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Sometimes I Pay Expenses in Cash. Can I Have Problems?

Accounting obligationsTax Agency (Hacienda)

Pay in cash autonomo

Recently, the Superior Court of Justice of Valencia (TSJ) has issued a ruling in which, contrary to the criterion of the Tax Inspectorate and the Regional Economic-Administrative Tribunal (TEAR), it has considered as deductible certain expenses accounted for and declared paid in cash, without providing means of payment, contracts, or any other documentation.


The Inspection did not admit the deductibility of the expenses paid by cash because it considered that there are important differences between the invoices contributed and the payments, which according to the Administration were not sufficiently justified to have used the cash and not another verifiable means of payment.

For its part, the TSJ of Valencia, in its analysis, considers that the only hint on which the Administration sustains its conclusion of nonexistent expenses, is that the payments were made in cash, which for the Court is insufficient.


The Court concludes that the credibility of both arguments is equated:

  1. a) the Administration considers that the invoices were artificially elevated starting from the hint of the payment in cash,
  2. b) and the taxpayer offers an alternative explanation, alleging that the invoices were paid by checks through cash.


Therefore, the Administration can not reject invoices by opposing a simple denial or mere conjecture. It must provide sufficient evidence for its denial, and only then the taxpayer must provide additional justifications to the invoices. In conclusion, the hints are insufficient to reach the conclusion of the Administration.

 As a complement to this interpretation of the Supreme Court of Valencia, we will remember the requirements the expenses must meet in order to be admitted as deductible:



Expenses must be susceptible to their timely and sufficient justification and must be made by document or invoice. Here you can find the specific requirements that a complete invoice must contain.



The expense must be accounted for, showing that it must respond to an operation actually performed.



Expenses must be charged in the accrued year, regardless of the date of payment.



There is no requirement in the tax standard for the expense need for its deductibility, although there must be a correlation with income directly or indirectly.


Any expense justified and accounted for in accordance with the accrual principle that responds to actual and effective operation is deductible.


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