The digitization of paper documents is a central step toward increasing efficiency in businesses. But under what conditions can these documents be stored electronically under German law?
A look at the relevant regulations - particularly Sec. 257 German Commercial Code (Handelsgesetzbuch - HGB), Sec. 147 German Fiscal Code (Abgabenordnung – AO), and the “Principles for the Proper Management and Storage of Books, Records, and Documents in Electronic Form as well as for Data Access” of the German Federal Ministry of Finance, dated November 28, 2019, in its current version (GoBD) - provides clarity.
Legal basis for storage obligations
According to Sec. 257 HGB and Sec. 147 AO, companies are required to retain certain documents for specified periods. Accounting records, such as invoices, must be retained for 8 years starting January 1, 2025.
The retention period for invoices begins at the end of the calendar year in which they were issued. For example, the period for an invoice issued on January 20, 2024, starts at the end of December 31, 2024, and generally ends on December 31, 2032 (exception: invoices for which the assessment period has not yet expired, Sec. 147 Paragraph 3 Sentence 5 AO).
Principles for electronic storage
For the electronic archiving of paper documents, the following principles apply according to the GoBD:
- Consistency with the Original: The scanning process used must ensure that the digital copy visually and content-wise matches the original when displayed. Various devices (e.g., smartphones, multifunction devices, or scanning stations) can be used for visual capture, provided the GoBD requirements are met. Full color reproduction is only necessary if it is relevant to the invoice (e.g., negative amounts in red font or notes in different colors).
- Availability and Readability: The digital records must remain available at all times and be promptly readable throughout the retention period. This includes the use and provision of appropriate formats and software for data processing.
- Machine Evaluability: The electronically captured invoice must also be machine-evaluable. This is the case when it allows mathematical-technical evaluations, full-text searches, and general checks (e.g., screen queries, tracking of links, or text searches based on specific criteria).
If a paper document is converted into a proprietary format (so-called in-house format), both versions must be retained, and the converted version must be marked as such. Retaining both versions is unnecessary if the following requirements are met:
- No visual or content changes are made.
- No other required information is lost during conversion.
- The proper and loss-free conversion is documented (procedural documentation, see below).
- Machine evaluability and access to data by the tax authority are not restricted.
The conversion of an electronically captured invoice into another format is only permitted if machine evaluability is not restricted and no content changes are made. For example, converting a PDF/A-3 invoice into a TIFF file is impermissible, as XML files contained in the PDF are lost during conversion. Similarly, converting an email invoice into a PDF format results in the loss of header information (e.g., sender and recipient information), making it impossible to trace how the email was actually received.
- Immutability: Electronically captured invoices must not be altered in a way that makes the original content indeterminable. No changes should be made if it is unclear whether they were made initially or later.
- Invoices created or received electronically (e.g., via invoicing systems or email) must be retained in their original form and not deleted before the end of the retention period. For instance, this also applies to the data set of a self-created invoice.
- Electronic invoices must not be retained solely in printed form; they must remain unalterable for the duration of the retention period (e.g., email invoices in PDF format).
- The immutability of electronic invoices can be ensured through hardware (e.g., tamper-proof data carriers), software (e.g., backups, locks, markers, automatic logging, versioning), or organizational measures (e.g., access authorization concepts).
- Procedural Documentation: The scanning process must be documented. An organizational directive should be created that specifies who is authorized to capture, at what point capturing occurs (e.g., upon receipt, during, or after processing), which documents are to be captured, whether visual or content consistency with the original is required, how quality control for readability and completeness is performed, and how errors are logged.
The specific design of the procedural documentation depends on the complexity and diversification of business activities, organizational structure, and the data processing system used.
When can paper invoices be destroyed?
Paper invoices can be destroyed after GoBD-compliant electronic capture unless they are required to be retained in their original form under non-tax or tax regulations. However, it may be prudent to retain the original invoice for evidentiary purposes, e.g., for tax procedures or legal disputes.
Conclusion
The electronic storage of invoices offers numerous advantages but requires careful planning and implementation to meet the legal requirements of Sec. 257 HGB and Sec. 147 AO. Companies should ensure their systems and processes comply with GoBD requirements and enable audit-proof storage. Regular reviews and adjustments to current legal requirements are essential.
* The information provided in this article does not constitute legal advice and is not intended to address specific legal issues or problems that may arise in individual cases. The information on this website is general in nature and serves informational purposes only.
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