The Tax Authority Is Turning Off the Cash Tap
If until now you were accustomed to a certain degree of flexibility in cash payments to suppliers or service providers, it's time to recalculate your route. The Law for the Reduction of Cash Use, which stormed into our lives, is entering its aggressive phase. As of January 1, 2024, the permitted threshold for cash use in a transaction where one of the parties is a business has been cut nearly in half – and now stands at NIS 6,000 only (down from NIS 11,000).
A Trap for Routine Small Payments
The drop to the NIS 6,000 threshold is dramatic because it brings everyday, routine transactions that were previously "under the radar" into the enforcement zone. Office repairs, purchase of consumable supplies, advances to small vendors, or payments to freelancers – all of these can easily exceed the new ceiling. For managers and business owners, the risk is twofold:
Heavy financial penalties: The fines for violating the law represent a significant percentage of the violation amount.
Reputational damage: A violation of the Cash Law constitutes a "red flag" for the Tax Authority and may trigger a comprehensive books audit.
Key Changes and New Rules
The new ceiling: In a transaction involving a business, it is prohibited to pay or receive cash exceeding NIS 6,000.
Prohibition on splitting transactions: The law explicitly prohibits splitting a single transaction into multiple payments to circumvent the ceiling. Purchasing equipment for NIS 10,000? You cannot pay for it in two cash installments of NIS 5,000.
The 10% limit: If the total transaction amount exceeds NIS 6,000, cash may only be used to pay 10% of the transaction price or NIS 6,000 (whichever is lower). In practice, for transactions above the threshold, cash becomes virtually irrelevant.
Between private individuals: The ceiling has also been reduced here (to NIS 15,000), but our focus is on the business sector, which is subject to the stricter threshold.
Zero Tolerance for Cash in the Organization
At Shlomi Vaknin & Co., we are seeing a sharp increase in enforcement in this area. The most common mistake is made by junior employees or procurement managers who make a "quick" payment to move things along, without being aware of the change in the law. Strategic recommendations:
Immediate procedure update: Issue an urgent memo to all procurement and finance personnel in the company.
Transition to digital payment methods: Broadly prefer the use of bank transfers, credit cards, or checks (payee only), which create a clear audit trail.
Documentation of exceptions: If a borderline cash transaction was nonetheless carried out, ensure there is precise documentation justifying the transaction's classification and ruling out any claim of artificial splitting.
