Opinion of the European Central Bank of 10 May 2012 on limitations on cash payments (CON/2012/37)
Date: 2012-05-10
Institutions: European Central Bank
Subjects: Denmark, electronic money, fight against crime, national law, paper money, payment system, tax evasion

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 10 May 2012  

on limitations on cash payments 

(CON/2012/37) 

Introduction and legal basis 

On  17  April  2012  the  European  Central  Bank  (ECB)  received  a  request  from  the  Danish  Ministry  for 

Economic  Affairs  and  the  Interior  on  behalf  of  the  Ministry  of  Taxation  for  an  opinion  on  a  Law 
amending the Law on tax assessment and various other laws (measures aimed at tax evasion)1 (hereinafter 

the ‘draft law’).  

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of the European Union and the second indent of Article 2(1) of Council Decision 98/415/EC 

of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft 
legislative provisions2, as the draft law relates to means of payment. In accordance with the first sentence 

of  Article 17.5  of  the  Rules  of  Procedure  of  the  European  Central  Bank,  the  Governing  Council  has 

adopted this opinion. 

1.  

Purpose of the draft law 

1.1  The  draft  law  implements  a  number  of  measures  aimed  at  combating  tax  evasion.  One  of  the 

measures is the tightening of the rules on cash payments in order to ensure greater traceability of 

payments. The draft law proposes the following two requirements on which the ECB is consulted. 

1.2  The  first  requirement  proposed  is  that  any  purchase  of  services  or  goods  in  connection  with 
services above an amount of DKK 10 0003 by an individual is to be made by electronic payment. 

The individual may be held jointly and severally liable with the provider of the services for any tax 
and/or VAT which the provider has evaded4 if the individual chooses to make a cash payment. The 

aim of the requirement to make electronic payments is to create a transaction trail of the payments 

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The Law on tax assessment, see Consolidated law No 1017 of 28 October 2011 with later amendments, Law no 1333 of 
19  December  2008  on  the  recovery  of  public  debt  with  later  amendments,  Law  No  403  of  8  May  2006  on  an  income 
register, Law on taxation according to source of income, see Consolidated law no 1403 of 7 December 2010 with later 
amendments, Law on the collection of tax and charges, see Consolidated law No. 1402 of 7 December 2010 with later 
amendments, Law on the registry of vehicles, see Consolidated law No 580 of 7 June 2011, Law on controlling taxes, see 
Consolidated law No 819 of 27 June 2011 with later amendments, the Law on value added tax, see Consolidated law No 
287 of 28 March 2011 with later amendments and Law No 521 of 12 June 2009 amending the Law on taxation according 
to source of income.  
OJ L 189, 3.7.1998, p. 42.  
Approximately EUR 1 330. 
The proposal gives rise to liability for the purchaser only if the provider fails to declare the payment for tax purposes or 
fails to report the VAT on the payment. See p. 12 of the Explanatory Memorandum. 

 
 
 
 
                                                 
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in order to identify the payer and the payee. The proposal also attempts to reduce the turnover of 

cash in order to reduce the black market for purchases of goods and services.  

The  draft  law  also  proposes  that  individuals  who,  in  particular  instances,  are  not  able  to  pay 

electronically have the option to avoid liability for the failure of the provider to declare taxes and 

VAT.  This  option  is  conditional  upon  the  individual  notifying  SKAT,  the  Danish  tax  authority, 

about the purchase made and the payment thereof via SKAT’s website.  

1.3  The second requirement proposed is that any transaction between companies above an amount of 
DKK  10  0005  shall  be  made  electronically.  If  such  payments  are  not  made  electronically,  the 

companies will be denied any relevant tax deductions which they may be entitled to and they will 
be held jointly and severally liable6 under the VAT rules7.  

The  direct  joint  and  several  liability  in  the  area  of  VAT  means  that  the  tax  authority,  when 

recovering  an  outstanding  tax  and  VAT  balance,  may  seek  to  have  the  sum  paid  either  by  the 

purchaser  or  the  provider  in  the  order  that  the  tax  authority  chooses.  Whether  the  tax  authority 

chooses to collect the sum due from the provider or the purchaser has no effect on the liability. The 

liability, in such cases, will follow the general rules governing joint and several liability. 

The introduction of joint and several liability in relation to VAT payments mentioned above aims 

to combat tax evasion and make it easier to detect transactions which have the evasion of VAT and 

other taxes as their purpose. Given that a transaction trail is created, it is anticipated that this will 

have a positive and crime-preventing effect on unreported employment, chain fraud and fictitious 

invoices  used  for  the  purposes  of  tax  and  VAT  evasion.  Furthermore,  it  is  anticipated  that 

unregistered  firms  will  have  trading  difficulties,  as  purchasers  will  need  to  obtain  documentation 

for incurred expenditure.  

1.4  The  two  legislative  requirements  set  out  above  under  paragraphs  1.2  and  1.3  introduce  joint  and 

several  liability  for  any  individual  purchasing  services  and  for  business-to-business  transactions. 

Although this does not constitute a legal prohibition on cash payments, it will, in practice, limit the 

practical opportunity for a customer or a company to make cash payments above DKK 10 000. 

2. 

Specific observations  

2.1  The ECB notes that Union law only regulates restrictions on cash payments in euro8. However, for 

consistency reasons, the ECB considers it appropriate to assess the draft law’s provisions against 

the relevant Eurosystem practices. 

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The proposed threshold of DKK 10 000 mirrors the limit for the individual who chooses to pay cash when purchasing a 
service. 
The  proposal  gives  rise  to  liability  for  companies  only  if  the  provider  fails  to  report  the  VAT  on  the  purchase.  See 
page 13 of the Explanatory Memorandum. 
Article  205  of  Council  Directive  2006/112/EC  of  28  November  2006  on  the  common  system  of  value  added  tax,  
(OJ L 347, 11.12.2006, p. 1) sets out the legal basis for joint and several liability for the purchaser. Under page 25 of the 
Explanatory Memorandum, the joint and several liability is thus in accordance with the Directive. 
See  recital  19  of  Council  Regulation  (EC)  No  974/98  of  3  May  1998  on  the  introduction  of  the  euro  (OJ  L  139, 
11.5.1998, p. 1). 

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ECB-PUBLIC 

2.2  The ECB notes that the draft law is in compliance with Union law9, and in particular with recital 19 

of  Council  Regulation  (EC)  No  974/98,  which  states  that  ‘limitations  on  payments  in  notes  and 

coins,  established  by  Member  States  for  public  reasons,  are  not  incompatible  with  the  status  of 

legal  tender  of  euro  banknotes  and  coins,  provided  that  other  lawful  means  for  the  settlement  of 

monetary  debts  are  available’.  The  ECB  acknowledges  that:  (i)  such  other  lawful  means  for  the 

settlement  of  monetary  debts,  other  than  cash,  are  available  in  Denmark;  and  (ii)  the  draft  law’s 

objective  of  combating  tax  evasion  qualifies  as  a  public  reason  outweighing  the  impact  of  the 

limitations on cash payments.  

2.3  The  ECB  further  notes  that  the  draft  law’s  provisions  on  joint  and  several  liability  in  relation  to 

cash  payments  exceeding  DKK  10  000  do  not  affect  the  legal  tender  status  of  Danish  krone 
banknotes10. 

2.4  However,  the  effects  of  these  provisions  containing  practical  limitations  on  the  possibility  for  a 

customer or an undertaking to make cash payments above DKK 10 000 should be proportionate to 

the  general  objective  of  combating  tax  evasion  and  should  not  go  beyond  what  is  necessary  to 

achieve this objective. Any impact of the proposed provisions should be carefully weighed against 

the  public  benefits  expected  to  be  derived  from  them.  Also  in  view  of  the  fact  that  the  measures 

may affect relatively low value payments, the competent authorities should ensure that the effects 

of these measures do not go beyond what is necessary for achieving the objective of combating tax 

evasion.  

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 10 May 2012. 

[signed] 

The President of the ECB 

Mario DRAGHI 

9  

10  

See paragraph 5 of Opinion CON/2002/24, reiterated in paragraph 2.3.2 of Opinion CON/2010/36 and paragraph 2.2 of 
Opinion CON/2010/79. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
The legal tender status of Danish kroner is set out in Article 8 of the Law on Danmarks Nationalbank (Law No 116 of 7 
April 1936 with later amendments).  

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