Limitation of cash payments between professionals

Next week becomes effective the limitation of cash payments, introduced in the Law 7/2012 of 29th of October about the modification of tax and budget regulations and adaptation of the financial normative in line with the intensified prevention and battle against fraud. Amongst other measures in the Law is also the limitation of cash payments, which we detail in continuation.

In this respect, the article 7 of the above mentioned law establishes that it is not allowed to pay in cash equal or superior amount to 2.500 euros in such operations where one of the intervening participants is an entrepreneur or a professional, (15.000 euros if the payer is a private person who is not a fiscal resident in Spain and does not participate in the operation as an entrepreneur or a professional), breach of which is considered a serious administrative offense. To this effect, as cash payment are considered both national and foreign notes and coins, and bank cheques to carrier or any other medium, even electronic, conceived to be used as a payment to carrier.

To calculate the indicated amounts, the section 1.2 of the above mentioned rule, establishes explicitly that "the total of all operations or payments in installments for a delivery of goods or services are summed up".

In accordance with the previous, in the face of the application of the limitation of cash payments it is decisive that the value of the delivered goods or services does not reach the indicated limits, even if the payment has been done in various installments or documented in various invoices.

On the other side, relative to the responsibility derived from the assumed cases where amounts in cash superior to the referred limits are received from clients, the article 7. Dos.2 of the Law 7/2012 establishes that the offending subjects are both the persons or entities that pay, as well the ones who receive all or part of the quantities in cash, responding both in solidarity. The Tax Authority can turn independently against either parties or both of them and being the pecuniary fine proportional to 25 percent of the amount paid in cash. The offense prescribes in five years, during which time it is necessary to keep all the documentary evidence of the payments.

On the other hand, it is of special interest how  the normative allows a mechanism that exonerates from the cited responsibility the participant of the operation that within 3 months of payment in cash in infringement of the limitation reports the deeds to the Tax Administration identifying the other intervening party.

Remember that limitation will be applied to all the payments carried out from next week on, even if they refer to operations agreed upon before the limitation comes in force.

For more information, contact us.