Spanish Bank warns against the illegality of payments that are partly cash

by Lorraine Williamson
cash payments
ASSSA

MADRID – Cash payments are one of the main concerns of the Spanish tax authorities. It wants to end the hidden economy at all costs in order to minimise tax fraud and illegal activities. And, moreover, to collect more taxes. 

That is not an easy task: banknotes and coins are practically impossible to trace, which means that the Tax and Customs Administration must take special measures for this payment method. The European Union estimated the level of the shadow economy in Spain at 16.9% in 2021. 

Cash means of payment are considered: 

  • Paper money and metal money, national or foreign
  • Bearer bank checks in any currency
  • Any other physical means, including electronic ones, are designed to be used as a means of payment for the wearer

Professions where cash is rampant

Although card payments and contactless applications such as Bizum are gaining ground, cash is still widely used by citizens in Spain. This mainly happens for small payments and daily expenses. But there are also many professions and sectors where cash is rampant. These include garden maintenance workers, handymen, plumbers, technicians and the hospitality industry. Spaniards pay relatively little with their bank card but continue to withdraw money to have ‘cash’ in their wallets. 

Related post: Spanish tax inspectors take to the streets in pursuit of black economy 

One of the most recent measures by the Tax and Customs Administration is that the limit with which you can pay in cash has been lowered from €2,500 to €1,000. Because misunderstandings have arisen about this, the Bank of Spain wants to warn citizens. “The fight against fraud is something that concerns us all, so we must be well aware of the current regulations to avoid problems,” explains the Bank of Spain about the need to know the changes in detail. 

Related post: What happens if you make cash payments over 1,000 euros in Spain? 

“From 11 July 2021, payments of an amount equal to or greater than €1,000 or the equivalent in foreign currency can no longer be made in cash. This rule concerns payments where one of the parties acts as an entrepreneur or professional,” explains the Bank of out of Spain. 

Rule applies to entire operation 

But beware, because there is a detail that is overlooked by many. You need to know this rule in order to avoid inspection and a possible subsequent fine from the tax authorities. “The restriction applies to the entire operation, not to the cash payment itself. That is, if you have to pay an amount of €1,100 for one operation and you pay €200 in cash, you are already in violation,” warns the financial entity. 

Heavy fines 

The consequences of breaking this rule are dire. You can count on a hefty fine. The Bank of Spain puts it this way: “You should bear in mind that both the payer and the person receiving the amount in cash are considered offenders. Both are jointly and severally liable for the penalty that will be imposed. The penalty is 25% of the amount paid in cash for the operation exceeding the amount of €1,000”. 

So if you have an outstanding payment of €1,000 or more, you cannot use cash for full or partial payment. 

Foreign persons arriving in Spain, on the other hand, can take with them an amount of €10,000 in cash, either to carry out a procedure with another person, to pay in a shop or a company or to carry out a transaction with a company from to perform, writes OndaCero here. 

Be careful in Spain to deposit more than €3,000 in cash into a bank account. And also prefer not to make payments in notes of €500. While not illegal, it could lead to the IRS investigating you. 

Denounce at the tax office 

The tax authorities also encourage people to report cash payments above the set limit. On the website, the service writes: “You can report to the Tax Authorities that you do not comply with the limitation to cash payments with an amount equal to or greater than €1,000 (€10,000 if the payer is a natural person who does not act as the owner of the professional company without tax residence in Spain)”. 

Related post: Cryptocurrencies under scrutiny of Spanish tax authorities

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