Cash and the law in Spain: A guide to payment methods, limits and what's legal

WITH card payments having overtaken cash for first time in Spain as a result of the pandemic, more and more establishments are accepting plastic, mobile phone and Bizum for any amount, even a few cents – but consumers often feel embarrassed at not using cash for these sums, and a few traders are still insisting on notes and coins.

Can a shop refuse to sell you a loaf of bread or a carton of milk if you try to pay by card? And if so, where is the cut-off point? 

One of Spain's main consumer organisations, the OCU, has offered clarification.

“Under current laws, nobody is obliged to accept card payments,” it says, “but there are exceptions, such as taxis in most cities.

“In all cases, accepted payment methods must be displayed prominently.

“Any establishment is free to set a minimum expenditure for card payments, but this must be clearly indicated to customers where they can see it before deciding to make a purchase, in order for it to be valid.”

And there is a caveat: That minimum cannot, legally, be over €29.99.
 

If you spend €30 or more in one transaction, the seller cannot insist on cash

Long before the pandemic, a massive crackdown in Spain on all types of money laundering and tax evasion, and even hitherto 'legal' tax avoidance, meant cash came under rigorous scrutiny – legislation passed almost exactly three years ago paved the way for today's ever-growing panorama of people walking around with empty purses when shopping.

Royal Decree, or Bill of Law number 19/2018, of November 23, covering payment services and other urgent measures pertaining to financial matters, states that if the sum payable is less than €30, establishments do have the right to require cash-only payments.

But once the amount reaches €30, all traders are obliged by law to offer other payment options besides notes and coins – which can include debit or credit cards, cash cards, mobile phone applications, or even bank transfers depending upon the type of business.

Effectively, this means shops can no longer tell customers it 'has to be cash' because they 'haven't got a card machine' – even where the overwhelming majority of their sales are in small sums, such as a corner shop or a coffee shop, they will need to have facilities available for non-cash payments just in case someone does spend €30 or more.

Going even further back and in line with consumer organisation warnings ahead of every January and summer, shops and other businesses offering their wares at discounted prices during the sales cannot, legally, demand cash-only payments for these where they do not habitually do so.

For example, if that pair of shoes you had your eye on for months when they were €200 suddenly plummets to €40 in the January sales, they are expected to be of the same quality as they were at €200 and, if the retailer would have let you pay by card at that price, they are not permitted to force you to pay cash now they carry an '80% off' tag.

Do card payments really cost traders more than cash?

Fortunately for very small businesses trying hard to maximise their profits to make ends meet, high-street banks are gradually making it easier and cheaper for traders to accept non-cash payments.

Even prior to the Covid crisis, a growing number of bars and shops were starting to display signs assuring customers that cards were accepted 'for any amount, however small'.

For many small traders, their refusal to accept card payments has been linked to high commission charges made by their banks, but these are starting to become easier and more flexible as banks compete against each other to offer the best deals to attract commercial customers.

Also, even cash involves a cost: Staff counting up the takings at the end of the day risk pointing fingers or having to forfeit a chunk of their wages if the numbers do not add up - otherwise, 'employee infidelity' insurance cover as part of your commercial policy attracts an extra premium, and you could face expensive court action if you accuse them of theft without proof, and lose.

Workers and business owners put their safety in jeopardy when carrying cash to banks, and a hold-up on the premises, trader being mugged en route to the branch, or a break-in and a safe being forced can wipe out the proceeds of a day's work.

Loss of earnings insurance cover may be capped at a certain figure, and receipts may be required to prove every single cent being claimed.

Specialist secure courier firms which bear this risk when transporting cash involve a fee which can far exceed the commission banks charge for card payments.

Finally, passing trade is lost. If someone's purse contents are 20 cents short for something you sell, they'll walk on by; if you accept cards, this won't be an issue and you'll make a sale.

But can I pay in cash for any amount?

As notes and coins are legal tender throughout the Eurozone – and the Central European Bank (BCE) has warned this is not going to change – no establishment can refuse to allow you to pay for something in cash rather than by card, Bizum, transfer, or mobile phone, unless it exceeds the maximum figure set by law.

Aiming to tighten up even further on money laundering and tax evasion, Law number 11/2021 of July 9 states that nobody is permitted to pay for anything in notes and coins priced at more than €1,000.

If anyone acquires a product or service for more than this amount, they have to use a different payment method.

This figure applies even if it is in a different currency, and is based upon the exchange rate at the time of the transaction.

The limit rises to €10,000 where the party making the payment is able to prove they are a 'physical person' and not a business entity or a professional and that they are not tax resident in Spain.

In fact, Spain's tax authorities keeps tabs on any cash transactions exceeding €500, although it will not necessarily order either party to account for them if they are below the legal limit.

Is there a cap on deposits made into a bank account?

Payments made into a bank account, via transfer, cash dropped off, PayPal or any other means may, in theory, be for any figure, even millions – but you need to be able to prove where they come from.

You may or may not be subject to tax on the sum in question, depending upon what it is for, who gave it to you or where you got it, and who you are – private individual, trader, business owner, and so on.

Anything paid to you, or which you pay in, that's in excess of €3,000, has to be justified upon request, and the tax authorities are, indeed, very likely to make said request. 

You will probably already have a system in place, or your bank can explain to you how, if you are a small business dropping off daily takings that exceed €3,000, or if your monthly take-home salary paid in by your firm goes beyond that figure.

Typically, a payment turning up in your bank account from a third party of €20, €50, €100 or even €200 is very unlikely to attract attention, unless lots of them accumulate over a short time.

Where this is the case, or any regular, unaccounted-for sums in cash payments are made into your account, your bank is obliged by law to notify the tax office.

Of course, we don't mean that if someone pays you €20 a week to clean their house and dumps it into your account that the bank will tell the taxman, but if you were getting €20 a day or €100 two or three times a week and there was no obvious, traceable source, alarm bells would ring and your branch has a statutory duty to flag it up.

Banks are also required, legally, to advise tax authorities if any transaction is made using a €500 note – any amount of these, starting from one – such as attempting to pay this into an account, your own or someone else's, whether over the counter to a staff member or via a cashpoint deposit facility.

This is because €500 notes are very rarely found nowadays and are actually quite difficult to part with, as many establishments display signs stating they are unable to guarantee they will have change available for notes of a higher denomination than €50.

Carrying cash in the street: What's legal (and safe)

It's never a good idea to carry more physical money on you when out of the house than you can afford to part with in an emergency, wherever you are in the world. Drawing out your entire week's or month's pension or wages in one hit and lugging it around in your purse means you face extreme hardship if this falls out of your bag or someone pulls a knife on you and demands all your money – complying with their request is normally a matter of life or death.

Thankfully, violent crime is statistically very low in Spain – in fact, the crime rate in general in the country is one of the lowest on earth; you're more likely to find that if you left an envelope with 20 years' salary in notes on a bar table clearly marked 'steal me', someone would come running after you shouting that you'd 'forgotten' it, and be genuinely surprised or even incredulous if you tried to give them a cut of it in thanks for their honesty.

But even if absolutely everyone you pass in public is a multi-millionaire friend you've known since nursery school and has their hands and feet tied behind their backs, still don't chance it. If you still prefer to pay in cash, take only what you need, and when in crowded places such as markets, tube trains or airports, keep your bags under close scrutiny. If there are 10,000 people on the train and 9,999 are honest, law-abiding citizens, you still might be standing next to the one who isn't, and one is all it takes to relieve you of your hard-earned funds.

Even if you have the kind of fortune that means getting mugged in a dark alley and handing over a few million to avoid being stabbed is only a minor hiccup in your daily routine, you still shouldn't – Spanish legislation establishes a maximum sum in cash that you are allowed to carry about your person.

Law 10/2010 of April 28 states that you are not permitted to have more than €100,000 in cash on you at any time.

If you did need to convey this sum in notes and coins from A to B, either from one street to the next or across the entire country, you are required to formally declare it.

The amount reduces even further when crossing international borders: You must not carry more than €10,000 in cash into or out of Spain without declaring it at customs.

Again, this applies to any currency, so if you're near the legal limit before you travel, check exchange rates to be sure you're under it.

Cash under the mattress

These days, it's practically impossible to survive without having access to a bank account, meaning commissions and 'admin fees' are something that generally has to be factored into your expenses.

That said, there is no law against stashing your life's savings in physical notes in your home, as long as it has all been legally acquired and declared as you went along for tax purposes.

Neither is there any legal limit on how much you can keep in a safe deposit box or under the mattress.

But it's not sensible, because if you're burgled – and burglars have an unpleasant habit of demanding to see safe deposit boxes, and getting a bit cross if you refuse – or you have a flood, major water leak or the house catches fire, that's the proceeds of your life's work gone up in smoke or turned to papier mâché.

And insurance policies place automatic limits on loss, damage to or theft of money in cash, either in your home or about your person – often as little as €100 - and normally require you to specifically request this cover in exchange for a small extra premium so it can be 'specified', or mentioned expressly, on your policy schedule.

Also, whilst the interest a cash deposit earns in a bank is minimal these days, with the Eurozone rate or Euribor in negative figures since February 2016 (a good thing, because it makes mortgages, loans and commercial finance much more affordable), it will necessarily earn more in a bank account than it will under the bed.

Higher-interest accounts do exist, although they may require you to 'lock in' your money for a set period or forfeit said interest; otherwise, if you're looking to get a future return longer term, or an ongoing income, property in Spain continues to be a sound investment. Prices are far below those of the 'housing boom' of 2005 to 2008, but after they hit rock-bottom in about 2011, they are starting to climb again and it seems very unlikely they will drop drastically in the foreseeable future.

Even if they did, over the years or decades, they would necessarily rise again, and you'd have the use of a sunshine pied-à-terre or an income from renting it in the interim.

If you're tempted, check out our catalogue of over a quarter of a million homes, commercial premises and plots for sale in every single corner of the country, ranging in price from those you could pay for on a credit card through to tens of millions – every budget, taste and area preference is covered.

I might just do that, actually. But what if my tenants want to pay me in cash?

According to Article 17.3 of the Urban Tenancy Law (Ley de Arrendamientos Urbanos), rent payments must be made 'at the place and via the procedures that both parties agree to' or, where landlord or landlady and occupants cannot see eye to eye on how and where, must be made 'in cash and on the premises of the property subject to the tenancy'.

So, yes, your tenants can pay you in cash, but if you'd rather they didn't, you and they can try to negotiate an alternative; if one of you wants the cash route and the other doesn't, then notes and coins are the default.

Article 17.4 of the same law states that the landlord or landlady, or his or her legal representative – such as a letting agency or property management company – is required to 'supply a receipt for payment', which, clearly, must have a stamp or signature on it to prove that it is real so neither party can dispute it later, 'unless both parties have agreed to other procedures that duly accredit the fulfilment of the tenant's obligation' to make payment.

Such 'other procedures' have not been listed, by definition, since it is up to the parties involved to agree on these, provided they show clear evidence that the sum in question has been duly handed over on a given date.

So, in theory, sending your tenant a thank-you card via Moonpig with a combination of your fingerprints in it and accompanied by a bunch of flowers or box of chocolates would suffice, as long as your tenant was happy with this.

The main idea, as well as protecting both parties, is to prevent undeclared rental income from circulating.

Tenants, where they are Spanish residents or wish to be, will need to sign on their local council's headcount register, or padrón, a document that proves they live in the town and shows their address.

Without proof of a padrón registration (which is a quick and simple process conducted at the town hall), nobody living in any town is able to take advantage of basic services such as State healthcare, schools, pensioners' or residents' discounts where applicable, nor apply for loans or finance, such as for buying a car.

Owner-occupiers will simply show their house deeds and photo ID to register, but tenants need to show a rental contract.

If a rental contract exists, you are liable for tax on the rent you charge, and not drawing up a rental contract – as well as being illegal and financially risky for you and the tenant – means the tenant cannot go and see a GP, put their children in class, register as self-employed or, effectively, exercise any of their basic rights.

So you won't get a tenant without making it 'official', and if you make it 'official' you can't avoid declaring your rental income, meaning a cash-only tenancy does not give you an easy route to tax evasion.

In any case, Spanish authorities are quite sharp when it comes to tax evasion and stamping on it, since they know all the likely methods and plenty more you'd never thought of; you'll get caught eventually, and that's more expensive than just abiding by the law from day one.

Normally, though, cash is not the go-to for property rent payments in Spain, since it's basically not very convenient. It means owner and occupant have to arrange to be in the same place once a month to exchange money and receipt, which is not always possible if the owner lives elsewhere in the country or abroad.

Generally, tenancies involve bank account standing orders, although manual transfers, PayPal and Bizum are occasionally used if landlord or landlady and renter agree to use these.

Electronic means of payment also ensure an indelible record of the transaction, date, and sum, eliminating the likelihood of disputes.