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HomeLatest NewsCash payment: what is the maximum limit and how is non-compliance punished?

Cash payment: what is the maximum limit and how is non-compliance punished?

Recently, new technologies and especially the COVID-19 pandemic have led to the fact that cash payments, which until recently were used in most transactions, lost a lot of ground in favor of the use of bank cards and electronic systems.

It so happened that in addition to the comfort provided by new means of payment, and the version circulated at the beginning of the pandemic that the coronavirus could spread by contact with surfaces, the Spanish government took measures to even more discourage traditional exchange of banknotes and coins.

The most important of these decisions was cap reduction for cash, which since July last year is 1000 euros. This was established by Law 11/2021 “On measures to prevent and combat tax fraud”, which changed this limit (which was 2,500 euros from 2012).

This maximum applies to all transactions “in which one of the parties acts as a businessman or professional.” Therefore, payments between individuals and payments to financial institutions are excluded from this limitation.

As a result, transactions for amounts equal to or greater than 1000 euros They must be made by bank transfer or one of the aforementioned systems: cards or applications for mobile phones or tablets.

What happens if I pay more cash than allowed?

The law establishes for persons exceeding this limit a fine of 25% of the amount in cash. The Treasury can apply it to both parties, both the payer and the recipient of the money, as explained in the Consumer and User Organization (OCU) article.

Either side, by the way, remains is released from liability if you report another within three months of the operation. That is, he will force another person to pay a fine, but will not have to do it himself.

There are some specifications to keep in mind. Firstly, the fact that the limit regulates the total amount of the transaction, and this can’t be divided. That is, if the transaction is for 2000 euros, the payer cannot choose to deliver 999 euros in cash and 1001 in another way. All payments must be made by this other method.

On the other hand, when the law refers to “cash”, it actually refers to all means of payment that they don’t allow id payer. Thus, payments in gold or other metals, traveler’s checks, bearer’s checks, etc. are included. And, of course, “its equivalent value in foreign currency”, as stated in the text of the law.

The €1,000 limit came into effect on 11 July 2021 and regulates all payments conducted since then, including those corresponding to transactions closed prior to the publication of the law in the Official State Gazette.

The limit is too low for the European Central Bank

In Spain, before the pandemic, up to 87% of payments at points of sale were made in cash. The European average was 79%, with Sweden leading the way with hardly one in five transactions being paid in cash in the Scandinavian country, which planned to go cashless as early as next year.

A little over two years later and the pandemic 79% of the Spanish population already uses electronic payment systems, according to the OCU survey. The most popular media are Bizum (63% of people used it last year), platforms like Pay Pal (45%), and apps like Apple Pay and Google Pay (28%).

However, not everything is so positive. In a report released in March, the European Central Bank (ECB) described “disproportionate” a limit of 1,000 for cash transactions, as he believes that “such a reduction would have unintended adverse effects on the legal tender status of euro banknotes.”

“In addition,” adds the agency, “this limit on cash payments significantly reduces the ability of payers to use euro banknotes and freedom of citizens choose a payment method.

The ECB is also considering “disproportionately high» a penalty of 25% of the transaction amount for those who exceed the established limit. And he criticizes as “discriminatory” the difference the law makes between people who have a fiscal domicile in Spain and those who do not, since in the case of the latter the limit for cash payments is much higher: 10,000 euros.

Benefits of cash

The European Banking Authority bases its opinion on the benefits of working with cash, which, as explained, “remains very important for certain social groups who, for various good reasonsthey prefer to use cash instead of other payment instruments.”

The ECB document lists the following advantages of cash:

It is a payment instrument that is widely accepted, fast and makes it easy for the payer control your own expenses. This is a means of payment that allows citizens to instantly pay for transactions, and the only one does not carry a legal possibility of charging a commission for its use.
always available, as it does not require an existing technical infrastructure or related investments. That is, it is not affected by power outages or failures of electronic payment systems.
Not bound by restrictions daily or weekly payments determined by entities offering payment services.
Facilitates inclusion of the population as a whole in the economy, thus allowing him to settle any financial transaction. The ECB emphasizes that cash is an important means of payment for older people, immigrants or people with disabilities, socially disadvantaged citizens and people with limited access to digital services.

It is for all this that the Bank of Spain ensures that the distribution of cash in the country is even and appropriate”, which is of particular importance, especially in rural areas (“Spain is empty”), in which thousands of bank branches and ATMs have recently disappeared.

In any case, regardless of the criticism of the ECB and what may happen in the future, the limit of 1,000 euros for cash payments remains in place. And it is convenient to pay attention to this in order to avoid important sanctions.

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