On October 31st, 2012, Law 7/2012 entered into effect, modifying the Spanish tax and budget legislation and adapting the financial regulation to boost the actions designed to prevent and fight against frauds (“anti-fraud law”).

The anti-fraud law contains many novelties, such as the obligation to declare assets abroad, modifications of the general regime of tax liability, modifications of the law on VAT, of article 108 of the Spanish Securities Market law, etc.

Among all the measures to fight vs. fraud, the limit of €2,500 for payments in cash is undoubtedly the one that has been most remarked by the public opinion.

A) Scope of application:

Paragraph 1 of article 7 of the anti-fraud Law writes “a transaction where one of the parties intervenes as a professional or a business owner can’t be paid in cash if the amount equals or exceeds €2,500 or its counter value in a foreign currency”. It then reads that “Nevertheless, this limit will be €15,000 or its counter value in a foreign currency when the payer is an individual and proves he/she is a non-resident individual in Spain.”

As regards the term “cash”, the Law specifies it means: (1), bank notes and coins, national or foreign, (2) checks to the bearer, and (3) any other physical means, such as electronic ones, designed to be used as bearer instruments.

In order to calculate the limits stipulated before, the amounts of all the operations or payments for goods or service rendering that could have been made in installments will be added up.

Payments and deposits to credit institutions are excluded.

B) Proof:

The burden of proof to fulfill this limitation falls on the intervening parties in the operations that, because of the amount, can’t be paid in cash. The latter must keep hold of the proof that it was made with a means of payment different from cash for 5 years.

C) Offence:

Failure to fulfill this limiting measure will imply a serious regulatory infringement. Both payers and receivers of complete or partial amounts will be considered as infringers, and they will be jointly and severally liable of the committed infringement and of the penalty.

D) Penalty:

This serious regulatory infringement is sanctioned by a proportional fine of 25% of the amount paid in cash for operations adding up to, or exceeding €2,500 (or €15,000 or its counter value in a foreign currency if the payer is a non-resident individual).

E) Exemption for reporting:

The anti-fraud law foresees an exemption of liability for the one who is party in the transaction, if he/she reports the other party before the Tax Authorities (www.aeat.es), within 3 months counting from the payment.

The Tax Authorities, with their usual agility, have already implemented an online reporting service that can be entered by clicking on the following link: http://lgl.kn/0d7d1

F) Statute of limitations of the infringement and the penalty:

The infringement will become statute barred after 5 years, starting from the day the infringement occurs.

The penalty derived from infringing will become statute barred after 5 years, starting from the day after the resolution imposing the sanction is enforceable.

G) Coming into effect:

This regulation has entered into force and is applicable to payments in cash since November, 19th, 2012.

The complete Anti-fraud Law can be looked up at http://lgl.kn/cf8fe

Álvaro Marco Asencio