Explained

Israel's New Rules on Use of Cash and Tradable Checks

January will bring set of measures to fight money laundering, tax evasion and terror funding; Here's what they mean for you

File Photo: Woman holding Israeli New Shekels, August 2018.
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As of January, regulations limiting the use of cash and tradable checks will take effect, in an effort by the government to combat money laundering, tax evasion and terror funding.

What does the Tax Authority’s new measures have in store for rank-and-file consumers? Let’s find out.

What are the limits on cash payments?

Transactions of less than 11,000 shekels (nearly $3,000) are unaffected. Transactions with a business for more than 11,000 shekels can be paid up to 10% in cash, up to a cap of 11,000 shekels, whichever is lower. For private citizens the law limits transactions to 50,000 shekels in cash, after which up to 10% may be paid in cash, or 50,000 shekels, whichever is lower.

Do the limits affect tourists?

Tourists may not pay for purchases of more than 55,000 shekels in cash. Tourists also are not permitted to use more than 11,000 shekels in cash to receive or pay a salary, a donation, or a loan. Tourists may not give or receive gifts of more than 50,000 shekels in cash.

How about gifts within the family?

Gifts may not total more than 50,000 shekels in cash, but these limits do not apply within the family. The definition of family is broad, and includes a partner, parent, grandparent, child, sibling and nieces and nephews. This family exception does not apply to salaries.

What’s considered a transaction by law?

The sale of an asset or a service. The price is the total, even if it is divided up into payments, and including taxes and any accompanying expenditures.

And if part of the transaction is paid in cash and part in credit, what’s the price?

The price is still considered the total paid.

And if I buy matching sofas, a table and a bookshelf for a total of 20,000 shekels, is the transaction total what matters, or the price for each individual item?

In this case, the total only matters if the deal was carried out as one unit – if the buyer is given a special offer for this specific collection of items.

If I buy a living room set as a unit but request a price quote for each item on its own, that’s not considered a single transaction?

The wording of the regulation is unclear, but if all the items are purchased at the same time, such an action could be considered a false division. The Tax Authority has stated that falsely dividing up a transaction into payments or by other means in order to get around the restriction is considered fraud, which has a penalty of jail time.

For an ongoing service contract, such as a retainer paid to a law firm, what’s the price?

In this case, every periodic payment – such as monthly fees – is considered a transaction.

And regarding a lawyer hired to handle a specific suit or acquisition over a certain period of time, and the payment is carried out in several parts?

In such a case, the price is the total paid for the service, even if the payment is divided up.

What are the sanctions on a company that receives cash in violation of the law?

The fine is based on the total violation (cash received). For violations of up to 25,000 shekels, the fine is 15% of the total; for violations of 25,000-50,000 shekels, the fine is 20%; and for violations of more than 50,000 shekels, the fine is 30%. The violation is calculated after subtracting the sum that would have been permissible to receive in cash.

What does the law hold for an individual who pays in cash in violation of the law?

Private individuals pay a fine.

What about legal and accounting services?

Lawyers and accountants receive money for two kinds of services – one for their work, and one to be passed on to third parties, such as in a land sale. These sums are subject to the same limits, depending on whether the client is an individual or a business. Businesses are limited to 11,000 shekels, while private individuals are limited to 50,000 shekels.

What are the limits regarding apartment sales?

The limits apply here, too, depending on whether the buyers are businesses or private individuals. They do not apply for transactions between family members. As part of the transaction report, the buyer will be required to state how the payment is being carried out – such as by check, bank transfer, mortgage.

Will fines be levied in January 2019, when the regulations take effect?

No, there’s a transition period through September 2019. Fines will only be levied before then if it’s a second violation. Religious interest-free lenders (gemachim) have an exemption for two years, or until a law takes effect regulating their operations.

Is there a statute of limitations on cash use violations?

Yes, between five and seven years, depending on the nature of the violation.