Economic Efficiency Law 2026 and Black Capital: Exchanging a Check for Cash Up to NIS 6,000

The black capital chapter of the Economic Efficiency Law 2026, published in the Official Gazette on 31.3.2026, restricted the exchange of checks and promissory notes for cash. From 1.4.2026, a check of up to NIS 6,000 may be converted to cash in full. For a higher-value check, only 10% of its amount or NIS 6,000, whichever is lower, may be received in cash — including at a check-cashing company or any other regulated financial entity. The second section of that chapter provides that money changers must file a quarterly report even when they have not carried out any transaction of NIS 50,000 or more, starting from the report for the third quarter of 2026.

Two sections in Chapter A of the Law address black capital. The first amends the Restriction on Cash Use Law, and the second amends Section 141A of the Income Tax Ordinance.

• The Law: Economic Efficiency Law (Legislative Amendments to Achieve Budget Objectives for Budget Year 2026), 5786-2026. Passed by the Knesset on 30.3.2026 and published on 31.3.2026.

• Effective date: The restriction on exchanging a negotiable instrument applies to transactions from 1.4.2026. The quarterly reporting obligation applies from the report for the third quarter of 2026.

• The amount: A negotiable instrument (including a check) of up to NIS 6,000 is exchanged in full. Above NIS 6,000, cash is limited to 10% of the instrument's amount or NIS 6,000, whichever is lower, with the balance paid by another means of payment.

• Applies to: Every individual and business, as well as regulated financial entities. The quarterly reporting obligation applies to money changers.

• Sanctions: Violations are enforced through the existing mechanisms of the Restriction on Cash Use Law — a financial sanction for businesses and a fine for non-business individuals. For a quarterly report that was not filed, a financial sanction may be imposed for each full month of delay.

• Official source:Income Tax Circular 06/2026 dated 30.6.2026.

Until April 2026, check-cashing companies could pay cash in exchange for a check in any amount. According to Circular 06/2026, the Law defines a "loan" as any credit transaction as well as the discounting of a negotiable instrument, and a regulated financial entity was excluded from the restriction on cash loans. The new Law added subsection (g1) to Section 2, prohibiting the giving or receiving of cash in exchange for a negotiable instrument — by way of discounting, breaking down, or converting — above the amount specified in the First Schedule. The discounting itself remains permitted; the proceeds are simply transferred by bank transfer.

For example, according to the Circular: for a check of NIS 50,000, one may receive NIS 5,000 in cash; for a check of NIS 100,000, one may receive NIS 6,000.

1. 11.3.2026: The Constitution Committee approved the provisions for second and third readings.

2. 31.3.2026: The Law was published in the Official Gazette.

3. 1.4.2026: The restriction on exchanging a negotiable instrument for cash took effect.

4. 30.6.2026: The Israel Tax Authority published Circular 06/2026.

5. 10.10.2026: Deadline for the first quarterly report by money changers, covering the third quarter. The next report is due by 10.1.2027.

The Quarterly Report for Money Changers

A money changer — i.e., anyone required to hold a license under the Regulation of Financial Services Law — already reports to the Israel Tax Authority on every transaction of NIS 50,000 or more. From now on, the money changer must also file a "no-activity report" by the 10th of April, July, October, and January, declaring whether any such transaction was carried out in the preceding quarter. In addition, the period specified in Section 141A(b) has been extended from three years to seven. According to the explanatory notes, this is the data-retention period for the reporting database.

The restriction applies to anyone who converts a negotiable instrument into cash, but the Law established several defined exemptions. According to Circular 06/2026:

• A business that received a check from a customer for a transaction may convert a check of up to NIS 25,000 (inclusive) into full cash at a regulated financial entity. The condition: the business must present an invoice bearing an allocation number and a receipt specifying the check details. Above NIS 25,000, the standard rule applies.

• A negotiable instrument in foreign currency may be fully exchanged for cash up to a value of NIS 25,000.

• A cash loan extended by a regulated entity may be repaid with negotiable instruments of up to NIS 25,000 each.

Withdrawing cash from a bank account is not considered exchanging a negotiable instrument. The Israel Tax Authority examines the economic substance: a current account with diverse transactions tends to be treated as a regular withdrawal, whereas an account opened solely to deposit checks and immediately withdraw cash may be treated as an exchange of a negotiable instrument.

1. Map out how your business converts customer checks. If the proceeds from checks over NIS 6,000 are received in cash, switch to bank transfers.

2. If you rely on the relief for checks up to NIS 25,000, make sure every invoice includes an allocation number and that the receipt specifies the check details. The financial entity keeps a scanned copy of the documents, and these serve as evidence in an audit.

3. Money changers: verify that the third-quarter report was filed by 10.10.2026, and establish a procedure for the report due on 10.1.2027.

4. Check whether a financial sanction has been imposed on you under the Restriction on Cash Use Law. According to Income Tax Circular 03/2026, an expense paid in cash above the threshold from 1.1.2026, for which a sanction was actually imposed, will not be allowed as a deduction.

A pre-sanction notice of claims or a demand from the Israel Tax Authority regarding cash matters is handled by our firm within the practice area of anti-money laundering and cash offenses. The practice area is headed by Adv. & CPA Shlomi Vaknin, who served for approximately a decade as a national supervisor in the professional division of VAT at the Israel Tax Authority.