Cash payments above €2.500 are banned

Cash payments for an amount of €2,500 euros or higher are to be banned from today (Monday, 19th November 2012) in a measure that the Tax Agency (AEAT) relies on for limiting cases of tax fraud in this type of transaction. This is the only initiative that was published in the BOE on 30th October which had been delayed to allow time for people to get used this new limitation.

The limitation on cash, which already exists in countries like France or Italy, aims to “avoid such operations in the professional trade, because it is very common for the effective use of tax fraud” said a director of the Tax Agency, Luis Jones. “We understand that this preventive measure will reduce such operations”. This prohibition is limited to cases where one party is a business or self-employed, so it does not affect private transactions.

The tax office has been responsible for ensuring that in the last five years over €1,600 million have been ‘regularised’ thanks to inspections after detecting operations that involved large amounts of cash, especially those including so-called “high-denomination” bank notes (€500).

Failure to abide by this new rule will result in an administrative penalty of 25% of the amount of the transaction and both parties are jointly liable for the payment, so the tax can be directed either to the payer or the collector, or both. In the case of both parties paying the fine, the total amount will be 25% of the operation, not 25% for each party involved. As an example given, if a transaction is paid in cash for a value of €3.000, the fine would be €750 which would be claimed from either party or split between the two.