Retention periods for electronic invoices – how long to archive?
If you rely on digital business processes, archiving electronic invoices may be more than just a good idea: it’s often required by law.
Generally speaking, the retention periods in Europe for business documents – i.e. documents relevant under tax law – range from three to ten years.
How long do companies have to archive electronic invoices?
According to the German Fiscal Code (Abgabenordnung – AO), the retention period for received and issued invoices is 10 years. This is described from a tax law perspective in the Fiscal Code, Section 147 (3) “Regulations for the retention of documents”. The same applies from a commercial law perspective, as in the German Commercial Code (HGB), Section 257. The retention period always starts with the end of the calendar year (31 December) in which the invoice was created or delivered.
- Example: You receive an electronic invoice on 1 February 2023. You must keep or archive this invoice until 31 December 2033.
It does not matter whether the invoices are archived and stored in paper form or as electronic invoices. According to the Fiscal Code, the retention obligation applies to both. Once this term elapses, the invoices can be destroyed.
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Who has to archive invoices and other tax documents?
All companies and persons who are required to keep accounts in accordance with commercial and tax law must comply with retention periods for invoices and other tax documents. This also applies to the self-employed, freelancers and small business owners. This is where the principles of GoBD* come into play, which incorporate the aforementioned German Commercial Code (HGB) as well as the German Value Added Tax Act (UStG) and the German Fiscal Code (AO).
Why is there a retention requirement of 10 years for electronic invoices, etc.?
The obligation to retain invoices, together with other tax documents, e.g. commercial and business letters, is intended to ensure one thing: that the business transactions of the respective company are documented and retrospectively traceable. Whether they are still in the form of paper invoices or already kept as electronic invoices is irrelevant when it comes to retention.
From a tax perspective, it is important to prevent or detect fraud. This is one of the main reasons why legislators enacted the retention requirements for invoices, receipts and business records to be overseen by the tax authorities. Tax audits aside, it is always in the interests of the company itself to ensure transparency with regard to its financial transactions. This ensures that you have all the data needed for assessing the financial and business development of your company and making effective plans for the future.
Which different retention periods are there and for which business documents?
In Germany, there are two statutory retention periods for business documents, depending on the type of document: 6 or 10 years. A short overview and a list of common documents is provided below:
A six-year retention period applies to:
- Offers and quotations
- Import/export documents and customs documents
- Company audit reports
- Commercial & business letters
The following documents are subject to a ten-year retention period:
- Partial payments
- Delivery bills (If the delivery bill is also the invoice.)
- Accounting documents
- Outgoing invoices
- Depreciation documents
- Bank statements
- Financial statements
Of course, this is not a complete list of the documents and tax records subject to retention requirements.
In what form should invoices be archived?
Ideally, you should archive electronic invoices and other tax-relevant documents in a digital archive. You should then digitize any invoices that you have in paper form. It is all about choosing an archiving strategy that suits you: more on this in the article about the scanning process. Before selecting an archiving solution, you should consider the various requirements that apply to the archive. In legal terms, two of these requirements are central:
- GoBD compliance, e.g. certified by IDW PS-880
- GDPR compliance, e.g. certified by ISAE 3000
The principles of proper management and archiving of books, records and documents in electronic form (GoBD) are defined in one of the key administrative directives issued by the German Federal Ministry of Finance (BMF). This directive describes how to properly archive electronic business documents. But the archive must also be capable of addressing the requirements derived from the General Data Protection Regulation (GDPR).
What does audit-proof mean in connection with electronically archived invoices?
The word “audit-proof” comes up again and again in connection with retention periods. This requirement is derived from the GoBD, the German Commercial Code (HGB) and the German Fiscal Code (AO). Audit-proof archiving means simply that the following legal requirements must be met during the retention period of the archived invoices by the archiving software and the selected procedure:
- Immutability and access protection
- Readability and suitability for automated processing
One thing is worth mentioning at this point: Audit-proof archiving is not a purely technical process. Organizational aspects also play an important role here, such as the process documentation that guides the systems and employees involved in the archiving process at the company.
Where can invoices be archived electronically?
Assuming you want to use digital archiving for your electronic invoices, the first thing to do is provide the relevant tax authority with the location of the data processing system, i.e. the digital archive, or the name and address of any service provider you have chosen. This follows from Section 146 (2a) German Fiscal Code (AO). Naturally, companies based in Germany should also store their electronic invoices in this country. In the case of on-premises electronic archiving, this does not pose any problems. And the same should apply to an archiving system in the cloud. In case of doubt, you will need approval from the tax authorities. Please consider: Auditors must also be able to view your electronic archive online at any time.
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How should electronic invoices be archived?
Paper invoices belong in the past. The legislature is in full agreement, even if motivated by different reasons. Since passing of the 2011 Tax Simplification Act, paper invoices and electronic invoices have been placed on equal footing. This simplifies the handling and eliminates media discontinuities.
So if you already receive your invoices electronically, it follows that you must continue to process these electronic invoices digitally and ultimately archive them electronically. If you receive your invoices as an email with an attached PDF, keep this invoice format and archive the PDF invoice. Of course, this requires that the digital invoice contain all the mandatory information that an invoice must have.