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Limitation on cash payments in Israel - 2022

cash payments in Israel

From August 1, 2022: new reform on cash payments in Israel!

From August 1, 2022, the law limiting cash payments in Israel will take a new twist.

  1. What exactly does it involve?
  2. Who is potentially affected?
  3. What influence will this have on the Israeli market?
  4. What are the legal penalties?

New law imposes new restrictions on cash payments.

This new law concerns both Israelis and tourists. So there's going to be a change.

We take a full look at the new cash payment reform in Israel.ALSO READ: From January 1, 2019: new reform on cash payments in Israel!

Who will be affected by the new cash payment reform in Israel?

Restrictions will apply to the use of cash on both the payer and the receiver.

Both companies and individuals are concerned.

Whether the money comes in the form of wages, loans, donations or gifts.

Understand the definition of the terms used in the law:

  1. Transaction Sale or purchase of a product or service.
  2. Transaction price The consideration agreed between the parties to the transaction for the good or service, including value-added tax. (VAT - Maam) As well as the expenses associated with the transaction agreed with the seller, supplier of goods or services.
  3. During the sale of several itemsThe cumulative cost of all the assets will not be considered as the price of a single transaction, unless the parties have agreed to sell them simultaneously.
    ExampleA person buying several items at the same time in a furniture store for one overall price. (Package).
  4. In a transaction in which there are several buyers or sellersthe transaction price will not be split between them.

The law on limiting species in Israel

The law will apply from August 1, 2022. This law provides for the following restrictions on cash payments:

For a company in Israel

1. A transaction of up to NIS 6,000 including VAT may be received in cash in full.

2. A business in Israel must neither give nor receive any cash payment for a transaction in the course of its business, if the transaction price exceeds NIS 6,000 incl. VAT.

He may, however, receive 10% of the transaction in cash. However, no more than the amount of 6,000 Nis incl. VAT, whichever is the smaller of the 2.

2 Examples for a better understanding :

A) A service costing 30,000 Nis (incl. VAT) may be paid for 3,000 Nis in cash (10% of the amount). The remainder must be paid by bank transfer or cheque.
B) a service costing 500,000 Nis incl. VAT may be paid for in cash up to a maximum of 6,000 Nis. (6,000 Nis is less than 10% of the total amount, which is 50,000 Nis). The remainder must be paid by bank transfer or cheque.

For private customers

An individual who is not a reseller (including an entrepreneur selling an item unrelated to his or her business activity) must not receive or give another person a cash payment for a transaction, if the transaction price exceeds NIS 15,000.

Practical examples : selling personal items on the net.

  1. No person shall give or receive any cash payment in the form of salary, gift or loan.. (except in the case of a loan granted by a supervised financial entity, such as a bank) if it exceeds NIS 6,000.
  2. A person must not give or receive payment in cash as a gift if the amount exceeds NIS 15,000.READ ALSO: QUESTION / ANSWER: SELLING WATCHES AND PERSONAL JEWELRY IN ISRAEL

Watch out!

Purchase of a second-hand car between private individuals.
The transaction can still be made in cash up to 50,000 nis and not limited to 15,000 nis as for other transactions.

What about tourists in Israel?

A company will not receive a cash payment from a tourist for a transaction if the transaction price exceeds 55,000 NIS incl. VAT.

The 2019 law remains unchanged in this respect.

He may, however, receive 10% of the transaction in cash. However, no more than the amount of 55,000 Nis, whichever is the lower of the 2.

Important to know.

The above restrictions do not apply to cash payments between relatives.

Restriction on the use of check payments in Israel

The new law imposes restrictions on the use of cheques, among other things:

1. Merchants may not give or receive in payment a cheque for a transaction, salary, contribution, loan or gift without their name appearing on the cheque.

So it's impossible to endorse a check now: הסבת שיק.

2. An individual must not accept or give to another individual a cheque for more than NIS 5,000 for a transaction, salary, contribution, loan or gift, without the name of the recipient being specified on the cheque.

3. No person shall give a company in Israel any payment by cheque for a transaction or as wages, as a contribution, as a loan or as a gift, without the name of the company appearing on the cheque.

4. No person shall endorse a cheque unless the name and identification number of the payee are specified on the cheque.

Practical examples to pay particular attention to.

Example 1: Residential apartment rental in Israel between individuals :

the Israeli tax authorities regard the rental of a residential apartment in Israel as a single transaction per month (even if the lease is for a year or more).

So if the monthly rent is less than 6,000 Shekels, you can pay (or collect) the rent in cash. Without fear of violating Israel's cash restriction law.

Of course, cash receipts do not exempt the apartment owner from declaring the receipt of rent in Israel.

Example 2Do not write the name of the recipient on the cheque.

It's not uncommon for service providers to ask for the recipient's name to be left blank.

From now on, you'll be just as responsible as the service provider. (If not more, because it was you who actually signed the cheque).

What are the legal penalties?

The law imposes penalties on those who infringe these provisions. Offenders may be subject to financial penalties.

The law already applies from January 1, 2019. However, it will not apply to loan contracts or transactions concluded before 2019.

Sanctions.

A person who violates the law will be liable to a financial penalty linked to the amount of the violation. The amount of the violation corresponds to the sum of the "cash payment", the payment by check or the payment in the converted check.

  • Amount of infringement up to NIS 25,000 - a financial penalty at the rate of 10% of the amount of the infringement. (15% in the case of a company).
  • The amount of the infringement between NIS 25,000 and NIS 50,000 - a fine of 15% of the amount of the infringement. (20% in the case of a company).
  • If the amount of the infringement exceeds NIS 50,000 - a fine at the rate of 25% of the amount of the infringement. (30% in the case of a company).

Example of penalty calculation:
The transaction price was NIS 30,000. The buyer paid NIS 20,000 in cash and NIS 10,000 by bank transfer.

On this transaction, it would have been possible to pay only 10% of the amount in cash, i.e. 3,000 Nis. The amount that will be sanctioned (Amount of infringement) will therefore be 17,000 Nis (20,000 - 3,000).
The amount of the financial penalty will be : 17,000 * 10% = 1,700 NIS.

The law in brief :

  1. Restriction on the use of cash in Israel from August 1, 2022 for any amount exceeding 6,000 Nis incl. VAT. Whether for a transaction, purchase, gift, loan or salary.
  2. Cash payment of 6,000 Nis or 10% of the transaction amount (whichever is less).
  3. The law does not concern the conversion of foreign currencies with the Israeli Shekel (NIS).
  4. Cash transactions with tourists are limited to 55,000 Nis.
  5. Restrictions will not apply to cash payments between parents (except for salary payments).
  6. Obligation to keep proof of payment.
  7. It is forbidden to give a cheque without an order.
  8. Fine for non-compliance: between 10% and 30% of the amount of the infringement.

Our advice

  • As with any new law, the Israeli tax authorities are likely to be very intransigent about compliance with the new provisions. It is likely to "make an example" of those who transgress the law.We therefore recommend that you double your vigilance to avoid unpleasant surprises.

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Boruch Levenson - CPA

A native English speaker qualified in both Israel and the UK, Boruch cares for the English speaking clients.

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Our consultants in Jerusalem

English speaking accountants in Israel
Address: Kanfei Nesharim 68. Merkaz Oranim
Phone number: 02 631 9000
Fax: 02 631 9005
Email: office@cpa-dray.com