Since 2019, Israeli businesses and consumers have been subject to a limit on the value of cash transactions. On Aug. 1, that limit is set to decrease from NIS 11,000 ($3,192) to NIS 6,000 ($1,741) for business payments and from NIS 50,000 ($14,510) to NIS 15,000 ($4353) for transactions between private individuals.
The stated purpose of the law is to force the public to use digital means of payment rather than cash. This is intended to enable better transaction monitoring so that Israeli authorities are equipped to tackle tax evasion, black market activity and money laundering.
Payments made to Palestinian Arabs and certain religious loans are exempt from the country’s cash cap. Likewise, car purchases are excepted from the new rules, where the cash cap will remain unchanged at NIS 50,000.
According to Israel National News, Tax Authority figures show a gradual increase in compliance with the law, from around 84% in 2019 to 92% in 2021 and 95% in 2022.
Israel National News reports that NIS 5 billion have already been collected in fines since the restrictions came into law. Tens of thousands of audit raids on businesses have been conducted by the Tax Authority and thousands of violators have been penalized. In 2022 alone, around 6,000 audits have been conducted so far, with 2,189 law-breakers identified, representing a sum of NIS 35 million in illicit transactions.
Violations of the law are punishable by fines starting at 15% of the transaction if the cash payment was less than NIS 25,000 to a business, increasing to 20% where the transaction was between NIS 25,000 and NIS 50,000, and reaching 30% for larger transactions.
Between private individuals, the fines are lower, starting at NIS 10,000 for payments up to NIS 25,000, increasing to 15% for amounts up to NIS 50,000, and 25% for larger sums.
People who are found to have been paid a salary in cash are liable to a fine of 5% if the payment was above the NIS 6,000 ceiling but below NIS 8,500. The penalties apply to payment by check and banker’s check, as well as with banknotes.
Israel’s cash cap is also applicable to tourists, with responsibility for breaking the law resting with both parties to the transaction.
A short grace period of grace will apply following Aug. 1, but there are plans afoot to impose additional restrictions on cash in the future. Israel’s Treasury and Tax Authority are pushing for a law prohibiting any citizen from holding more than NIS 200,000 in cash in their home.
Israel is not the only country to set legal limits on cash transactions, but many others stop short of outright banning large cash payments.
For example, in Germany, where cash plays a larger role in the retail economy compared to many of its northern European neighbors, anyone who wants to make a payment of 10,000 euros or more in cash needs to show a valid ID.
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