Hacienda Applies Sanctions for Cash Payments over the Legal Limit

In 2012, the Spanish Government introduced a measure to combat tax fraud and money laundering, making it illegal to make a cash payment in a business transaction for 2,500 euro or more.

Last year, the tax office (Agencia Tributaria) received almost 5,000 denunciations against individuals and businesses that had broken this law and exceeded the maximum limit allowed in a business transaction involving cash.

As a result, the Treasury began investigations into all the complaints and ended up fining around 1,000 contributors.

This law, which isn’t really new anymore, affects operations in which at least one of the parties is a professional, self-employed person or a company. A maximum of 2,499 euro is permitted to be paid in cash for any work or service provided. For example, if you have a new kitchen fitted and the total cost is more than 2,500 euro, it is illegal to pay the full amount in cash.

The number of people being denounced for failing to comply with this law increased by 51% in 2014 from the previous year. This is a surprising figure as those making the complaint must present their DNI and details of the incident before their local tax office – something that would be too much hassle for most people to bother with.

Many of the denuncias were made through a lack of distrust between the two parties involved. This is because the anti-fraud measure comes with a fine for all those involved, which is 25% of the total amount of money of the transaction, which is then shared between both parties. However, if one of those involved in the deal denounces the fact that an illegal amount of cash has been paid in a deal before the 3-month time period allowed, he will be exempt from having to pay the sanction.

Other denuncias have been made, however, by a third party, often in the form of registrars, notaries or lawyers that have been witness to the fraudulent deal.

During a session at Parliament, the head of the Agencia Tributaria explained that inspectors had also carried out a greater number of visits than ever before. This is the case for properties that they suspect are being rented out but where the owner is not declaring the money earned. These types of visits have gone up 11% in the last year.

In order to carry out their investigation into this type of fraud, tax office inspectors turn up at the property and speak to the caretaker, neighbours and anyone else that could help them detect whether a fraud is taking place.

The inspectors also have access to electricity and water records, which they cross-reference with census and property records held by various council offices.

The tax office has also sent officials to 2,567 communities of property owners to investigate ‘irregularities’ with their accounts. In 40% of the visits some kind of fraud was detected.

And, as well as trying to uncover properties that have been rented out long-term where the earnings are not declared, inspectors are also on the hunt for those that rent out their property to tourists and holidaymakers for short-term lets. Much of these are discovered by trawling through websites that advertise holiday rentals.

Hacienda also uncovered 145 cases of foreigners who had officially reported to their country of origin that they had moved to Spain permanently, but who are registered in Spain as non-residents – in order to pay less tax.

Source: www.elpais.com