Expenses over 15,000 PLN paid in cash do not constitute a cost

In 2017, the limit of cash transactions was reduced from EUR 15,000 to PLN 15,000, which results from the amendments introduced to the Act on the freedom of economic activity before its repeal. As of today, the limit of cash transactions is regulated by the Entrepreneurs' Law. What consequences of the changes have fallen on entrepreneurs and whether the expenses above 15,000 PLN paid in cash were excluded from tax costs? Check how the cash payment limit of PLN 15,000 works.

Cash payment limit of PLN 15,000

Article 19 of the Entrepreneurs' Law Act stipulates that making or accepting payments related to the performed business activity takes place through the entrepreneur's payment account, whenever both conditions are met jointly:

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

• the one-off transaction value, regardless of the number of payments resulting therefrom, exceeds the equivalent of PLN 15,000.

If the entrepreneur settles transactions in foreign currencies, they should be converted into zlotys according to the average exchange rate of foreign currencies announced by the National Bank of Poland on the last business day preceding the transaction date.

Therefore, the two conditions indicated above must be met in order for the obligation to make or receive payments through a bank account to arise.

Expenses over 15,000 PLN paid in cash are not a cost!

Entrepreneurs who, despite the restrictions, purchase for an amount higher than PLN 15,000 PLN and pay it in cash, they will not be able to recognize this purchase as a tax deductible cost. Art. 22p sec. 1 point 1 of the Personal Income Tax Act:
Taxpayers engaged in non-agricultural economic activities do not include the cost of obtaining revenue costs in that part, in which the payment for the transaction referred to in article 1. 19 of the Act of 6 March 2018 - Entrepreneurs' Law was made without the use of a payment account. The sanctions are therefore serious and the entrepreneur may lose a lot by not complying with the regulations. The regulation requires that the costs not only exceed PLN 15,000 paid in full in cash, but also those whose principal amount is PLN 15,000 and which were partly paid in cash and partly by bank transfer. In such a situation, therefore, the entrepreneur is not entitled to include the amount paid in cash as the cost.

Example 1.

The entrepreneur purchased the material from the warehouse for the amount of PLN 20,000. He made the payment in such a way that:

• He paid PLN 10,000 in cash

• He paid 10,000 PLN by bank transfer.

Is the transaction subject to the cash payment limit of PLN 15,000?

Yes. The total value of the transaction exceeded PLN 15,000, therefore the part paid in cash, i.e. PLN 10,000, cannot be recognized by the entrepreneur as tax deductible costs.

How to write off an expense above PLN 15,000 paid in cash?

If, despite the regulations, the entrepreneur has booked the invoice for the amount exceeding PLN 15,000 into costs and then paid it in full or in part in cash, he is obliged to write off the amount that he settled in cash. The act is about how to do it. Art. 22p sec. 2 of the Personal Income Tax Act
In the case of recognition of the cost of obtaining revenue costs in that part in which the payment for the transaction referred to in article 1. 19 of the Act of March 6, 2018 - Entrepreneurs' Law was made in violation of para. 1, taxpayers conducting non-agricultural economic activity in this part:
- reduce tax deductible costs, either
- if it is not possible to reduce tax deductible costs - they increase revenuesin the month in which the payment was made without the use of a payment account.

Example 2.

The entrepreneur purchased the material from the warehouse for the amount of PLN 20,000. On the first day of the month (01/05/2020), he received an invoice FV 12/2020 which he booked in KPIR on the date of issue. At the end of the month (May 31, 2020) he paid in full in cash.

In addition, the entrepreneur purchased advertising materials for the amount of PLN 13,000 from another contractor on May 3, and commercial goods for the amount of PLN 10,000 on May 5 - the invoices were paid in cash.

The expenditure may not constitute tax deductible costs, therefore it should be derecognised from the KPiR:

Date	ID number	7. Sale of goods or services	8. Other income	10. Purchase of commercial goods and materials	13. Other expenses
1.05.2020	FV 12/2020			20.000
3.05.2020	FZ 123/2020				13.000
5.05.2020	FZ 223/2020			10.000
31.05.2020	Correction of costs on 1/05/2020			-20.000

Since the value of all costs in a given period is higher than the value of the correction, the entrepreneur will reduce tax deductible costs.

Example 3.

The entrepreneur purchased the material from the warehouse for the amount of PLN 20,000. On the first day of the month, 1.05.2020, he received the invoice FV 1/05/20, which he posted in KPIR on the date of issue. At the end of the following month (30/06/2020), he paid in full in cash. In June, the entrepreneur issued one sales invoice with the date of 1.06 for PLN 3,000 and purchased materials for PLN 10,000, paid by bank transfer.

The expenditure cannot constitute tax deductible costs, and therefore should be derecognised from the KPiR:

Date	ID number	7. Sale of goods or services	8. Other income	10. Purchase of commercial goods and materials	13. Other expenses
1.05.2020	FV 1/05/20			20.000
...	...	...	...	...	...
1.06.2020	FS 12/2020	3.000
10.06.2020	FZ 223/2020			10.000
30.06.2020	Cost correction on 1/06/2020		10.000	-10.000

Since the value of all costs in a given period is lower than the value of the correction, the entrepreneur will reduce the tax deductible costs only by a possible part, i.e. PLN 10,000, and the remaining part of the correction will be booked as other revenues.

Provisions regarding the need to derecognise expenses with an amount exceeding PLN 15,000. PLN also apply to:

• acquisition or production of fixed assets or acquisition of intangible assets paid for in cash;

• making a cash payment:

• after liquidation of non-agricultural economic activity,

• after changing the form of taxation into a flat rate on recorded revenues.

However, in the last two cases, the entrepreneur will reduce tax deductible costs or increase revenues for the tax year in which the liquidation of this activity took place, or for the tax year preceding the tax year in which the form of taxation was changed.

Types of payments subject to the limit of cash transactions

Tax regulations ordering the derecognition of the costs of payments made in cash for transactions exceeding PLN 15,000 in practice apply to the situation of payment of liabilities. In addition to the traditional form of cash or direct transfer, entrepreneurs also use settlements on the basis of compensation or electronic payments. Does the cash payment limit of PLN 15,000 also apply to them?

Compensation over PLN 15,000 is allowed

Entrepreneurs do not have to be afraid that compensation of transactions exceeding PLN 15,000 will result in the necessity to adjust costs. At the stage of consultation of the provisions of the Act, the Ministry of Finance explained that the limit of cash transactions will not apply to the settlement of compensation - with a deduction. This was also confirmed by the Director of the Tax Chamber in Katowice in the individual ruling of October 7, 2016, file ref. 2461-IBPB-1-2.4510.772.2016.1.AK:

The company may set off mutual claims regardless of the amount limitations resulting from Art. 15d paragraph. 1 of the CIT Act and the company's liabilities settled by way of compensation will constitute tax deductible costs in full, provided that all the conditions under Art. 15 sec. 1 of the CIT Act.

Electronic payments and card payments above PLN 15,000 are also allowed

Regulations on the limit of cash transactions do not apply to forms of settling liabilities with payment instruments, such as:

• credit cards,

• electronic payments such as DotPy, PayByNet, PayPal, PayU etc.

In such situations, they will be considered payment via a payment account.

Does the cash payment limit of PLN 15,000 also apply to payments to contractors or worksheets?

Not. Here, attention should be paid to the provision in the Entrepreneurs' Law Act.

Art. 19 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:
1.a party to the transaction from which the payment results is another entrepreneur and
2.the one-time value of the transaction, regardless of the number of payments resulting therefrom, exceeds PLN 15,000 or the equivalent of this amount, and transactions in foreign currencies are converted into zlotys according to the average exchange rate of foreign currencies announced by the National Bank of Poland on the last business day preceding the day make the transaction.

The provision in the act means that the obligation to pay by bank transfer will arise when two conditions are jointly met. The first one is therefore that another entrepreneur is to be a party to the transaction. An entrepreneur within the meaning of the Act 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.

Economic activity is, on the other hand, gainful production, construction, trade, service activities as well as exploration, recognition and extraction of minerals from deposits, as well as professional activity, carried out in an organized and continuous manner. Therefore, the payment transaction for the contractor who does not conduct business activity will not be subject to the cash payment limit of PLN 15,000.

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The wfirma.pl system keeps an eye on the cash payment limit!

Cost documents in the wfirma.pl system are entered via the EXPENDITURE »ACCOUNTING» ADD »VAT INVOICE / WITHOUT VAT tab, where you must select the correct type of expenditure and complete the data in accordance with the invoice.

If a cost document is entered into the system, for which CASH has been selected as the payment method and the gross value exceeds PLN 15,000, the system will display a message informing about the need to write off the cost due to the exceeded limit of cash transactions.

The method of derecognition of the cost from the system is described in the article: Writing off a cost paid in cash with a value exceeding PLN 15,000. zloty