The cash law, you must know: the actions that will turn you into criminals

Let's say you received cash for the wedding - and you went to buy furniture with it in an amount over NIS 6,000.

Are you a criminal?

The answer may surprise many.

Here's everything you need to know about staying on the right side of the "Cash Law"

Greenberg roasts

01/08/2022

Monday, August 1, 2022, 10:01 a.m. Updated: 10:10 a.m.

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Cash: How can its use complicate you, according to the new law? (Photo: ShutterStock)

Want to buy furniture for the new house with the cash you received at the wedding?

Or a luxury electric scooter from the cash he chained to the box of envelopes at the Bar Mitzvah?

And maybe even use the tip money you saved working as a waitress to pay the rent for the coming months?

You better think twice, because starting today (August 1, 2022) these are criminal thoughts, the implementation of which could cost you fines of up to tens of thousands of shekels, and even going to prison.

The tightening of the regulations of the Law on Reducing the Use of Cash came into effect and lowered the amount of the allowed payment in cash for a purchase transaction, payment of wages, and a donation, from NIS 11,000 to only NIS 6,000.

Moreover, the amount of cash that can be transferred between private entities will also drop from NIS 50,000 to NIS 15,000, unless it is a matter of purchasing a second-hand car from a private entity such as your neighbor (and preferably a doctor, of course...), which can still be bought in cash , up to an amount of NIS 50 thousand.

For those of us who use credit cards, leave checks for several hundred shekels at bar mitzvahs and weddings, and at most use cash to pay our bi-monthly property tax bills at the local post office - there is nothing to be excited about.

But entire populations, such as the Arab and ultra-Orthodox sectors, conduct themselves mainly in cash and do not trust financial institutions to transfer their money (many in the Arab sector, for example, do not have bank accounts at all).

These become potential criminals from today.

Along with them, the elderly population who are used to dealing with cash, and about 22% of the Israeli public, who according to a survey published last June by the Bank of Israel, prefer to deal with cash, are also now headed for a life of crime.

Adv. Nava Hans, an expert in the field of tax offenses and money laundering (Photo: Dor Sabag)

Adv. Nava Hans, an expert in the field of tax offenses and money laundering and formerly director of Central District Claims at the Tax Authority

, told Walla! Money that "there is something a little unfair in charging citizens to hand over their property to parties they don't fully trust.

Entire populations living in Israel do not trust the various financial entities and prefer to manage themselves by using cash.

In addition, there are populations that have become accustomed to paying in cash in order to receive a discount on the payment, such as paying the rent in advance quarterly or semi-annually in order to receive relief from the apartment owner on the amount of the payment, or those who build on the money received at the event to use it to pay the owner of the event hall.

But from the moment the fur fell, all citizens must be aware of what is required of them as a result of the implementation of the law and the passage of the new regulations in the Settlements Law in August of last year.

And according to the data of the Tax Authority for the amount of violations and fines on the subject, it can be understood that the situation is not like that.

The data of the Tax Authority show that it found about 1,206 violations in the framework of the enforcement of the law restricting the use of cash that were made in the cumulative amount of about NIS 43 million, which led to fines in the total amount of about NIS 10.6 million.

Hans adds, that "it is good to know that although the Israeli leader likes to find various loopholes such as dividing the purchase of the furniture into several transactions instead of one transaction - according to the law this is prohibited and cannot be done, unless you buy a piece of furniture in one place and another piece of furniture in another place or at a different time. It was found that this is an artificial split, so section 22 of the law allows for a punishment of up to 3 years in prison."

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Accountant Eddie Koffman (photo: courtesy of the photographer, courtesy of the photographer)

Most of the violations of the cash limit law were committed by consumers and businesses in the construction sector, which accounted for approximately 23% of the total number of violations, 18.4% of the cumulative amount of violations, and approximately 17% of the amount of fines imposed.

About a quarter of the amount of fines, however, was imposed on professionals from the field of professional, scientific and technical activity who committed about 50 violations and were fined a total of about NIS 10.7 million.

"The impact is not only on the private entities, but perhaps mainly on the various businesses, which are forced to completely change the nature and manner of their cash registers and accounting" adds

"Many businesses in Israel are used to working in cash with amounts much higher than the established ceiling," Koffman continues, "and there are businesses that cater to many populations that only operate in cash. These businesses will now be forced to break the law against their will, or alternatively to close the business, since they have the right to exist only as long as They provide their customers with what is required by the latter. But if a customer cannot pay the business owner, then a transaction cannot take place and the business has no right to exist.

You also need to understand more deeply the subject of the payment ceiling, since it is 6,000 shekels or 10% of the transaction amount. For example, in a transaction of NIS 6,000 including VAT, the full amount can be paid in cash.

But if I now want to buy two beds for my children and the transaction amount is NIS 7,000 including VAT, for the purpose of the example, then the law allows me to pay the business owner only 10% of the amount in cash, that is NIS 700, and I am required to pay him the rest by bank transfer, Check to payee only or by credit card.

Businesses whose nature is cash such as containers and greengrocers, for example, will now not be able to pay from their cash receipts for the rent for the store they rent in amounts exceeding NIS 6,000.

And the flow behavior of the business owners will also be affected, since the restriction also applies to taking loans.

For example, business owners will no longer be able to receive cash loans for their business in amounts that exceed NIS 6,000.

It should be noted that quite a few business owners think that it will be possible to manipulate the income tax.

For example: take several loans of NIS 6,000 so that they add up to a large amount.

But in this context it should be understood that the test of logic is the determining factor, and ten transactions of NIS 6,000 each, for the purpose of the example, taken in close proximity to each other, will likely not pass the income tax audit.

Therefore, it is recommended to prepare for the issue and not try to manipulate the income tax."

The law to reduce the use of cash came into effect in 2019, as part of the state authorities' fight against black capital, which is estimated to be nearly a quarter of Israel's national product.

The entry into force of the law led to the expectations of the Tax Authority to increase the state's preparations by approximately NIS 150 million this year and by approximately NIS 300 million in 2023.

The amount of fines for offenders is graduated and for businesses it is set at 15% for each violation of the law in an amount of up to NIS 25,000, 20% if the violation was committed in the range of NIS 20-50,000, and 30% if the amount of the violation is NIS 50,000 or more.

The amounts of the fines for private entities are determined according to the same level, but in percentages that are 5% lower in each of the levels of violation.

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• cash

• Law

• Income Tax

• Dirty money