Hacienda (the Spanish Tax Agency) is now focusing on cash transactions, and in the future, fines will be imposed on those who make cash payments exceeding 1,000 euros. This new regulation came into effect with Law 11/2021, which aims to combat tax fraud by limiting the maximum amount for cash transactions.
The regulation aims to reduce tax fraud, money laundering, and the underground economy. With this law, the Spanish government wants to prevent illegal money flows and ensure economic transparency.
Why Is It Important to Be Aware of Cash Payment Limits?
The recent power outage on April 28th highlighted the significant role cash still plays in our daily lives. Despite the growing popularity of digital payments, such as card payments, cash is still widely used, especially in emergencies. The power outage caught many people off guard, unable to make purchases as electronic payment systems were down. While digital payments are often more convenient, cash remains a backup for many in certain situations.
Therefore, it’s important to remember that not all cash transactions are allowed in Spain, and making certain payments in cash could lead to serious financial penalties.
What Amount Can You Pay in Cash?
Until recently, the maximum amount that could be paid in cash was 2,500 euros. However, following the introduction of Law 11/2021, the maximum amount that can be paid in cash is now 1,000 euros. This rule applies to cash in any form, including both national and foreign currency, as well as cash checks or other bearer physical or electronic payment methods.
Exception:
If the payer is not a Spanish resident, the limit increases to 10,000 euros.
What Happens If You Break the Rules?
If you exceed the 1,000-euro limit and make a cash payment, you will incur a 25% fine based on the amount paid in cash. For example, if you pay 5,000 euros in cash, the fine will be 1,250 euros (25% of 5,000 euros). The penalty will increase with the amount of the transaction.
This fine will also apply if multiple smaller payments cumulatively exceed the 1,000-euro threshold. For example, if you make several smaller transactions with the same seller and their total exceeds 1,000 euros, you will still face the penalty.
Important Note: Keep Your Receipts!
These restrictions on cash payments are part of the Hacienda’s anti-tax fraud strategy, which aims to limit cash transactions for specific commercial activities and reduce tax evasion and fraud. If Hacienda detects suspicious activity, they may ask for payment receipts from both the payer and the seller. It’s important to keep receipts for all transactions for at least five years.
This is because, if you exceed the 1,000-euro limit for cash payments, the fraud will expire after five years, starting from the day the violation occurred. Likewise, the penalty associated with the violation will also expire after five years, and the clock for this begins the day after the penalty decision becomes final.
Summary
Spain is increasingly imposing stricter rules on cash transactions, and Hacienda aims to combat tax evasion and fraud by limiting cash payments to 1,000 euros. Failure to comply with these rules can result in a 25% fine of the amount paid in cash. Therefore, it’s crucial to ensure that you comply with the regulations by keeping receipts for all transactions and understanding the limits on cash payments.
Statistical Data and Further Details
- In 2019, cash transactions in the Spanish economy exceeded 50 billion euros. However, this number significantly decreased by 2021, due to the growth of digital payment systems like Bizum and online shopping.
- 74% of Spanish households use card payments for everyday purchases, but cash transactions are still popular in smaller stores and markets.
- The majority of cash transactions are between 100 and 200 euros, but Hacienda has emphasized that higher-value transactions attract more scrutiny to prevent fraud.
The new regulation ensures financial transparency in transactions and helps prevent tax evasion. It’s essential to follow the rules regarding cash payments to avoid penalties and legal issues!
