Recent legislative amendments introduce a ban on cash payments of more than EUR 5 000 in Lithuania.
On 1 November 2022, a package of legal measures restricting cash payments in Lithuania entered into force. In order to combat the shadow economy and money laundering, as well as to reduce the VAT gap in Lithuania, the Law on Restrictions on Cash Transactions sets a ban on cash payments exceeding EUR 5 000 or the equivalent amount in foreign currency. Parties to a transaction are also prohibited from splitting the transaction if this would avoid application of the cash settlement restriction.
Prior to adoption of the new Law, the Lithuanian Civil Code set separate restrictions on cash settlements, e.g., if the loan amount exceeds EUR 3 000 and the transaction is settled in cash. In these cases, the loan agreement must be concluded in notarial form. However, the restriction in the new law applies to all cash-settled transactions.
The law allows exceptions for cash payments in the following cases:
1. other laws permit it;
2. settlements or payments through payment service providers where customer identification is guaranteed; and
3. cash payment is not possible because payment service providers at the place for settlements or payments do not provide the necessary services and the transaction must be settled immediately. In these cases, the person receiving the payment must notify the State Tax Inspectorate of the transaction within 10 days, with details of the circumstances that prevented non-cash payment and the identity of the parties involved in the transaction.
Failure to comply or properly comply with the requirements set in the Cash Settlement Restriction Act will not invalidate the transaction but may result in the parties being held liable under the Code of Administrative Offences. Depending on the extent and repetition(s) of the violation, persons who do not comply with the cash settlement restrictions may be fined between EUR 100 and 4 000. In addition, the right to participate in public tenders may be restricted.
Although Bank of Lithuania data shows that 97% of all payments in Lithuania are below EUR 5 000, the effectiveness of the cash settlement restriction measures and their actual impact on businesses and residents can only be assessed next year.
Law of the Republic of Lithuania on Restriction of Cash Settlements, TAR, 2022-07-07, No 14903