Do you own a business and receive cash payments? Are you a private individual who pays your lawyer or accountant with checks? This guide explains the law to reduce the use of cash in Israel, details the punishment imposed on those who violate it, and expands on the provisions of the law for private individuals, traders, tourists, buyers of real estate, and practically everybody else.
The Reduction of Use of Cash Act of 5778 – 2018 was enacted to circumvent the use of “black money” (funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes – DI) and help fight against criminal activity, including serious crimes, tax evasion, money laundering, and terror financing. It restricts the use of cash and checks by dealers, non-dealers, tourists, CPAs, and attorneys.
The 2014 Locker Committee, headed by Maj. Gen. Yohanan Locker (what a fitting name!), found that about one-fifth of Israel’s economic activity is carried out with black money. The Locker Committee recommended an outline for the gradual reduction of the use of cash and other paper-based payment methods while promoting and increasing the use of electronic means of payment.
The gradual reduction reached its peak yesterday, August 1, 2022, and from now on, these are the restrictions on using cash and checks in Israel:
Regarding the purchase of a product or service by a private person from a business: up to NIS 6,000 NIS ($1,778) in cash, no restriction applies. Above this amount, only up to 6,000 NIS plus 10% of the overall transaction price/loan/donation.
Regarding a sales transaction with a dealer, an attorney, CPA, etc. the previous ceiling of NIS 50,000 ($14,820) in cash is reduced to NIS 15,000 ($4,446). Above this amount, the dealer and customer can pay or receive cash amounting to only 10% of the transaction price.
The penalties for breaking this law are fines and, possibly, prison.
The fines will be determined according to the size of the violation, which is the amount that should not have been paid in cash or by check. If the amount of the violation is up to NIS 25,000 ($7,410), the fine is 15% of the amount. Up to NIS 50,000 thousand ($14,820), the penalty rate is 20% of the amount. Over NIS 50,000, the penalty rate is 30% of the amount.
Also: whoever commits a fraudulent act, including one of the acts listed above, to evade one of the prohibitions regarding the use of cash, will be sentenced to three years in prison.