On January 1, 2009 Germany introduced the possibility for German tax payers to install electronic bookkeeping outside of Germany. This enables German companies and subsidiaries of foreign entities to outsource IT infrastructure and accounting and payroll processes to other countries. The limitation to EU/EEA-countries has been abolished by the end of 2010.
Note: This regime only applies to electronic books and records. Paper documents such as annual financial accounts, opening balance sheets but also in- and outgoing invoices have to be kept in Germany. This restricts the possibilities to transfer the entire bookkeeping abroad.
The following requirements apply:
- The taxpayer has to inform German tax authorities where electronic bookkeeping is conducted. If a service provider is assigned to do the bookkeeping his name and address has to be reported to the tax authorities.
- The taxpayer has to fulfil special obligations in regard to participation in tax audits and documenting business transactions.
- Tax authorities must have full access to all electronic books and records.
- Taxation shall not be negatively affected by the transfer of electronic books and records abroad.
German tax authorities may grant permission to transfer electronic bookkeeping abroad. The application has to be made in writing. The following information is required:
- Detailed enumeration and description of electronic books and records to be transferred abroad
- Description of the bookkeeping process
- Description of facts which allows the tax authorities to verify above mentioned requirements
Foreign Service provider who is conducting the bookkeeping for a German company has to follow German accounting standards. Provisions of German commercial and tax law have to be considered. And he has to follow the special regulations of the Principles of proper IT-based Accountancy Systems (Grundsätze ordnungsmäßiger DV-gestützter Buchführungssysteme).
German tax authorities have the right to audit data produced by means of data processing systems (EDP systems). There are three forms of data access:
- Audit of stored data by using the taxpayer’s EDP system (access form: Z 1)
- Computer evaluation by instructing staff of the tax payer using EDP system (access from: Z 2)
- Demanding a data medium such as a CD with tax relevant data, documents and records (access form: Z 3)
In practice only access form Z 3 is used by tax inspectors when auditing smaller companies. The special rules of the Principles of Data Access and Auditability of Digital Records (GDPdU) have to be followed by the foreign service provider.
If the company and/or its service provider is not complying with the requirements under this regime fines in a range between € 2,500 and € 250,000 may be imposed. And the tax authorities have the right assessing taxes based on estimates.