The European Central Bank (ECB) describes as “disproportionate” the reduction to 1,000 euros of the limit of cash payments in which a party acts as a professional or company within the framework of the legislation for the prevention and fight against tax fraud in force in Spain since July 2021, according to an opinion from the institution, which also warns of the “adverse and undesirable” impact on the legal tender status of euro banknotes.
“The ECB considers the reduction of the limit of cash payments in operations in which either party acts in a professional or business capacity to 1,000 to be disproportionate,” says the central bank, considering that said cap significantly reduces the ability of payers to use euro banknotes and the freedom of citizens to choose how to pay.
Likewise, the ECB points out that by extending to 10,000 euros the limit admitted for cash payments made by individuals who do not act in a professional or commercial capacity, who are not tax residents in Spain either, to parties that act in a professional or commercial capacity, “This discriminates payments made by residents against those made by non-residents.”
Fine of 25% of the amount
On the other hand, the institution considers that the sanctioning regime established by the Law “seems excessive” and warns that, in particular, the fine of 25% of the amount paid “seems disproportionately high”.
Although the issuing institution considers that the objective of the Law to prevent and combat tax evasion may, in general, constitute a “public reason” that justifies the establishment of limitations on cash payments, it recalls that by limiting the possibility of complying In general, an obligation to pay in euro notes and coins, “the Member States must ensure that the measures adopted comply with the principle of proportionality”.
In this sense, the ECB considers that the legislation does not address in the statement of reasons the social impact and the risk of financial exclusion that would result from the reduction of the previous limit of 2,500 euros for payments in cash, in addition to noting that it does not provide evidence that with such a limit it is, in fact, likely to achieve the declared public objective, nor is it indicated whether alternative measures could have been adopted with a less adverse impact.
On the other hand, the institution warns that the cash payment limit established in the Law “significantly hinders” the settlement of legitimate transactions using cash as a means of payment, thus endangering the concept of legal tender enshrined in the Treaty. .
Thus, it recalls the proposal of the European Parliament and the Council on the prevention of money laundering or financing of terrorism to set a cash payment limit at Union level of 10,000 euros.
In this regard, the ECB notes that “the threshold for the intended ban on consumer-to-business and business-to-business transactions should be set high enough to avoid a factual impact leading to the abolition of euro banknotes.”
“It should be borne in mind that the ability to pay in cash remains especially important for certain groups in society that, for various legitimate reasons, prefer to use cash over other payment instruments,” recalls the ECB, stressing that “they facilitate the inclusion of the entire population in the economy” and represent a fundamental payment method for the elderly, immigrants, the disabled, and anyone with limited access to digital services.
This is the limit to spend with cash and so are the fines for exceeding it
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