New restrictions on cash transactions

The Italian tax authority is tightening up further on the possibilities of money-laundering and tax evasion. As of 6th December 2011, the limit of cash that can change hands in any transaction was reduced to € 1000. The previous limit was € 2500.

This means that if you want to pay your builder, plumber or commercialista (!) for example, or even purchase an item in a shop for a value of € 1000 or more, you may no longer pay in cash but will need to use bank transfer, credit or debit card or the like.

The legislation also prohibits attempts to get round the new law by artificially breaking down larger transactions into smaller payments of amounts below the limit. This should not however affect the position where this is done for genuine commercial reasons, such as payment by instalments.

This new legislation may well prove a problem for those running a small business in Italy, where cash transactions are the norm. However it will also have an impact on those of us who buy property in Italy and need to pay workmen and fit out our homes with higher value items. It may also affect those renting out Italian property who make or receive their rental payments in cash.

The fine for breaching the legislation is high – a minimum of € 3000 per transaction.

It is hoped that the Italian tax authority will allow a grace period – possibly until the end of the year – to allow people to adapt to the change.  We will keep the site updated – if you are affected by this and wish to discuss the situation further, contact us here.