Limit on cash payments
The fight against fraud is something that concerns us all. Accordingly, we need to keep ourselves well informed of the current regulations to avoid any problems. Are you aware of the new limit on payments in cash? Or that you could be reported if you breach the limit, even by the other party to the cash payment?
From 11 July 2021, no payment of over €1,000 (or the foreign currency equivalent) where one party acts as an entrepreneur or professional can be made in cash. If the payer is a natural person, can demonstrate that they are not a tax resident in Spain and are not acting in a professional capacity, the limit is €10,000.
Note that the limit applies to the total transaction, not the cash payment itself. For instance, if you need to make a total payment of €1,100 and you pay €200 of that in cash, you would still be in breach of the regulation.
Of course, this limit does not apply to payments and deposits made at credit institutions and payment institutions, or when exchanging cash at currency-exchange bureaux open to the public.
Bear in mind that both the payer and the recipient would be deemed to be in breach and would be held jointly liable for the penalty fine, which would be 25% of the amount paid in cash.
Should either party report the payment, its amount and the name of the other party to the tax authorities within three months of the payment, the reporting party will be exempted from the fine.
Lastly, bear in mind that bearer cheques and any other payment method where the parties are not identified will be considered cash.
We recommend that you keep proof of payment for any transaction above the established limit for five years. That way you will be able to prove how the payment was made.
The legal text can be found here: Law 11/2021, of 9 July 2021, on measures to prevent and combat tax fraud.