Correct keeping of electronic tax documents is of key importance in providing for compliance with laws, namely in terms of credibility of origin, intactness of the content, and readability. Due to growing digitalisation, this issue is becoming more and more relevant. While the same essential elements have to be included in both forms, the methods of providing for compliance differ. This article brings you a summary of legal requirements for electronic keeping of documents pursuant to Section 34 of the VAT Act (the “VATA”), Section 11 of the Accounting Act (the “AA”), and Information of the General Financial Directorate, including methods of providing for compliance with Directive 45/2010/EU.
Under Section 34 of the VATA, three conditions must be provably met over the period from a document’s issue through the end of a statutory deadline for documents’ keeping:
Electronic documents’ readability can be guaranteed by using reliable software, e.g. the PDF format, which can be displayed in programs such as Adobe Acrobat.
In addition to this, the AA requires a signature of a person responsible for recording in accounting books. This duty can be met by using an accounting software and identification of the user who is making the entry.
Methods of Providing for Credibility and Intactness
The VATA specifies methods of providing for origin’s credibility and intact content of a tax document in an electronic form, which include accepted electronic signature, accepted electronic seal, or electronic data interchange (EDI). An electronic signature or seal have to be attached as soon as upon a document’s issue. However, if those elements cease to be valid during the period of the document’s keeping, the document’s credibility has to be proven in another way.
The General Financial Directorate’s Information provides another method of complying with the credibility and intactness requirements, one of them being a document’s delivery via a data box where the received message’s archiving is the guarantee of the origin’s credibility. Moreover, re-authorisation using timestamps ensures absence of changes in the document throughout its being kept.
Intactness of a document’s content can be provided for by attaching a timestamp, by storing the document on a medium preventing change, or by depositing in a reliable document repository that complies with the constancy and security requirements (e.g. through encryption). If, after having been issued, an electronic document is completed with information that does not change mandatory essential elements of a tax document pursuant to Section 29 of the VATA (such as the timestamp or an accounting centre), the document’s content remains intact in the General Financial Directorate’s opinion.
Unreliability of a Document Sent by Email
Last but not least, the General Financial Directorate stresses in the Information that a document’s receipt via email is not considered a sufficient way of proving the origin’s credibility due to unsecured data transmission. Authentication of the document’s sender must be provided for in another way, for example by sending the document from a previously agreed email address (e.g. fakturace@xyz.cz), if such method has been agreed between the parties in advance.
Audit Trail as an Alternative Solution
Where the above-described methods are not applied, a document’s credibility and intactness can be provided for through monitoring mechanisms of processes, which establish a reliable link between a tax document and a supply itself. This process, known as the “audit trail”, includes a sequence of documents concerning a supply such as an order, a contract, shipping documents, bank statements or other pieces of documentation (e.g. photographs, or attendance lists).
The General Financial Directorate states that the particular resources to prove the link between a document and a supply are the entity’s choice. Monitoring mechanisms should be adequate to the entity’s size and operation’s nature, and the quantity and value of the supply. However, it is impracticable to guarantee that the audit trail will be sufficient in a particular case.
As a result, we recommend consulting auditors prior to introducing a new method of an electronic register of documents as to whether the selected procedures are sufficient to provide for compliance with the requirements for origin’s credibility and intact content of documents in particular types of transactions.
Jitka Sobotková
sobotkova@clarksonhyde.cz