As soon as the fiscal year is out and has been closed in accounting and tax reporting terms, one may proceed and destroy certain documents to make room in the archives. Are you on top of the mandatory archiving periods for your company’s financial records?
The range of archiving periods, and the various exemptions which may apply to specific documents, is truly bewildering – and to make matters worse, the mandatory archiving periods are stipulated by a number of different laws.
That said, the basic rules (and the basic time periods for which accounting records must be kept preserved) are set out in four fundamental acts of law:
- the Accounting Act
- the Income Tax Act
- the VAT Act
- and the Archiving and Records Management Act
Pursuant to Sec. 31 of the Accounting Act (Act No. 563/1991 Coll.), the following materials must be archived for the following time periods:
- Financial statements, annual reports – 10 years
- Accounting records, main ledgers, depreciation schedules, inventories, chart of accounts, overviews – 5 years
- Accounting records which companies use to substantiate their keeping of accounts – 5 years
The time period for the assessment of income tax is three years as of the day on which the period for filing the regular tax return lapsed. This time period may however be extended, e.g. if the company claims taxable loss, or in the event of a tax audit.
The maximum extension period is 10 years.
The general provisions on the archiving of tax records in Sec. 35 of the VAT Act (Act No. 235/2004 Coll.) speak of an obligation to archive tax vouchers both on part of the tax payer and on part of the recipient of services and supplies. This archiving period is 10 years from the end of the fiscal year in which the relevant performances were rendered.
The archiving of such documents as e.g. the deed of incorporation, transformation documents, by-laws, articles of association, rules of procedure, annual reports, records of liquidation and dissolution and others, is being addressed by the Archiving and Records Management Act
A company whose archiving procedures and practices are in accordance with all the above-described rules and regulations will save itself a lot of trouble if it later has to provide evidence for facts and circumstances which were decisive for determining its tax assessment base.
For this reason, it makes sense to draw up an internal guideline or policy for the circulation, processing, and archiving of records at the given company (or for the given businessperson). The implementation and strict observance of such a policy will help avoid penalties and sanctions.
Alternatively, companies and entrepreneurs may turn to specialized firms which offer comprehensive archiving services (whether for records in paper form or in electronic form), including the final destruction of obsolete documents.
Act No. 235/2004 Coll., on value added tax Act No. 563/1991 Coll., on accounting Act No. 499/2004 Coll., on archiving and records management and on changes to certain laws Act No. 586/1992 Coll., on income taxes Act No. 101/2000 Coll., on the protection of personal data