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Spain's new tax law bans cash payments of more than €2,500

Source: Bloomberg - Mon 19th Nov 2012
Spain's new tax law bans cash payments of more than €2,500

As of this morning, Spain began a ban on all payment in cash for anything over the value of €2,500 in a bid to combat tax evasion.

This new legislation will be applied when at least one party in any such transaction "acts in a professional or commercial capacity".

The new law, which was passed on October 30th, notes that "The social and economic reality in a situation of crisis and budgetary austerity makes tax fraud today even more reproachable than ever."

Cash payments for a variety of goods and services - popularly known as Black Money have been nortoriously widespread across Spain for many years as a means of tax-avoidance. Now PM Mariano Rajoy hopes that the EU's largest generator of untaxed earnings could recover some of the estimated €245 Billion - equating to 23% of GDP - and avert the need for a 2nd bailout.

Economists estimate that the value of tax avoidance in Spain in around 10% more than the EU average.

While the new cash ban doesn't affect purely personal transactions - such as buying a second-hand car or home from another private individual - it does extend to non-commercial transactions when the buyer is fiscally resident in another country. In that case the cash limit increases to €15,000.

Both buyers and sellers must keep receipts for 5 years. Violations, including dividing a deal up into pieces smaller than €2,500, will be considered "serious" infractions of administrative law, not criminal acts.

The ban won't be applied to the repayment of principal and interest to banks.

Comment on this Story

 
Maybe if the Spanish Government had thought about doing this 5 years ago (which would still have been too late) then the country would not be in as big a mess as it in now. Too little too late Sr Rajoy !
Mary Gee - Tue, 20th Nov 2012