Electronically Assisted Tax Audits – Proactive Preparation

The goal of electronically supported tax audits is to realize potential cost savings and efficiency gains. For this reason, employers are required to maintain payroll records in electronic form. Starting January 1, 2023, the euBP will be mandatory. Specifically, this means that the requirement for digital storage of payroll records should already be met. Your tax advisor in Düsseldorf and Oberhausen has summarized what you need to keep in mind.

The legal framework for an electronically supported tax audit (euBP) in social security was introduced in 2011. Starting in early 2014, the euBP was conducted on a regular basis. Employers had the choice between the new option and the “traditional” on-site audit. However, taking advantage of this option was not mandatory for employers. Nevertheless, the proportion of euBP audits conducted rose to over 60% in 2021.

There are several advantages offered by the electronically supported audit. It simplifies the preparation and conduct of the audit. It enables the electronic transmission of audit-relevant data. It allows for the analysis of data using audit software. It eliminates the need for an on-site audit and provides the option to access results electronically.

The Electronic Form of Pay Records

The euBP now offers potential cost savings and efficiency gains for social security authorities and employers. These two goals can only be achieved if the relevant payroll records are also maintained electronically. This is the basis for the newly introduced requirement: Payroll records must be maintained electronically by employers.

The requirement to maintain payroll records electronically means that certain documents will no longer be issued by employers in paper form at all. It is sufficient at this point that they are made available in electronic form. Various file formats are conceivable in this context. In addition to PDF files, image files in .jpeg, .bmp, .png, or .tif formats are possible. The goal of this process is to avoid a media break during the transfer.

According to the statutory text, payroll records have been required to be available electronically since January 1, 2022. The relevant guidelines were issued by the umbrella organizations of the social insurance agencies. The joint guidelines were published on March 18, 2022. They provide important guidance on the practical implementation of electronically supported tax audits. These principles clarify that the electronic maintenance of payroll records applies only to documents that were newly created or issued on or after January 1, 2022, or that will be newly created or issued in the future. Documents from previous years therefore do not need to be digitized retroactively.

Furthermore, employers are not solely responsible for ensuring that these payroll records exist in electronic form. Employees and other entities (such as health insurance providers) are also required to submit their documents to the employer in digital form. Health insurance membership certificates have been available only in digital form since January 1, 2021.

Documents Requiring a Signature

Documents that require a signature to be valid have special status. For these documents, the law requires written form. A classic practical example concerns exemption from mandatory pension insurance. In the case of employees with minor earnings who submit an application for exemption from mandatory pension insurance, the date of receipt by the employer is documented on the form.

For this type of document, the ideal scenario is that the document is already delivered to the employer with a qualified electronic signature. This is because this electronic document can be accepted and retained. In other cases, however, the document is provided in paper form. In that case, the document must be converted into a digital format. But it is important to note: The original paper copy must also be retained. Unless, however, the transfer is made with an advanced employer signature. Only then may the original paper copy be destroyed.

Exemption

Employers may be exempted from the obligation to maintain payroll records electronically. An approved application ensures that the electronic transmission of stored payroll data is deferred until December 31, 2026. An informal application to the pension insurance provider is sufficient. It must include the company number. Even a last-minute application is possible, provided it is received before the next audit. There is no specific application deadline.

If the competent pension insurance provider approves the application for exemption, the obligation to maintain payroll records electronically will apply only to all new circumstances and events occurring on or after January 1, 2027. Although the retroactive digitization of payroll records for periods prior to January 1, 2027, is permitted, it is not mandatory.

Tax Advisors in Düsseldorf and Oberhausen

Trimborn.Partner is your tax advisor in Düsseldorf and Oberhausen. Our team is happy to assist you with legal and tax matters. Simply schedule an appointment.