,699.19 net
PLN 23,000 gross
He has booked the invoice in accordance with the date of issue and plans to pay half of the installments in cash (PLN 11,500), and the other half (PLN 11,500) by bank transfer. Will the entrepreneur be able to include the expenditure paid in this way as tax costs?
Due to the fact that the value of the transaction exceeds PLN 15,000. The portion of the transaction that was paid for in cash cannot be deducted for tax purposes.
To sum up, in accordance with the above Act, the entrepreneur is obliged to settle liabilities towards other entrepreneurs using a payment account. According to Art. 2 points 25 of the Payment Services Act:
“(...) a payment account also means a bank account and an account of a member of a credit and savings union, if these accounts are used to perform payment transactions.”
In addition, the Ministry of Finance explained that payments made with the use of payment instruments related to payment accounts, such as payment cards, PayPal, PayU, etc., meet the requirement to settle the obligations. However, despite the changes introduced, there are no contraindications to make cash payments, as long as the entrepreneur makes sure not to exceed the payment limit of PLN 15,000.
Limit of 15 thousand PLN also includes the split payment mechanism and payments to the account included in the white list of taxpayers. More information in the article - The concept of transactions above PLN 15,000 - how to interpret it?
Cash payment limit and compensation, netting and barter
The limit of cash payments raises many doubts among entrepreneurs. Mainly in terms of the possibility of using a payment method other than bank transfer, such as compensation, netting or a barter agreement. This is due to the fact that entrepreneurs often decide to settle payments in this form with regular partners.
In response to the doubts of entrepreneurs, the Ministry of Finance explains that the provisions refer to the concept of "payment" resulting from a transaction (referred to in Article 19 of the Entrepreneurs' Law), and therefore cover only the manner of settling the liability indicated therein, i.e. by making payments Consequently, forms of settlement of obligations such as offsetting, netting or barter trading are not covered by the regulations. While the obligation is then settled, the parties to the contract do not make "payments" that could fall within the scope of these regulations.
If a liability exceeding PLN 15,000 is settled through compensation, netting or a barter agreement, the taxpayer will be able to include such an expense as tax expense.
The "ABC" company has a debt to the "XYZ" company in the amount of PLN 38,000, and the "XYZ" company has a liability to the "ABC" company in the amount of PLN 38,000. A compensation agreement was signed between the companies on January 10, 2021 and the above-mentioned claims expired on that date.
Therefore, we are dealing with the settlement of liabilities in accordance with the contract, so there is no cash payment limit in this case, as enterprises regulate their liabilities by means of compensation.
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Cash payment limit - consequences
Along with the change of the limit, the consequences of failure to comply with the new provisions were also provided for, in accordance with Art. 22p paragraph. 2 of the PIT Act, if the entrepreneur includes an expenditure exceeding PLN 15,000 paid in cash as tax deductible costs, he will be obliged to:
- reduce tax deductible costs, either
- if it is not possible to reduce tax deductible costs - increase revenues
- in the month in which the payment was made without the use of a payment account.
The above solution also applies when the invoice value exceeds PLN 15,000, and it has been half paid in cash, and the other half has been paid by bank transfer.
In January 2021, an entrepreneur purchased a fixed asset - a passenger car worth PLN 35,000. Settled the payment in cash within the payment date indicated on the invoice (January 19, 2021)
In February, he entered the vehicle into the fixed assets register as it met certain requirements as a fixed asset. However, depreciation write-offs will not constitute a tax deductible cost for the entrepreneur, as the payment has been settled in cash. This is due to the fact that the entrepreneur has exceeded the cash payment limit during this transaction.
In January 2021, the entrepreneur purchased goods worth PLN 17,000. He decided to settle the payment in cash in the amount of PLN 5,000 and by bank transfer in the amount of PLN 12,000. Can the entrepreneur include this expense as tax costs if he only paid PLN 5,000 in cash?
Yes, the entrepreneur in such a case is obliged to reduce the tax deductible costs by the amount paid in cash or to increase the revenues by it. This is because the transaction value has exceeded the set limit. Therefore, in the above situation, the entrepreneur may only include the amount of PLN 12,000 as costs.