Required Receipts – The Background Explained

Since the beginning of 2020, a new tax law has made receipts mandatory. At first glance, one might think that a law regarding a small piece of paper would not be perceived as particularly relevant by anyone. When the new regulation was being planned, presumably no one had anticipated that it would elicit such a reaction from people in Germany. The new “mandatory receipt” requirement was debated for months. A simple remedy for tax fraud or unnecessary environmental pollution? It is clear that the mandatory receipt has both advantages and disadvantages. As tax advisors in Düsseldorf and Oberhausen, we would like to provide clarification in this article and address the advantages and challenges of the mandatory receipt requirement as objectively as possible.

Current Situation – Receipt Regulations Were Previously Poorly Defined

First, the basics must be understood. The fact that you receive a receipt at the store checkout is, at first glance, nothing unusual. Sometimes, at the supermarket checkout, you are asked whether you would like the receipt or not. Generally, however, there has been no regulation to date requiring a receipt to be issued. In many industries—from restaurants and pharmacies to bakeries—no purchase receipts were often issued at all. After all, why would anyone want a receipt for a roll costing 80 cents? This situation has been quite normal for us in Germany up until now. However, the problems associated with it aren’t immediately apparent. The tax authorities, in particular, face a dilemma.

Why a mandatory receipt requirement?

As previously described, the issuance of receipts was not previously subject to comprehensive regulations. Under the new law, a receipt must be issued. But why? The core issue relates to tax fraud. The following points are relevant across many industries. In the past, some unscrupulous operators in the industry have cheated when selling bread rolls or other everyday goods. For example, in some restaurants, only interim receipts were issued—which could then be easily reversed in the cash register—and in some shops, no sales were recorded in the cash register at all. As a result, this revenue is not recorded. Consequently, the income does not appear on tax returns either. In such cases of fraud, the tax authorities see nothing of the profits or the taxes that should result from them.

One might argue that the government already has enough tax revenue and that these small amounts of cents hardly make a significant difference. However, one must bear in mind that “even small amounts add up.” Tax fraud due to missing receipts has unfortunately not been an isolated incident in the past. According to estimates, the government is said to have lost 10 billion euros in revenue annually in this way.

How can the mandatory receipt requirement combat tax fraud?

The new receipt requirement is intended to significantly reduce tax fraud resulting from unregistered income. This will be achieved through legally mandated cash registers that store all transactions for several years. In addition, there is an obligation to issue a receipt (or an electronic equivalent). Whether the buyer accepts the receipt is initially irrelevant. The point is that the revenue is stored in the cash register. This makes tax fraud significantly more difficult.

A look at other countries with mandatory receipt laws

In Germany, there was already a lot of criticism even before the new requirement was introduced. As we will see shortly, there are indeed some valid grounds for criticism here. At first glance, it seems as though German bureaucracy has once again gone a bit overboard and is “too” precise. In fact, however, the receipt requirement is not a new idea. Other countries have similar—and in some cases even much stricter—rules regarding mandatory receipts. In Italy, as well as in Austria and France, this requirement has been in place for some time. Italy serves as an extreme example. There, the financial police monitor compliance with the regulations. Italy goes so far as to require customers to take the receipt with them. It may happen that this receipt must be presented on demand by the authorities in the vicinity.

Why is there criticism of the receipt requirement?

So far, we have only discussed how the new regulation prevents tax fraud. The fact that such a small slip of paper can help prevent fraud in the future is, in principle, highly desirable. Nevertheless, there are serious points of criticism. Environmental protection and resource consumption are particularly contentious issues. It is important to approach the issue with nuance. Fundamentally, it is important to know that in many cases, the small receipt is made from so-called thermal paper. Thermal paper can sometimes contain toxic substances. Additionally, the “paper” is not recyclable due to its special thermal coating. A receipt therefore belongs in the general waste and is thus associated with a significant waste of resources. Many environmentalists took notice early on and responded with protests. But even less environmentally conscious citizens complained about the “unnecessary” environmental burden. For an 80-cent roll, the harmful slip of paper is simply unnecessary in most people’s minds.

According to initial estimates, the mandatory receipt requirement will generate up to 5.7 million kilograms of additional paper per year. If laid end to end, all these additional receipts could stretch 2.2 million kilometers—enough to circle the equator 55 times. Or more than three times to the moon and back. Given these figures, one might quickly question the balance of costs and benefits.

However, it’s important to note that the new law doesn’t specify the form in which the receipt must be provided. There are certainly alternatives to the traditional paper receipt. For example, there are good digital alternatives. In theory, the buyer could also receive the receipt via NFC (near-field communication for smartphones), a customer account, or email. However, implementing these alternatives in practice remains problematic. It’s also worth noting that all cashless transactions are automatically recorded anyway. A receipt would therefore not actually be necessary in these cases. This includes debit cards, credit cards, or payments made via smartphone. With some adjustments, the mountain of paper generated by the mandatory receipt requirement could thus be avoided.

Start of the Receipt Requirement

The law mandating receipts has been in effect since January 1, 2020. The law was not presented in its final form until very late in the process. As a result, the government had to allow cash registers that do not yet meet the required standards to remain in use until the end of September 2020. There are also not expected to be any inspections until that time. Accordingly, the mandatory receipt requirement will not be fully felt until toward the end of the year. By then, hopefully, there will also be well-functioning solutions for the problems mentioned.

Questions on tax matters – answered by experts in Düsseldorf and Oberhausen

As tax advisors in Düsseldorf and Oberhausen, we are your first point of contact for tax-related questions. We also advise businesses on issues regarding the receipt requirement. Simply schedule a consultation at our Düsseldorf or Oberhausen office. Our team of experienced tax advisors and certified public accountants is here to assist you with any tax-related matters. We look forward to your visit! Contact us now.