Restrictions on the use of cash in the labyrinth of opaque legislation - 3

Following on from the publication Restrictions on the use of cash in the labyrinth of opaque legislation (iFinanses.lv, 11.09.2012) on the topic of restrictions on the use of cash, this time I would like to focus on a complex of issues concerning cash and advance payments.

The questions below will apply to the following situation in the company:

• there is no limit on the amount of cash advanced to a person making an advance payment; the only limit on cash advanced to a person making an advance payment is the prohibition on using it for personal purposes. The amount of the advance to the cash-in-advance person shall be determined on a case-by-case basis, taking into account the expected level of payments. Cash shall be issued to the imprest agent for the purpose of settling payments with counterparties for the purchase of goods or services, to cover loans, to pay into a current account with a bank and for other operating expenses;
• an employee of the company withdraws cash from the company's current account to pay partners for the purchase of goods or services, to cover loans, to pay salaries or to pay into the company's cashier. There is no limit on the amount of cash withdrawn from a current account with a bank; the only limit on the cash dispensed to an employee is the prohibition on using it for personal purposes;
•  in the case of an advance payment to a person who has an overdraft, the person must, at the first request of the undertaking, pay into an account or cashier's office of the undertaking the amount of the overdraft which is the property of the undertaking and in the person's custody and, if the person has an underdraft, the amount of the overdraft must be paid to the person at the request of the undertaking;
• if an employee of the company withdraws cash from the company's current account with the bank and deposits it in the company's treasury in cases where cash withdrawals from the company's treasury are planned, there is no limit on the amount, but the payments are documented in accordance with the relevant laws and regulations or are recorded on the basis of external supporting documents (cash receipt/expenditure warrant, current account print-outs or other documents).

So here are the questions that we will answer together in this article about the ambiguous cash restrictions:

1. Does the issue and return of cash from the company's cashier to the person making the advance payment to the person making the advance payment apply to Law on Taxes and Duties Article 30 cash restriction or declaration obligation?
2. Is the surplus of money advanced to an advance-settlement person a loan transaction?
3. Is an overdraft (where the person making the advance has overdrawn the advance issued to him and the company returns the overdrawn money to the person making the advance in accordance with the report received) a borrowing transaction?
4. Do I need to use electronic payment recording devices when receiving cash for the transactions referred to above?
5. In the case of a person making an advance payment withdrawing cash from the company's bank current account for the purpose of carrying on a business activity or for deposit in the company's cashier's office, and receiving cash from the company's cashier's office for deposit in the company's account with a credit institution or for the purpose of carrying on a business activity, are the following deductible Law on Taxes and Duties Article 30 restrictions/declaration obligations?

According to Accounting Law Article 15(1) the Cabinet of Ministers shall issue regulations on the keeping and organisation of accounting records and on the accounting of cash transactions.
 
The procedure for accounting for cash payments received and made by a business entity, a cooperative society, a branch of a foreign business entity and a permanent establishment of a non-resident (foreign business entity), an association and foundation, a political organisation (party) and an association of political organisations (parties), a religious organisation, a trade union, an institution financed from the state budget or local government budget, a state or local government agency, other legal and natural persons engaged in economic activity (hereinafter - an entity) (hereinafter - cash transactions) shall be regulated by Cabinet of Ministers Regulation No 584 of 21.10.2003 Rules on accounting of treasury operations (Cabinet Regulation No 584), as laid down in Paragraph 1 of the said Regulation.
 
According to Cabinet Regulation No 584 Point 8, if the company receives a cash payment from a person that is not subject to the requirements set out in the laws and regulations governing the use of electronic devices and equipment for recording taxes and other payments (for example, an employee deposits cash into the company's treasury as a surplus of an advance payment received), a separate cash receipt order (in the case of credit institutions, savings and loan associations and the Bank of Latvia - a document justifying cash deposits) is prepared for each such payment, in accordance with which the cash is paid into the treasury and an entry made in the cash book.
 
Cabinet Regulation No 584 Paragraph 22 states that only salaries or other remuneration in connection with work (wages, salaries), compensation and other payments provided for by laws and regulations to employees of the enterprise, advances (in lats) for travel or business trip expenses of employees, regular scholarships and compensations to students or other persons during their studies, pensions and regular state social or social insurance benefits and municipal social benefits may be paid in accordance with the list of expenses.
 
On the basis of Cabinet Regulation No 584 Point 38 the cashier's cash receipts and disbursements statement together with the cash receipts and disbursements warrants (for credit institutions, credit unions and the Bank of Latvia - the supporting documents for cash deposits and disbursements) and the supporting documents, if any, attached to them (for example, a list of disbursements, a written order or authorisation from the head of the enterprise to advance cash to an employee of the enterprise for the performance of business tasks, a receipt registered with the State Revenue Service or a summary of the data in such receipts, tickets or cash register register), shall be submitted to the accountant in charge against signature in the manner prescribed by the head of the enterprise.
 
It follows from the above-mentioned legal provisions and the situation described above that, in the legal situation in question, the undertaking carries out internal cash transactions, the accounting for which is governed by Cabinet Regulation No 584.
 
In the cases described above, the economic and substantive nature of the activities described above is that of the organisation of cash flows within the enterprise, since the enterprise's cash will be handled on its behalf by the enterprise's employee (the imprest agent) in the performance of economic tasks and the surplus will be returned to the enterprise's treasury. Consequently, in this legal situation of the law About taxes and duties Article 30 shall not apply. Law About taxes and duties The requirements of Article 30 could be applied by the State Revenue Service to a cash transaction carried out by an employee of the company (the person making the advance payment) on behalf of the company with another taxpayer or a natural person.
 
Given that an employee of the enterprise (the person making the advance payment) handles the money advanced on behalf of the enterprise and for the purpose of carrying out the enterprise's business tasks, the cash advanced by the enterprise to the employee of the enterprise (the person making the advance payment) or the receipt of the money back from the employee of the enterprise (the person making the advance payment), and the surplus of money provided to an employee (imprest person) of the enterprise, or the provision of an overdrawn amount on the basis of an imprest report, shall not be treated as a loan to an employee (imprest person) of the enterprise or as a loan to the enterprise.
 
As the company issues money from the cash desk to an employee (the person settling the advance), and receives back the money or the balance of the money issued, or issues an overdraft on the basis of an advance settlement report, and the acts of a responsible employee (advance settlement person) of an enterprise - the withdrawal of cash from the enterprise's account with a credit institution for the purpose of carrying out business tasks, the payment of salaries, and the deposit of that cash in the enterprise's treasury or the deposit of cash received from the treasury in the enterprise's account with a credit institution - shall not be regarded as transactions in cash of the law About taxes and duties within the meaning of Article 30, but are cash activities within an undertaking governed by Cabinet Regulation No 584, not Cabinet of Ministers Regulation No 282 of 02.05.2007 Procedures for the use of electronic devices and equipment for recording taxes and other payments, those operations need not be recorded in a cash register, cash system, specialised device or equipment.