The use of cash is necessary in any economy and essential for small transactions. However, the use of cash to pay large amounts is usually not justified. In these cases, reasons of convenience and, of course, security make it more appropriate to use other means of payment such as transfers, checks, credit or debit cards, etc. In these high-value transactions, cash may be used not for reasons of efficiency, but because it is an opaque means of payment that leaves no trace. The use of cash in such transactions is a well-known mechanism, both domestically and internationally, for money laundering and to avoid the correct taxation of income obtained through direct taxation and VAT accrued in the indirect.

As regards, exclusively, the fulfillment of tax obligations, the main "advantage" of collecting cash for transactions carried out lies in the difficulty of the tax authorities to know of the existence and amount of said transactions. In some cases, the interest of the cash payment is also shared by the purchaser of the good or service since by obtaining fiscal "opacity" in the operation it avoids having to pay VAT, therefore, it is a means that allows obtaining prices cheaper or even allows you to use the money you have obtained from activities or operations also hidden from the tax administration.

Given the relationship between the use of cash and tax fraud, the regulation of such use for the payment of certain transactions has aroused the interest of authorities at European level. In this regard, countries have been adopting different solutions. Some countries do not set any limitations or conditions on the use of cash, while other countries prohibit cash payments depending on the amount of the consideration and/or the type of transaction carried out. In addition, another group of countries establish specific reporting obligations related to the use of cash in operations.

As regards Spain, as a financial and fiscal measure to make it more difficult to use cash in order to avoid money laundering and tax evasion, a limitation on cash payments for certain economic transactions was incorporated into internal regulations.

In this regard, Article 7 of Law 7/2012, of 29 October, amending tax and budgetary regulations and adapting financial regulations to intensify fraud prevention and combat actions, established limitations on cash payments. Specifically, this regulation stipulated that transactions of an amount equal to or greater than 2,500 euros (if the payer was a non-resident individual, the limit was 15,000 euros) could not be paid in cash when one of the parties involved acted in a business or professional capacity. Therefore, payments between individuals are not subject to this limitation, since at least one of the parties must be a businessman or professional. The limitation is also not applicable to payments and deposits made to credit institutions.

Recently, Law 11/2021, of July 9, on measures to prevent and combat tax fraud, transposing Council Directive (EU) 2016/1164, of July 12, 2016, establishing rules against tax avoidance practices that directly affect the functioning of the internal market, modification of various tax rules and regulations on gambling, has modified the aforementioned article 7 of Law 7/2012. From a substantive point of view, the general limit for cash payments has been reduced from 2,500 to 1,000 euros and, in the case of private individuals with tax domicile outside Spain, from 15,000 to 10,000 euros.

Linked to this limitation, a sanctioning regime was established, setting out the basic rules of the sanctioning procedure and the jurisdiction for its processing. The sanctioning procedure for breaches of the limitations on cash payments is regulated by the common administrative sanctioning regulations, rather than by tax regulations, since this is not a tax breach, but a financial breach, although it must be taken into account that it has clear tax implications. Therefore, it is established that the jurisdiction for processing and resolving the sanctioning procedure for non-compliance with the limitations on cash payments corresponds throughout the Spanish territory (including the Basque Country and Navarre) to the Tax Agency.