Cash purchases from the farmer above PLN 15,000 and tax costs

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Pursuant to the provisions of the Income Tax Acts in force from the beginning of 2017, a limit of PLN 15,000 was introduced into the law for cash payments, and for transactions above this amount, the obligation to make payments using a bank account. In addition, the new regulations provide for sanctions for failure to comply with the above rule in the form of refusal to recognize the value of purchases as tax deductible costs. In today's article, we will consider whether cash purchases from a farmer above PLN 15,000 are applicable in the described regulation.

Rules in force when making cash payments

Pursuant to Art. 22p of the PIT Act and, respectively, art. 15d of the CIT Act, taxpayers conducting non-agricultural economic activity do not include the cost in the part in which the payment related to the transaction referred to in Art. 22 of the Act of 2 July 2004 on the freedom of economic activity was made without the use of a payment account. If the expenditure is classified as tax deductible in the part in which the payment for the above transactions was made without the use of a payment account, taxpayers conducting non-agricultural business activity:

  1. reduce tax deductible costs either

  2. if it is not possible to reduce tax deductible costs - they increase revenues

- in the month in which the payment was made without the use of a payment account.

Analysis of the provisions of the Entrepreneurs' Law Act

In order to thoroughly explain the content of the above provision, please refer to the content of the Entrepreneurs' Law. Tax laws refer directly to Art. 22 of the Act, which states that making or receiving payments related to the business activity performed takes place via the entrepreneur's payment account, in each case when:

  1. a party to the transaction from which the payment results is another entrepreneur and

  2. 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.

As it is clearly visible, the regulation regulates transactions made between entrepreneurs and only such purchases are subject to the limit of bank payments above the amount of PLN 15,000. Due to the fact that the Entrepreneurs' Law Act uses its own, separate definition of economic activity and the definition of an entrepreneur, it is worth quoting them here. As Art. 4 of the Act, an entrepreneur is a natural person, a legal person and an organizational unit that is not a legal person, to which a separate act grants legal capacity - carrying out economic activity on its own behalf.

However, pursuant to Art. 3 of the Act, economic activity is organized gainful activity, performed on one's own behalf and on a continuous basis.

Important in the context of the analyzed problem is also Art. 6 of the Act, which states that the following are not considered economic activities:

  1. production activities in agriculture in the field of agricultural crops and animal husbandry and breeding, horticulture, vegetable growing, forestry and inland fishing;

  2. renting rooms by farmers, selling household meals and providing other services on farms related to the stay of tourists;

  3. the manufacture of wine by producers who are farmers who produce less than 100 hectoliters of wine during the marketing year referred to in Article 17 sec. 3 of the Act of 12 May 2011 on the production and bottling of wine products, trade in these products and organization of the wine market;

  4. the activities of farmers in the field of sales referred to in article 1. 20 paragraph 1c of the Act of July 26, 1991 on personal income tax.

Are cash purchases from the farmer above PLN 15,000 allowed?

Summing up, it should be stated that the regulations regarding the inability to include cash transactions in costs when the value of one transaction exceeds PLN 15,000 applies only to purchases between entrepreneurs. As a result, if we are dealing with purchases made from entities that do not conduct business activity and do not have the status of an entrepreneur, the indicated limit does not apply.

This means that a taxpayer running a business and purchasing products and goods from a farmer is not subject to the obligation to make payments via a bank account. As a consequence, even if the value of the expenditure exceeds the discussed limit of PLN 15,000, and the payment is made in cash, the taxpayer will still be able to recognize the purchase value in tax deductible costs.

Example 1.

A self-employed taxpayer purchased food products worth PLN 17,000 from a farmer on the exchange. The taxpayer paid for the goods in cash on the spot. This means that the entrepreneur can confidently include the entire value of the transaction in tax deductible costs, as the limit of cash payments up to PLN 15,000 applies only to contractors who are entrepreneurs. A farmer, on the other hand, is not considered to be an entrepreneur.