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Retention periods for business records
According to the law, businesses have an obligation to retain certain documents, records and accounts. These are subject to retention periods, i.e. periods during which these documents, records and accounts must be archived or kept. Depending on the type of document, a 6-year, 8-year or 10-year retention period is applicable. These retention periods and obligations must be observed, otherwise there is a risk of considerable drawbacks, fines or even imprisonment.
One important goal of these requirements is to be able to present these documents to the tax authorities, especially in the event of a tax audit.
1. Why are there retention periods for business records?
The obligation to retain data, accounts, documents and records is intended to ensure that business transactions can be verified during the retention period. The retention period defines the time period in which the documents, records etc. that are subject to retention must be archived.
Above all, the tax authorities must be able to access the documents during a tax audit.
If these documents are not properly archived or retained for the prescribed retention period, the tax authorities may call into question the company's entire accounts, as the taxation basis cannot be determined due to incomplete documentation. This means that the turnover of the company is estimated by the tax authorities. This estimation method often leads to a higher turnover and thus to a higher tax liability for companies.
Legal basis of the retention obligation
Both commercial law and tax law regulate the obligation to keep records, documents and accounts. In addition, the Federal Ministry of Finance has issued supplementary addenda for documents in electronic form, the so-called principles for the correct keeping and storage of accounts, records and documents in electronic form and for data access (German acronym GoBD).
- Obligation to keep records under commercial law (HGB): §257 of the German Commercial Code (HGB) regulates the obligation to keep records under commercial law as well as the retention periods of documentation for business people.
- Fiscal retention obligation (AO): the German Fiscal Code (AO), in particular §147 AO, regulates the fiscal regulations for the retention of documentation.
- GoBD: since the obligation to retain data applies to both physical and electronic data and the data must be retained in the form in which it was received, the GoBD regulates the retention of electronic data and documents. Here, particular attention must be paid to the audit-compliant archiving of data in electronic form. This means that unchangeability and the traceability of changes must be guaranteed during the retention period. This serves to protect against document falsification. In addition, the data must be available in a readable form for the tax authorities.
2. Who is obliged to store data?
In principle, all persons who are also required to keep accounts or prepare turnover and profit accounts are obliged to retain records. This means all businessmen and companies (e.g. limited companies and partnerships, general partnerships etc.) as well as freelancers, tradesmen and farmers and foresters who exceed a certain turnover and profit limit. This means
- Business people with an annual turnover of more than €600,000 or an annual profit of €60,000 and
- Farmers and foresters with an annual turnover of more than €600,000 or annual profit of more than €60,000 or who own agricultural land with an economic value of more than €25,000 are also obliged to keep certain documents, as bookkeeping is obligatory from these limits upwards (§141 (1) AO).
3. Retention periods for business records: How long to store what?
With regard to the retention period, the law differentiates between 6 years, 8 years and 10 years for documents, records and accounts.
A retention period of 8 years applies to the following documents
- Bank documents
- Accounting documents
- Balance sheet documents
- Credit documents
- Delivery notes
- Pay slips
- Receipts
- Invoices
- Tax returns
- Tax documents
- VAT returns
A retention period of 6 years applies to the following documents:
- Time sheets
- Commercial or business letters received
- Other documents, insofar as they are relevant for taxation purposes
A retention period of 10 years applies to the following documents
- Records and books
- Inventories
- Annual accounts
- Status reports
- Customs documents
Please note that the retention periods given apply to Germany. Depending on the country, the legal regulations may differ.
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Retention periods | PDF | 38.9 KB
How must documents be stored (paper form or electronic)?
Data must fundamentally be stored in the form in which it is received. This means that a paper invoice must be stored in paper form. Should you receive an electronic invoice, for example in EDIFACT format, this must be stored in this format.
Correct storage of digital documents
The retention requirements of business records are also applicable to documents that are in digital form and not paper form.
The law stipulates that documents must always be stored in the form in which they are received. Should you receive documents, for example invoices, in digital or electronic form, they must also be stored in the respective format. Should you receive, for example, an invoice in EDIFACT format (EDI), the invoice must be stored in this format.
When storing business records it is likewise necessary to ensure that these can be retrieved at any point within the retention period, and that they are complete, properly legible, unchanged, traceable and digitally analysable. This should ensure a seamless and transparent audit. Here, the “Principles for the proper management and storage of books, records and documents in electronic form and for data access” apply (GoBD).
4. When does the retention obligation begin?
According to §257 HGB, the retention period "...begins at the end of the calendar year in which the last entry in the accounting records was made, the inventory was drawn up, the opening balance sheet or the annual financial statement ratified, the individual financial statements according to §325 para. 2a or the consolidated financial statement prepared, a commercial letter was received or sent or an accounting document was created.
5. How to subsequently destroy business records
If the period for retention requirements for business records has elapsed, the business records can be destroyed. Of course, this is only where they are no longer required. Should these documents contain sensitive data, like in-house or even personal data, the business records must be destroyed in accordance with GDPR.
Even where business records are destroyed in accordance with data protection, the document format does not play a role (e.g. electronic or paper form). In any format, the data must be destroyed in a manner that conforms with data protection. For data in paper form, the following is recommended: document shredder with a security level from P-4. For electronic data that is on a data carrier, such as hard disk or USB stick there are likewise devices for GDPR-conforming data destruction.
6. Penalties for violating the retention requirement
If the obligation to retain records has been violated, i.e. the relevant documents and records have not been properly archived during the retention period, this may under certain circumstances be interpreted as a tax risk or even tax evasion. In this case, considerable fines could be levied. In some serious cases, a prison sentence may even be imposed.
Note: This is an editorial text by the editorial team. No advice is provided on the matters of retention requirements and retention periods. All data is non-binding.
