Cash payment limit: what is it and why does it exist?

The cash payment may not exceed two thousand five hundred euros. This is the limit to cash payment that both companies and individuals have had to take into account since 2012, when the Law 7/2012 which established it. This limitation remains unchanged since, despite the fact that, at the beginning of 2017, the Government considered imposing new measures, reducing this limit on the effective payment that was being applied by one thousand five hundred euros, in the end the proposal did not evolve.

However, there is an exception that applies to individuals who are not resident in Spain, in which case, the limit is set at fifteen thousand euros, provided that their actions are of a private and never professional nature.

Why is there a limit on cash payments?

The limit on cash payments is for control reasons.. All transactions carried out using a credit card or using financial institutions acting as intermediaries can offer a guarantee, namely that of traceability.

However, in the absence of telematic channels, the money can be lost track of. This lack of control and the difficulty of monitoring the veracity of payments made in sales and service contracts between companies and individuals are the reasons for this ruling.

The limit on cash payments is intended to prevent underground economies and to boost contributions..

By limiting the amount that can be paid in cash, tax fraud is greatly reduced, as it is now more difficult to issue invoices without VAT, for example.

How is cash payment limited?

The limit on cash payments applies to transactions in excess of 2,500 euros. This means that:

• As soon as the amount to be paid is higher than this figure, cash payment cannot be used as a means of payment.
• Even the option of splitting the amount to pay two thousand five hundred euros in cash and pay the rest by card or bank transfer is not allowed.
• Failure to comply with this rule, which is set out in Article 7 of the above-mentioned law, would result in fines amounting to 25% of the amount paid. 

Advantages of paying by card

As long as the management is centralised, as can be achieved with solutions such as Corporate, for example, card payment is a source of business benefits.

Avoiding cash leads to easier management, avoiding errors and minimising the risk of non-compliance. In addition, paying by card and having a system that centralises all invoices facilitates processes such as VAT deductibility and greatly improves business accounting planning.

Are coins and banknotes still used in your company? Take advantage of the cash limit to move towards a smarter and more convenient invoice management system..