RSM Poland


Reduction of the cash transactions limit

The proposal to reduce the amount limit for cash transactions - consequences in terms of tax deductible expenses


On 13 April 2016, the Sejm adopted the Act Amending the Personal Income Tax Act, the Corporate Income Tax Act and the Freedom of Business Activity Act. At present, the revised legal act is awaiting the signature of the President of the Republic of Poland. This Act provides for the amendment of Art. 22 of the Freedom of Business Activity Act of 2 July 2004 (Journal of Laws of 2015, item 584, consolidated text, as amended; hereinafter the FBAA), consisting in the reduction in the limit of cash payments in relation to a one-off transaction from the current applicable level of EUR 15 thousand to the level of PLN 15 thousand, regardless of the number of payments within the transaction. This means that the settlement of such transactions will have to be made through a payment account. In case of transactions carried out in foreign currencies, the average exchange rate of the National Bank of Poland from the last working day preceding the date of the transaction shall be applied to convert the amount into Polish zloty.

Under both the new and old regulations, the meaning of the term "transaction", which is not defined in the FBAA, remains to be problematic. However, from the practical point of view, a transaction should be understood as a contract concluded between entrepreneurs, whose subject is the provision of a service or the sale of goods in connection with the business activity conducted by them. Consequently, if under a contract, for instance, for the delivery of a machine, there are three payments, it should be assumed that they all take place within a single transaction.

At the same time, the amendment envisages the introduction of fiscal sanctions for making settlements between entrepreneurs in the manner inconsistent with the wording of Art. 22 of the FBAA. The proposed amendments assume that in the situation when a taxpayer makes a payment in violation of the aforementioned legal norm, the taxpayer will not be allowed to include in the tax expenditure the settled amount in the part in which payment was not made through a payment account. Thus, the said exclusion will be applied to the payment (regardless of its amount) if the transaction value exceeds PLN 15 thousand and the payment is made in full or in part without a payment account. If such amount has been previously recognised as tax expenditure, it will be necessary to reduce the current tax expenditure or to increase tax revenues (within the month when, e.g. the cash payment was made). The aforementioned regulations apply both to direct costs and indirect costs as well as depreciation expenses.

Nevertheless, the regulations fail to specify if the limit amount of cash payments includes VAT or if it is a net amount; therefore, there may be some doubts in this regard. However, taking into account the fact that payments occur in connection with the transaction made, the amount of PLN 15 thousand should be understood as gross amount.

Example 1

An entrepreneur made a transaction which total gross value amounted to PLN 123 thousand (23% VAT). A part of the receivables, i.e. PLN 110.7 thousand was paid in cash, and the remaining amount, i.e. PLN 12.3 thousand was settled by the taxpayer with the use of a payment account. In such case, the taxpayer will be allowed to classify as tax expenditure only PLN 10 thousand (assuming that VAT, in principle, is not tax expenditure).

Example 2

An entrepreneur conducted a commercial operation with a contractor, as a result of which the entrepreneur is obliged to pay the contractor the gross amount of PLN 14 thousand. The parties agreed that the settlement will be made in cash. In such case, the new regulations will not apply, as the amount of the transaction did not exceed PLN 15 thousand. This means that the taxpayer will be allowed to include the amount of PLN 14 thousand paid to the other party in deductible costs, excluding the VAT amount which, in principle, does not constitute tax expenditure.

During social consultations a doubt was raised concerning the application of the aforementioned regulations to settlements made in a different form, e.g. by offsetting receivables. In response to the above, the Minister of Finance specified however, that the provisions of Art. 22 of the FBAA relate to cash/non-cash payments, and not to the settlement of liabilities, as this term has a far broader scope. As a consequence, it was pointed out that the analysed regulations will not apply to the situation where the settlement or expiry of the liability is due to reasons other than making payments.

Pursuant to the discussed draft, the new regulations are to come into force on 1 January 2017 and will relate to payments made in the fiscal year starting after 31 December 2016. Therefore, they will apply to payments occurring after the aforementioned date and resulting also from transactions made prior to 1 January 2017, whose value exceeds the currently valid limit of EUR 15 thousand, as well as from the transactions concluded after 1 January 2017, which value already exceeds the new limit specified at the level of PLN 15 thousand. However, with regard to the adjustment of costs, it does not apply to those costs that have been recognised as tax expenditure before the discussed amendments have come into force.

The main objective of the proposed regulations is to reduce the grey market and to increase the transparency of transactions made between entrepreneurs. Consequently, measures taken may result in the increase of state budget revenues.


If you have any questions or need to discuss the topic, you are strongly encouraged to contact our expert, Tomasz BEGER:


tel. +48 61 8515 766

fax +48 61 8515 786