• Although it is becoming less and less common, there are still many people who prefer to make cash payments when they go shopping. Although it is becoming increasingly common to make payments by credit or debit card or even directly from a mobile phone, cash is still very much a part of our daily lives.

• However, in recent times there has been growing concern about the possible elimination of cash, especially in view of the European Central Bank's plan to launch the digital euro. However, at least initially, the digital currency would coexist with banknotes and coins.

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While some believe that eliminating cash could reduce undeclared money and make illicit activities such as money laundering, the shadow economy or tax fraud more difficult, its elimination would also have a number of important consequences for citizens.

One of the main ones would relate to the loss of privacy as regards citizens' transactions, as all movements would be recorded. Moreover, a fully digital system entails risks, such as a possible computer failure, a massive cyber-attack and other circumstances that could lead to a complete denial of the possibility to make payments, leaving many people without access to their money.

Treasury tightens controls

In this regard, the Treasury has now tightened and intensified controls over cash movements, both those taken out and those paid into bank accounts, especially when large amounts of money are involved that have not been previously justified to the Tax Agency.

The tax authorities therefore require proof of the origin of the money, i.e. proof of origin in the case of an income. It also demands that the purpose for which the money is taken out in cash be indicated, as long as it is for large amounts of money.

Although the Tax Agency does not specify amounts, it does stress that banks are obliged by law to notify the Treasury of any cash transaction equal to or greater than 3,000 euros. Similarly, the withdrawal or deposit of small amounts, such as 1,000 euros on different days, will be considered suspicious.

The Tax Agency clarifies that one of the best ways to provide evidence and appropriate justification of the amounts paid into and withdrawn from the bank is through documents such as payment invoices, contracts or inheritances received.

In the event that this cannot be properly demonstrated, the bank reserves the right to impose penalties of up to 150% of the money, which can lead to fines of up to 150,000 euros in the most serious cases.

Treasury sets its sights on Bizum

On the other hand, the Tax Agency has set its sights on the use of Bizum, a payment method increasingly used by users in Spain. This instant payment platform facilitates transactions between friends, family and companies, although it should be clear that it does not escape the supervision of the Treasury, especially when it involves transactions that exceed certain economic thresholds or are of an economic or professional nature.

Although many consider that movements through Bizum are not subject to tax, the reality is different, as current tax regulations make it clear that any taxpayer who receives more than 10,000 euros per year through Bizum is obliged to declare this figure in their income tax return.

Moreover, it should be borne in mind that it does not matter if this figure is not exceeded, since, if the income obtained via Bizum corresponds to taxable income, it must be declared anyway.

This means that not all bizums made or received are exempt from control, as the Tax Agency differentiates between those that are personal movements and those that are commercial, work-related or lucrative in nature. Thus, a sporadic payment between friends for a dinner does not need to be declared, while income related to economic activities will have to be reported.

Failure to comply with this tax obligation may result in substantial fines. According to the General Tax Law (Law 58/2003), penalties can range from 600 euros to 50% of the undeclared amount, depending on the seriousness of the offence.

This is why it is essential to be transparent with the income obtained through Bizum, especially when it is used for professional purposes, such as the collection of rent or services. Keeping a clear and organised record of these transactions can help to avoid problems with the tax authorities and therefore reduce potential penalties.

Having said that, it is important to be clear that when you are paying back a friend, paying for a dinner or buying anything sporadically, you will not have any problems and will not have to declare these payments to the tax authorities. This is because they are considered to be regular, everyday expenses and do not have a lucrative or work-related purpose.

Source: El Español, Mundo Deportivo