Cash transaction limit soon to go down

Polish government is working on amendments to Corporate Income Tax Act, Personal Income Tax Act and Freedom of Business Activity Act that will bring the legal limit of cash transactions down.

Presently, the threshold for transactions in cash between enterprises is 15,000 EUR, but this is soon to change. The new limit is planned to be set at 15,000 PLN, which is about a quarter of the old amount.

All transactions in the amounts above the threshold of 15,000 PLN are to be carried out by wire transfers, with banks as intermediaries. The government want to limit the number of transaction that escape taxation and remain untraceable. Cashless payments are seen as safe and transparent.

Limits to cash transactions have already been imposed in many other European countries, for example Greece, Spain or France.

This solution is to limit the scale of grey economy. It is more difficult for authorities to detect fictional transactions if there are no documents (such as bank statements) proving they took place. Ministry of Finance hopes it will be more difficult for companies to escape tax obligations.

Moreover, more transactions and transaction parties will be trackable, as banks are able to see where the money comes from and where the funds are passed on.

Also, Polish banks are obliged to verify account holders’ identities and implement actions against money laundering and financing terrorism.

The move is part of a greater strategy to counteract tax evasion and fraud. Polish budget is annually losing billions of PLN due to these illegal activities. The gap between the estimated and actual income from VAT tax is 35-55 billion PLN.

The upcoming amendment also concerns taxable costs. Cash payments above the threshold of 15,000 PLN will not be treated as tax deductible expenses.

What this means is that by paying with wire transfers will allow to lower one’s tax obligation. In this way entrepreneurs will be encouraged to use banking to a greater extend.

The government is currently working on the details of the new regulation. The proposed changes will now be analysed by the Sejm, lower chamber of Polish parliament. The amendments are to come into force sometime in the first quarter of 2017.

The proposed changes were met with mostly positive reaction by experts.