The new legislation (law 7/2012) passed by the Spanish Government in October 2012 aimed to prevent tax fraud establishes a limitation of cash payments.
Amount of the limitation
No cash payments of 1.000 Euros or more can be made in transactions when at least one of the parties involved is a company or professional. This means that the limitation does not apply to private transactions. Also, this limitation of the use of cash goes up to 10.000 Euros when the payer is not a resident in Spain.
The law will also consider cash payments of more than 1.000 Euros, the different cash payments of less than 1.000 Euros used in a particular transaction with added together result in a payment of more than the said figure.
Implications
This has certain implications for everyone who is involved in transactions of more than 1.000 € or 10.000 € in the case of non residents, because they must keep proof of payments made for a period of five years to demonstrate that the payment was not made in cash. The parties will be required to present such proof of payment upon request by the Spanish Tax Office.
Exceptions
The limitation of cash payments is not applicable to payments and deposits made with financial institutions.
What is considered as cash payments?
The cash payments comprise paper money and coins in Euros or the equivalent in any other currency, bearer cheques in any currency and any other physical means, including electronic, designed to be used as payment in cash.
Fines
Anyone failing to comply with this limitation will face fines of 25% of the cash payment. Both parties involved in the transaction will be individually liable for any such breach, meaning that the Spanish Tax Authorities can act against any of them or against both.
There will be no fines for the party involved that reports the transaction in the term of 3 months to the Tax office with information as to amount and identity of the other party. However, if both parties report, only the first one will be fine exempt. If the parties report simultaneously, they will both be subject to fines.
Statute of Limitation period
The statute of limitation period for the tax office to follow proceedings against the parties to put a fine will elapse after 5 years since the transaction took place and the payment was made.
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Rafael Berdaguer
Lawyer within the firm
Rafael Berdaguer Abogados based in Marbella, Spain.
www.berdaguerabogados.com
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