Germany shortens statutory retention period for accounting documents

Germany's new Fourth Act to Relieve Citizens, Businesses, and Administration of Bureaucracy (BEG IV), published on October 29, 2024, will shorten the statutory retention period for accounting documents from ten to eight years. The new regulation applies to all documents whose retention period had not yet expired one day before the law's entry into force, which is scheduled for January 1, 2025. For entities supervised by the Federal Financial Supervisory Authority (BaFin), the shortened retention period will apply with a one-year delay, starting January 1, 2026.

These changes have implications beyond just shortening retention periods, affecting the future preparation of annual financial statements. Costs for retaining business documents, a public-law obligation, must be accounted for as a provision in the commercial and tax balance sheets. A reduction in the retention obligation for accounting documents necessitates a corresponding decrease in the provision for the storage of business documents.

For tax balance sheet purposes, the commercial balance sheet valuation serves as the upper limit for the provision. Tax authorities permit both individual and standardized calculations. Currently, for a ten-year retention obligation, an annual storage cost is multiplied by 5.5; for an eight-year obligation, the factor would be 4.5.

The law, however, does not shorten the ten-year retention period for commercial books, inventories, and annual financial statements themselves. In practice, accounting documents are often retained for the same duration as annual financial statements. Consequently, a reduction in the retention obligation solely for accounting documents may not significantly alter actual storage practices. Nevertheless, the provision amount must be reduced. If documents are voluntarily retained beyond the legally required period, no provision can be made for them.