Cash payments

The use of cash is necessary in any economy and essential for small transactions. Despite this fact, however, when it comes to paying a large amount in cash, it is often not justified. The most common reasons are convenience and, above all, security. For this reason, other means of payment are used:

• Cheques.
• Credit or debit cards.

The use of large amounts of cash is a well-known mechanism, both nationally and internationally, for money laundering and for avoiding the correct taxation of income obtained in direct taxation and VAT accrued in indirect taxation.

As far as compliance with tax obligations is concerned, the main “advantage” of cash payment for transactions carried out lies in the difficulty for the tax authorities to know the existence and amount of such transactions.

In some cases, the interest of payment in cash is also shared by the purchaser of the good or service, since by obtaining a fiscal “opacity” in the operation he avoids having to pay VAT, therefore, it is a means that allows him to obtain cheaper prices or even allows him to use the money he has obtained from activities or operations also hidden from the tax authorities.

Given the link between the use of cash and tax fraud, the regulation of the use of cash for the payment of certain transactions has aroused the interest of the authorities at European level. In this respect, countries have adopted different solutions.

Some countries set no limitations or conditions on the use of cash, while other countries prohibit cash payments depending on the amount of the consideration or the type of transaction carried out.

In Spain, as a financial and tax measure to make the use of cash more difficult, which is aimed at opacity both for money laundering and tax avoidance purposes, a limitation on cash payments for certain economic transactions was incorporated into domestic legislation.

If you have any doubts about this subject, please do not hesitate to contact us, by telephone to Carles Monfort Codina or by e-mail to cmc@btsasociados.com, we will be delighted to help you.