A recent initiative publicised on social media, which showed us an attempt to combine the recycling of cardboard paper with its use in exchange for the purchase of dried bread, has drawn the public's attention to a practice that the pandemic period has made more frequent among us: the refusal of cash payments by some commercial establishments.
Some people, allegedly concerned about an Orwellian drift that would have them counting the number of loaves of bread and toast bought by each citizen, are upset about the impossibility of making payments in notes or coins.
The desire to oblige people to accept payment in notes and coins raises the issue of the legal tender status of the currency and, specifically, the Euro.
A legal tender is one that, according to the applicable law, can be used to settle public debts, private debts and fulfil financial obligations such as tax payments, contracts, fines or legal damages.
This means, therefore, that a creditor (or in this case, a merchant), if legal tender exists, has a legal obligation to accept the legal tender of a country (in our case, the Eurozone) for payment of a transaction or repayment of a debt.
Article 128 of the Treaty on the Functioning of the European Union states that ‘Banknotes issued by the European Central Bank and the national central banks shall be the only legal tender within the Union’, a determination that is corroborated by European Council Regulation (EC) No 974/98.
This determination is further consolidated in European Recommendation 2010/191, which states that, when there is a payment obligation, the legal tender status of euro notes and coins must imply, firstly, the compulsory acceptance of these notes and coins; secondly, their acceptance at face value; and, thirdly, their power to fulfil payment obligations. This point therefore shows that this concept of ‘legal tender’ covers, in particular, an obligation in principle to accept euro notes and coins for payment purposes.
The European Court of Justice has already ruled on a similar issue (Johannes Dietrich and Norbert Häring) in a case in which they challenged the requirement that the Broadcasting Levy be paid by direct debit, bank transfer or standing order - in other words, prohibiting payment of the levy in cash.
The Court of Justice ruled that European rules on the legal tender status of the euro preclude national legislation that excludes the possibility of fulfilling a payment obligation imposed by the public authorities by means of euro banknotes, provided that: and
- such regulation does not have the purpose or effect of determining the legal tender status of such banknotes;
- does not lead to the abolition, de jure or de facto, of such banknotes, in particular by jeopardising the possibility, as a general rule, of fulfilling a payment obligation using such cash;
has been adopted for reasons of public interest;
- the limitation on cash payments implied by that regulation is appropriate to fulfil the public interest objective pursued; and
- does not go beyond what is necessary to achieve that objective, in the sense that other legal means are available to fulfil the payment obligation
It follows from this, without much interpretative effort, that unless national rules are established that respect these conditions (as is the case here, namely in articles 40 and 63-E of the General Tax Law), the legal tender status of Euro notes and coins must be respected.
Therefore, only in the following cases can - and indeed should - cash payments be refused:
- transactions of any nature involving amounts equal to or greater than €3,000, a figure that rises to €10,000 when the payment is made by natural persons who are not resident in Portuguese territory, and provided that they do not act as entrepreneurs or traders;
- For IRC taxpayers, as well as IRS taxpayers who have or must have organised accounts, payments of €1,000 or more;
- taxes whose amount exceeds €500.
Apart from these cases, we believe that cash payments cannot be refused at this time.
