New restrictions will limit the use of cash and blank checks commencing from the beginning of 2019, pursuant to a law just passed by the Knesset (Law Limiting the Use of Cash, 2018, Book of Laws 2710).
The new law distinguishes between businesses, consumers (referred to as non-businesses) and tourists.
A “business” is an entity that sells an asset or gives a service in the course of its business, including a charity. A “transaction” is the sale or purchase of an asset, or the giving of a service or receipt thereof. A “tourist” is defined as someone on a temporary or visitor’s visa, but not someone on a work-permit visa or a diplomat.
The law becomes effective Jan.1.
NEW CASH LIMITS
A business will not be able to give or receive payment in cash for a transaction if the price of the transaction exceeds NIS 11,000.
A consumer will not be able to give or receive payment for a transaction in cash if the price of the transaction exceeds NIS 50,000.
So, for example, in a business- to-consumer (B2C) transaction, cash may not be paid if the transaction price exceeds NIS 11,000. In a consumer-to-consumer (C2C) transaction, however, cash may not be paid if the transaction price exceeds NIS 50,000.
In a business-to-tourist (B2T) transaction, cash may not be paid if the transaction price exceeds NIS 55,000.
A lawyer or accountant may not be used to circumvent these rules. They may not receive more cash than the above amounts as part of their business service to their client.
As for salaries, donations or loans, cash may not be paid if their amount exceeds NIS 11,000, except for loans by regulated financial bodies.
EXCEPTIONS TO CASH LIMITS
The cash limits may not apply to non-salary payments to a family member, namely: one’s spouse, or one’s parent, son or daughter, brother or sister, niece or nephew, grandson or granddaughter, or the spouse of any of these, as well as other dependents “attached to their table.”
Governmental bodies may also be excluded from the cash limits by the Finance Minister or other relevant minister.
NO BLANK CHECKS
Additional measures aim to stamp out the practice of checks being endorsed and passed down a chain of hands before eventually being banked. All endorsements must be to a named recipient.
Moreover, a business may not give or receive, as part of its business, payment by check for a transaction or as salary, donation, loan or gift unless the name of the recipient is stated on a check banked or endorsed.
A consumer may not accept payment by check for a transaction or as salary, donation, loan or gift exceeding NIS 5,000 without his name being stated on the check being banked or endorsed. A consumer may not give a check in payment to a business for such things without the name of the business being stated on the check banked or endorsed, or give such a check exceeding NIS 5,000 for such things to another consumer.
In the case of an infringement, the Tax Director is empowered to impose penalties ranging from 15% to 30% of the cash payment or endorsement to the unnamed person. The alleged offender must first be notified and allowed 45 days after delivery of notification to appeal to the Tax Director.
The Tax Director must then notify the alleged offender of his final decision, whereupon appeal may be filed at the magistrates’ court within 30 days of delivery. If it happens again within two years, the penalty is doubled.
Offenses may be published, but not the offender’s name.
It is not yet clear what happens if a payment is made in bitcoins or other virtual currencies. But it is clear that these new offenses will strengthen the hand of the Israeli Tax Authority.
The main deterrent may be the ability of tax officials to link these offenses to existing tough rules that enable them to disqualify the books of businesses that are deemed inadequate.
In cases of inadequate books, tax officials may estimate the taxable income of the taxpayer to the best of their judgment, which is never good for the taxpayer...
As always, consult experienced tax advisers in each country at an early stage of specific firstname.lastname@example.org The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.