Opinion of the European Central Bank of 22 May 2017 on limitations to cash payments (CON/2017/18)
Date: 2017-05-22
Institutions: European Central Bank
Subjects: Portugal, fight against crime, money, national law, payment, tax offence

EN  

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 22 May 2017 

on limitations to cash payments 

(CON/2017/18) 

Introduction and legal basis 

On 23 March 2017, the European Central Bank (ECB) received a request from the Portuguese Assembly 

of  the  Republic  (hereinafter  the  ‘Assembly’)  for  an  opinion  on  two  draft  laws  that  aim  to  introduce 

limitations to  cash payments above certain thresholds (hereinafter the ‘draft laws’). The draft laws were 

submitted  to  the  Assembly  by  two  parliamentary  groups,  namely  the  Bloco  de  Esquerda  (the  Left-Wing 

Block) and Partido Socialista (Socialist Party).  

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/EC1, 

as the draft laws relate 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 laws 

1.1.  The  draft  law  submitted  by  the  Left-Wing  Block  (hereinafter  the  ‘first  draft  law’)  amends  the 

Portuguese  General  Tax  Law,  which  was  adopted  by  Decree-Law  No  398/98,  of  17  December 
19982.  The  main  purpose  of  the  first  draft  law  is  to  require  the  use  of  payment  methods,  namely 

bank transfers, cheques and direct debits, that identify the recipient, for sums equal to or greater 

than  EUR  10  000.  This  restriction  applies  to  all  types  of  contracts,  whether  entered  into  in 

exchange for payment or free of charge. 

1.2.  As clarified in the explanatory memorandum to the first draft law, the purpose of the first draft law is 

to  combat  the  use  of  offshore  jurisdictions,  which  have  become  havens  for  tax  evasion,  tax 

avoidance  and  money  laundering.  Within  this  context,  it  is  considered  essential  to  limit  the 

accumulation of cash to the extent possible, including its use in payment transactions. 

1.3.  The draft law submitted by the Socialist Party (hereinafter the ‘second draft law’) introduces a new 

autonomous  framework  that  aims  to  prohibit  cash  payments  above  or  equal  to  EUR  3  000  or  its 

equivalent in foreign currency. A higher limit of EUR 15 000 (or its equivalent in foreign currency) 

would apply to payments made by non-residents, if the person making the payment is not acting as 

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2  

Council  Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 

Diário da República No 290, Series I-A, of 17 December 1998. 

 
 
 
 
                                                 
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a  business  person  or  commercial  dealer.  The  second  draft  law  also  prohibits  cash  payments  for 

taxes totalling more than EUR 500. 

1.4.  The second draft law introduces three exceptions to the general cash payments prohibition. These 

relate to (i) transactions with credit institutions and financial companies; (ii) transactions with public 

entities;  and  (iii)  payments  resulting  from  court  orders  or  decisions.  The  second  draft  law  also 

establishes a sanctioning regime, according to which a fine corresponding to 25 % of the amount 

paid in cash would be applied if the prohibition is not complied with. Furthermore, and in addition to 

this fine, if the improperly received cash has not been declared for tax purposes, the corresponding 

payable tax amount would be increased by 5 %. 

1.5.  As  clarified  in  the  explanatory  memorandum  to  the  second  draft  law,  the  purpose  of  the  second 

draft  law  is  to  combat  tax  fraud,  tax  evasion  and  money  laundering.  Against  this  backdrop,  it 

proposes limits to the use of cash as a means of payment. 

1.6.  Both  of  the  draft  laws  explicitly  state  that  they  also  apply  to  payments  above  the  respective 

thresholds  laid  down  in  the  draft  laws,  irrespective  of  whether  the  transactions  in  question  are 

made in a single operation or in several related transactions. 

2. 

General observations 

2.1  The Commission’s Recommendation of 22 March 2010 on the scope and effects of legal tender of 
euro  banknotes  and  coins3  (hereinafter  the  ‘Commission  Recommendation’)  states  that  the 

acceptance of payments in cash should be the rule, but acknowledges that cash may be refused 

for reasons related to the ‘good faith principle’, without this constituting a breach of the legal tender 

status  of  cash.  Neither  Union  law  nor  the  Commission  Recommendation  explicitly  addresses 

whether,  nor  to  what  extent,  it  may  be  permissible  to  introduce  a  more  general  limitation  to  the 

obligation  to  accept  euro  cash  payments.  Therefore,  Union  law  must  be  interpreted  in  order  to 

ascertain the conditions that a limitation on payments in euro notes and coins should fulfil, including 

the conditions that should be fulfilled to comply with the legal tender status of euro banknotes and 

coins when general limitations to the obligation to accept cash payments are introduced. 

2.2  Without prejudice to the specific considerations in paragraphs 3.1. to 3.8, both draft laws, in their 

general  provisions,  must  comply  with  Union  law.  In  this  context,  recital  19  of  Council  Regulation 
(EC)  No  974/984,  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’5,  should  be  taken  into  account.  The  ECB  considers  that  other  lawful  means  for  the 

settlement  of  monetary  debts,  which  ensure  similar  benefits  to  those  of  cash,  are  generally 

available in Portugal for business involving transactions with consumers. 

3  
4  
5  

OJ L 83, 30.3.2010, p 70. 

Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro (OJ L 139, 11.5.1998, p. 1). 
See,  for example, Opinions CON/2013/18, CON/2014/4 and CON/2014/37.  All  ECB opinions are published on the 
ECB’s website at www.ecb.europa.eu.  

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2.3 

In  this  respect,  the  ECB  notes  that  Directive  2014/92/EU  of  the  European  Parliament  and  of  the 
Council6, has made it easier for Union citizens to obtain payment accounts and related electronic 
payment services as alternatives to cash7. In Portugal, Decree-Law 27-C/2000, of 10 March, also 

aims  to  create  the  conditions  for  making  a  minimum  set  of  banking  services  accessible  to  all 

citizens. 

2.4  The  ECB  also  acknowledges  that  the  draft  laws’  objectives  of combating  tax  evasion  and  money 

laundering may, in general, constitute ‘public reasons’ justifying the establishment of limitations on 

cash payments, but any limitation needs to comply with the legal tender status of euro banknotes. 

2.5 

Limitations  on  cash  payments  should,  therefore,  be  proportionate  to  the  objectives  pursued  and 

should not go beyond what is necessary to achieve such objectives, especially in view of the fact 

that the measures set out in the second draft law also affect transactions between natural persons 

and involve payments for relatively small amounts. Any negative impact of the proposed limitations 

should  therefore  be  carefully  weighed  against  the  anticipated  public  benefits.  When  considering 

whether a limitation is proportionate, the adverse impact of the limitation in question should always 

be  considered,  as  well  as  whether  alternative  measures  could  be  adopted  that  would  fulfil  the 
relevant objective and have a less adverse impact8. 

2.6  Furthermore, it should be borne in mind that the ability to pay in cash remains particularly important 

for  certain  groups  in  society  that,  for  various  legitimate  reasons,  prefer  to  use  cash  rather  than 

other payment instruments. Cash is generally also appreciated as a payment instrument because it 

is widely accepted, fast and facilitates control over the payer’s spending. Moreover, it is a means of 

payment  that  allows  citizens  to  instantly  settle  a  transaction  in  central  bank  money  and  at  face 

value,  without  the  legal  possibility  to  impose  a  fee  for  the  use  of  this  means  of  payment. 

Additionally,  cash  payments  facilitate  the  inclusion  of  the  entire  population  in  the  economy  by 

allowing it to settle any kind of financial transaction in this way. 

3. 

Specific observations 

3.1  The  explanatory  memoranda  to  the  draft  laws  do  not  mention  the  social  impact  of  the  proposed 

limitations  on  cash  payments.  Given  that  limitations  are  to  be  placed  on  transactions  between 

natural  persons,  an  impact  assessment  might  be  useful  to  assess  any  negative  impact  of  the 

proposed limitations against the anticipated public benefits. Furthermore, establishing a cash limit 

for all transactions between private individuals (as opposed to only sector-specific cash limitations 

over taxable transactions) does not mitigate the risk of tax evasion as in many circumstances such 

transactions  are  not  taxable.  Instead,  it  only  makes  it  more  difficult  to  settle  legitimate  private 

6  

7  

8  

Directive 2014/92/EU of  the  European  Parliament and of  the Council of 23  July  2014 on the comparability  of  fees 
related  to  payment  accounts,  payment  account  switching  and  access  to  payment  accounts  with  basic  features 
(OJ L 257, 28.8.2014, p. 214). 
Within the framework previously created by Directive 2007/64/EU, of the European Parliament and of the Council of 
13  November  2007  on  payment  services  in  the  internal  market  amending  Directives  97/7/EC,  2002/65/EC, 
2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC, which introduced the legal basis for the creation of an 
internal  market  for  payments  within  the  Union  and  allowed  for  the  creation  of  the  Single  Euro  Payments  Area  – 
“SEPA”). 
See, for example, paragraph 2.3 of Opinion CON/2014/4, paragraph 2.3 of Opinion CON/2014/37 and paragraphs 
2.6 and 2.7 of Opinion CON/2017/8. 

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transactions  using  cash  as  a  means  of  payment,  thus  endangering  the  concept  of  legal  tender 

enshrined in the Treaty.  

3.2 

In  particular,  the  EUR  3  000  limit  on  cash  payments  proposed  by  the  second  draft  law  needs  to 

take  into  account  the  advantages  of  having  limits  on  cash  payments  in  place  and  the  potential 

inconvenience  thereof  for  citizens’  regular  transactions  in  certain  market  segments.  Setting  the 

limitation at this level may make it difficult to implement the limit in practice. In this regard, it should 
be  noted  that  Directive  (EU)  2015/849  of  the  European  Parliament  and  of  the  Council9,  whilst 

confirming  the  vulnerability  of  large  cash  payments  to  money  laundering  and  terrorist  financing, 

nevertheless applied customer due diligence measures to cash payments of EUR 10 000 or more. 

This  implies  that  the  draft  laws  should  establish  a  proportionate  threshold  for  limits  to  cash 

payments, taking into account the objectives of such limits. Regarding the second draft law, there 

seems  to  be  no  justification  as  to  why  a  different  standard  should  be  established  for  payments 

made by non-residents, which seems to discriminate against payments made by residents. 

3.3  The  ECB  considers  that  a  degree  of  flexibility  should  be  introduced  in  the  draft  laws  by,  for 

example, allowing the delivery and receipt of cash payments for compelling reasons or for reasons 
that are outside the individual’s control10, such as where no payment service provider is available at 

the place or time of the payment. It might also be advisable to allow cash transactions above the 

defined  thresholds  as  long  as  the  parties  are  able  to  ensure  that  the  payment  is  traceable  by 

identifying the amount, the reason for the transaction and the parties involved. 

3.4 

It is suggested that the concepts of ‘several apparently related operations’ under the first draft law 

and of ‘all payments associated with the sale of goods or provision of services’ being ‘considered 

on  a  joint  basis,  even  when  they  do  not  exceed  the  limit  when  considered  separately’  under  the 
second  draft  law11,  should  be  further  elaborated  in  order  to  provide  clearer  criteria  for  identifying 

precisely which operations and payments fall within the scope of the draft laws. 

3.5  The  prohibition  under  Article  1(4)  of  the  second  draft  law  regarding  cash  payments  for  taxes 

totalling  over  more  than  EUR  500  does  not  seem  to  be  aligned  with  the  exemption  from  the 

prohibition of cash payments under Article 2(b) of the second draft law for transactions with public 
entities12, since tax payments are typically made to public entities. 

3.6  The sanctioning regime established by the second draft law seems excessive and, in particular, the 
fine  of  25  %  of  the  amount  paid13  appears  disproportionately  high.  The  ECB  would  reiterate  that 

limitations on cash payments should not go beyond what is necessary to achieve their objectives, 

and that  any  negative impact of the proposed limitations  should  be carefully  weighed against the 

anticipated  public  benefits.  When  considering  whether  a  limitation  is  proportionate,  the  adverse 

impact of the limitation in question should always be considered. A sanction that would apply to any 

9  

10  
11  
12  
13  

Directive (EU) 2015/849 of the European Parliament and of the Council of 29 May 2015 on the prevention of the use 
of  the  financial  system  for  the  purposes  of  money  laundering  or  terrorist  financing,  amending  Regulation  (EU)  No 
648/2012  of  the  European  Parliament  and  of  the  Council,  and  repealing  Directive  2005/60/EC  of  the  European 
Parliament and of the Council and Commission Directive 2006/70/EC (OJ L 141, 5.6.2015, p. 73). 
See Opinions CON/2013/18 and CON/2014/37. 

Article 2 of the first draft law and Article 1, paragraph 2, of the second draft law. 
See Articles 1(4) and 2(b) of the second draft law. 

See Article 3(1) of the second draft law. 

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breach,  regardless  of  the  underlying  situation,  does  not  seem  to  comply  with  the  proportionality 

requirement.  

3.7  Furthermore,  the  parties’  joint  liability  for  the  fine  imposed  if  they  have  improperly  issued  or 

received a payment  only refers to the fine ‘in the previous paragraph’, namely the 5 % increase in 

the corresponding payable tax amount whenever sums improperly received in cash have not been 
declared for tax purposes14. Presumably it was intended that this joint liability should also apply in 

respect of the fine equal to 25 % of the amount paid. 

3.8  Finally, it is noted that Article 63-C(3) of the Portuguese General Tax Law already provides that for 

commercial transactions any  payments equal to or above EUR 1  000  should  be made  by  means 

that allow the identification of the receiver, e.g. by bank transfer, bank debit or by a cheque made 

out  to  the  recipient.  Unlike  for  commercial  transactions,  it  might  be  difficult  to  replace  cash  in 

transactions  between  two  private  individuals  due  to,  inter  alia,  the  risk  of  insolvency  of  the 

counterparty, the lack of possibility of immediate settlement, and the absence of infrastructure for 

cashless  means  of  payment,  that  ensure  similar  benefits  to  those  that  exist  in  the  case  of  cash 

payments  made  between  two  individuals.  The  interaction  of  the  draft  laws  with  the  existing  cash 

limitation for commercial transactions should be clarified. 

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

Done at Frankfurt am Main, 22 May 2017. 

[signed] 

The President of the ECB 

Mario DRAGHI 

14  

See Article 3(3) of the second draft law. 

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