Term and Legal Classification of ‘Cash’
Definition and Distinction of the Term ‘Cash’
The term ‘cash’ refers in the broadest sense to means of payment in the form of physical money. In business, tax, and legal terminology, ‘cash’ is often used synonymously with ‘liquid assets.’ This includes, in particular, banknotes and coins—physical money that is immediately available and recognized as legal tender. In contrast to other forms of payment such as wire transfers, checks, or electronic payment methods, the central characteristic of ‘cash’ is the immediate and anonymous fulfillment of payment obligations.
Legal Basis of Cash
Cash enjoys the status of legal tender in Germany on the basis of Section 14 (1) sentence 2 of the Bundesbank Act (BBankG). According to Art. 128 of the Treaty on the Functioning of the European Union (TFEU), the cash issued by the European Central Bank and national central banks is regarded as the only legal tender in the Eurozone.
Cash in Civil Law
Cash Payments and Fulfillment of Monetary Debts
Under German civil law, payment in cash is generally a permissible way of fulfilling monetary debts within the meaning of Sections 362 et seq. of the German Civil Code (BGB). The acceptance of cash, however, may be otherwise agreed upon by contract or law. For example, pursuant to Section 266 BGB, partial performance—including partial cash payments—may be refused by the creditor, unless agreed otherwise.
Place of Performance and Risk Allocation
The place of performance for monetary debts is generally determined in accordance with Section 269 BGB. In principle, this constitutes a so-called ‘dispatch debt’ (Schickschuld), whereby the debtor bears the risk of loss or damage to cash until the actual handover.
Cash in Tax Law
Recording Obligations and Documentation
The receipt and use of cash is subject, as part of proper accounting, to the provisions of the German Fiscal Code (AO) and the principles of proper bookkeeping (GoB). According to Section 146 AO, cash receipts and cash expenses must be recorded promptly, completely, and correctly.
With the Cash Register Security Ordinance (KassenSichV) and the GoBD (Principles for the proper keeping and retention of books, records, and documents in electronic form as well as for data access), strict requirements are imposed on companies with respect to handling cash registers and cash, to prevent manipulation and ensure transparency. For business transactions processed in cash, the individual record-keeping obligation is also relevant.
Cash Limits and Cash Payment Thresholds
To combat money laundering and tax evasion, various cash limits have been introduced in Germany and the European Union. According to the Money Laundering Act (GwG), transactions of €10,000 or more must be reported and identified. Additionally, certain industries are subject to lower cash payment thresholds, such as property transactions.
Cash and the Money Laundering Act (GwG)
Obligations in the Context of Money Laundering Prevention
The Money Laundering Act (GwG) establishes extensive duties of verification, due diligence, and reporting for the handling of cash. Obligated companies and individuals—such as banks, notaries, and real estate agents—must, in particular with cash payments above specific thresholds, verify the identity of their contracting parties and report suspicious transactions to the proper authorities. The goal is to prevent the introduction of illicit assets into the lawful economy.
Cash in Insolvency Law
Status of Cash in the Insolvency Estate
Within insolvency proceedings, cash in the debtor’s possession or under the debtor’s control regularly becomes part of the insolvency estate (Section 35 Insolvency Act – InsO). Creditors may access this cash through realization by the insolvency administrator.
Cash in Criminal Law
Relevance of Cash in Criminal Offenses
Cash plays a significant role in criminal law, especially in offenses such as money laundering (Section 261 German Criminal Code), tax evasion (Section 370 AO), and breach of trust (Section 266 German Criminal Code). The use of cash can be misused to conceal illegal origins or circumvent proof and documentation obligations. In investigative proceedings, the seizure and confiscation of cash pursuant to Sections 94 et seq. of the German Code of Criminal Procedure (StPO) are essential instruments.
Cash Payment Bans and Legal Developments
Developments at European and National Level
In the course of the digitization of payment transactions and to further curb money laundering, cash limits and bans on cash payments are gaining importance. The EU and several member states are discussing or have already implemented national cash payment limits. This is aimed at greater transparency and restricts anonymous cash transactions.
Summary and Outlook
‘Cash’ in the legal sense is primarily to be understood as physical money (legal tender) that is subject to various statutory regulations. In addition to civil law rules, bookkeeping obligations, and money laundering safeguards, tax and insolvency regulations govern the handling of cash in legal transactions. Against the backdrop of advancing digitization and increasingly restrictive legislation, the anonymous use of cash is generally declining in importance, while legal requirements for cash transactions continue to rise.
Note: This article provides a comprehensive legal overview of the term ‘cash’ and takes into account the legal situation as of June 2024.
Frequently Asked Questions
Who is authorized to accept or refuse cash payments in Germany?
According to Section 14 (1) sentence 2 of the Bundesbank Act (BBankG), the euro is the sole unlimited legal tender in Germany. This means that, in principle, any payment recipient—whether in commercial or private transactions—is obliged to accept euro banknotes and coins as a means of payment. However, there are exceptions: the acceptance of cash may be contractually excluded, for example, by general terms and conditions (AGB) or by individual contractual agreements. In addition, public bodies, particularly authorities, are not always required to accept cash payments, especially where cashless payment is explicitly provided by law. In the case of small coins, Section 3 (1) sentence 2 of the Coinage Act states that no one is obliged to accept more than 50 coins.
Are there maximum limits for cash payments, especially in business transactions?
Germany does not currently have generally binding maximum limits for cash payments, unlike some other EU countries. However, the provisions of the Money Laundering Act (GwG) are legally relevant. Therefore, companies in the financial sector, as well as traders, must identify customers for cash payments of €10,000 or more (in some cases from €2,000, e.g., in precious metals trading) in accordance with Section 10 GwG. At the EU level, a general upper limit for cash payments is currently under discussion, but national limitations exist only in specific cases (e.g., real estate purchases, luxury goods).
What reporting and identification obligations exist for large cash transactions?
Under the Money Laundering Act (GwG), certain thresholds are set for cash transactions above which identification and documentation of the contracting party are mandatory. For transactions of €10,000 or more, identification of the customer is required for traders in goods, real estate agents, and other obliged parties. In the precious metals trade, this obligation exists from €2,000 onwards (Section 10 (6) GwG). If there is suspicion of money laundering—even below these thresholds—a reporting obligation to the Financial Intelligence Unit (FIU) under Section 43 GwG applies.
What legal requirements apply to the storage and documentation of cash payments?
According to Sections 146 and 147 of the Fiscal Code (AO), taxpayers are obliged to keep proper records, receipts, and books for their income and expenditures, including cash payments. These documents must be retained for up to ten years, depending on relevance. For retail cash transactions, electronic cash register systems that comply with the requirements of the Cash Register Security Ordinance (KassenSichV) and the GoBD (Principles for the proper keeping and retention of books, records, and documents in electronic form) must be used.
What special rules apply to cash payments in real estate transactions?
In real estate transactions, there are special anti-money laundering regulations to minimize the risk of disguising illegal assets. The acceptance of large cash amounts is possible but remains subject to strict identification requirements under the GwG from €10,000. For notaries, Section 10 (6) GwG entails a strict duty of care; they must establish and document the identity of the buyer and, if applicable, the beneficial owner even before carrying out the transaction.
Are there any restrictions on cash payments to public bodies and authorities?
Payments to public bodies can generally be made in cash unless there are statutory regulations to the contrary. In recent years, however, administrative orders at the state or municipal level have often been issued that limit or exclude the acceptance of cash, provided a secure payment method, such as bank transfer, is available. Case law provides that authorities may not refuse cash payments without good cause, but appropriate administrative rules are permissible provided they do not contravene higher-ranking law, especially the Basic Law or EU law. The Federal Court of Justice (BGH) is currently considering, in several proceedings, the question of to what extent fees or taxes must mandatorily be paid in cash.
What tax risks exist in connection with large amounts of cash?
High cash volumes in companies and for the self-employed can lead to increased audit and verification requirements from a tax perspective. Tax auditors often regard unusually high cash revenues as a possible indication of tax evasion or undeclared work. Violations of recording and documentation obligations can be prosecuted as regulatory offenses or as tax crimes. Particularly relevant is the cash register inspection under Section 146b AO, which allows unannounced inspections of cash register management. If irregularities are found, additional tax assessments and serious tax and criminal consequences may follow.
