GoBD Compliance in Germany [Everything You Must Know]

Key takeaways

• The GoBD is a set of principles that instruct businesses on how to manage digital accounting and store tax-relevant business records.
• If you are not compliant with the principles of the GoBD, the tax office may reject your accounting. In this case, the tax office will estimate your profits. This is usually unfavorable for you.
• Hiring a tax advisor does not ensure compliance with the GoBD on its own. 

This is how you do it

• Use a GoBD-compliant accounting software. This will take care of invoicing, sending quotes, traceability, and verifiability of these documents, etc.
• If possible, make your accounting digital. You’ll need a procedural document for the same.
• Store all your tax-related documents for 8 or 10 years. Please note that the retention period starts at the end of the calendar year in which the document was created.
• You must store the original documents. Your documents must be version-controlled and stored in a DMS.
• You must record your transactions on time, as defined under GoBD.
• Hire a tax advisor to manage your accounting and for tax-related advice. You can also contact your local IHK for any bureaucratic questions.

Table of Contents

What is GoBD?

The GoBD is a set of principles that instruct businesses on how to manage digital accounting and store tax-relevant business records. It outlines what the tax office expects from your accounting.

GoBD stands for “Grundsätze zur ordnungsmäßigen Führung und Aufbewahrung von Büchern, Aufzeichnungen und Unterlagen in elektronischer Form sowie zum Datenzugriff“.

This translates to “Principles for the proper management and storage of books, records, and documents in electronic form and for data access”.

Why is complying with GoBD important for a business owner in Germany?

GoBD defines the rules you must follow when doing accounting. If you don’t follow these rules, the tax office may doubt the accuracy of your financial records.

Suppose the tax office finds out that your accounting processes and software are not GoBD compliant. In this case, the following happens.

• The tax office may reject your accounting and no longer trust your profit/loss statements.
• If the tax office rejects your accounting, it’ll estimate your profits. The tax office often estimates significantly higher profits. This leads to a higher tax burden. 
• In the worst-case scenario, you may be charged with tax evasion. 

Is hiring a tax advisor enough to ensure GoBD compliance?

Many new founders assume that transferring accounting to a tax advisor or using a GoBD-compliant accounting software is enough to ensure GoBD compliance. However, this is not the case.

There are many aspects of GoBD that you must know and integrate into your business processes. A tax advisor or an accounting software alone cannot cover all aspects of GoBD.

Any other software or systems you use for your business operations must also comply with the GoBD guidelines. Here is the list of software you may use.

• Order management
• Payroll accounting
• Invoicing software
• Payment transactions
• Time recording system
• Document management system (DMS)
• Email inbox

Please note it’s not an exhaustive list. These are some of the many software programs you use to run your business. 

Your tax advisor doesn’t have access to all of these tools. Thus, you must ensure that they are GoBD-compliant or that you use them in a GoBD-compliant manner.

You’ll learn next what being GoBD compliant means.

What should you consider to stay GoBD compliant in Germany?

Here are six key things every new founder must know to stay compliant with GoBD.

• Which documents come under GoBD compliance?
• How long must you store the data?
• When does the document retention period start?
• Your accounting should be auditable.
• Store the original document properly.
• Timely recording and documentation

Which documents come under GoBD compliance?

The GoBD applies to all tax-relevant data (§ 147 AO). Here is a non-exhaustive list of documents that must be GoBD compliant.

• your books, 
• reports, such as management reports, annual reports, profit and loss statements, balance sheets, etc., 
• inventories,
• invoices,
• quotes,
• communication (email, fax, or physical letter) between your customers, service providers, vendors, etc., 
• and any other outgoing and incoming document that is accounts-related

How long must you store the data to stay GoBD compliant in Germany?

You must retain all the tax-relevant data for 6, 8, or 10 years, depending on the document type (§ 147 paragraph 3 AO).

Documents you must store for 10 years

• books and records (Bücher und Aufzeichnungen), 
• inventories (Inventare), 
• financial statements (Jahresabschlüsse), 
• management reports (Lageberichte), 
• the opening balance sheet (Eröffnungsbilanz) and documents required to understand it, and 
• other organisational documents 

In short, you must keep all your tax-related documents for 10 years. This includes VAT returns, invoices you issued and received, bank statements, etc.

Documents you must store for 8 years

• bookkeeping documents (Buchungsbelege),
• Incoming invoices,
• Outgoing invoices, and
• any other tax-relevant document

Documents you must store for 6 years

• received commercial (Handelsbriefe) or business letters (Geschäftsbriefe) – this includes emails,
• sent commercial or business letters – this includes emails,
• Insurance policies,
• Quotes,
• Order confirmations,
• Reminders,
• Contracts, etc.

The tax authorities should be able to access your business documents within a reasonable timeframe for an audit.

Suppose you can’t provide the documents from the past years to the tax authorities for audit. In this case, the tax office will estimate your profits for those years. 

In most cases, the tax office’s estimation is unfavorable for the business owner. This results in you paying more in back taxes. In the worst-case scenario, you may be charged with tax evasion. 

When does the document retention period start? 

You now know that you must keep the tax and accounting-related documents for 10 and 8 years. But when does the 10 or 8-year period start?

According to German tax law, the document retention period begins at the end of the calendar year in which the document in question was created (§ 147 Abs. 4 AO).

Example:

• Suppose you filed your 2023 tax return in March 2025.
• In this case, your 2023 tax return will be prepared in 2025. So your retention period for the “2023 tax return” will start by the end of 2025 or 1 Jan. 2026. This means that you must keep your “2023 tax return” until 31 Dec 2035.

Some may think that they need to retain the “2023 tax return” until 31 Dec. 2033. However, this is not the case.

The year in which the document is created is taken into account when calculating the retention period.

Your accounting should be auditable

The tax authorities may audit your records at their discretion. This means your accounting must be auditable.

Here are some key principles for proper accounting, as outlined in the GoBD guidelines.

• The documents you create may not be changed later. For example, suppose you issued an invoice to one of your customers. The software you are using mustn’t allow changing the issued invoice later. The same applies to other kinds of documents, such as a quote.
• The documents and any changes to them must be traceable. This can be achieved by storing each document separately in a Document Management System (DMS). Your software should also maintain a version history of the document. This way, the tax office can easily audit when and what changes were made to a particular document.
• You must document your business processes. This document should be version-controlled. Moreover, you must follow the documented process in practice.
• Every accounting entry must be supported by documentary evidence. For example, you must have an invoice to claim an expense. Without an invoice, you cannot claim business expenses. Thus, keep your invoices in one place.

How to issue GoBD-compliant invoices in Germany? ->

Basics of accounting in Germany ->

Store the original document

The most essential GoBD principle is that you must retain the original document for the defined storage period. The original document can be either physical or digital. 

Here are some examples.

• You receive an invoice in PDF format via email. The PDF file is the original document. Suppose you take out a printout of this document and store it. The tax office doesn’t consider the printout as the original document.
• You maintain an Excel sheet to record travel and meal expenses. In this case, the Excel sheet is the original document.
• You recieve a physical receipt for an expense. This receipt is the original document.

As you can see, as a business owner, you’ll collect documents in both physical and electronic form. You must store them for a defined storage period.

You can also make your accounting completely digital to avoid storing physical documents. To do this, you need a procedural documentation (Verfahrensdokumentation).

How to make accounting digital? ->

Timely recording and documentation

Ensuring your documents are traceable and accessible is not enough. According to the German tax law, you must also record them in a timely manner (§ 146 Abs. 1 AO, § 239 Abs. 2 HGB). 

The GoBD, published by the German Ministry of Finance (BMF-Schreiben), clearly defines when you should record different types of accounting transactions. 

• Non-cash business transactions should be recorded within 10 days.
• Vendor transactions should be recorded within 8 days.
• Cash transactions should be recorded daily.

As a founder, you should build an accounting routine. For example, you should allocate 15 minutes daily to record all transactions with proper documentation. You can also do it weekly. 

NOTE: Don’t postpone your accounting tasks until you must file a VAT or income tax return. This will only cause you trouble and take a lot more time. Moreover, it’s not according to the GoBD requirements.

How to make accounting digital as per the requirements of the GoBD?

To do your accounting digitally, you must create a procedural document (Verfahrensdokumentation). Procedural documentation describes the organizationally and technically desired processes. 

The process documentation serves to prove that the requirements of the German Commercial Code (HGB), Tax Code (AO), and GoBD are met. This includes the requirements for recording, posting, processing, storage, and disposal of data and documents when processing digital documents.

What does a procedural document contain according to GoBD?

Procedural documentation (Verfahrensdokumentation) must adhere to a standardized structure. You cannot simply write down everything that happens in your company and expect the “procedural document” to be GoBD compliant.

The contents of a procedural documentation according to GoBD are divided into various sub-areas:

General description

In this section, you describe which business processes you’ll document.

• Legal framework
• Location of data storage
• Outsourcing

User documentation

How does the process work in daily use?

• Process description (e.g., incoming invoice processing, document management, contract management, digital mail delivery)
• Work instructions
• Training/instruction
• Administration

Operational documentation

How did you secure your IT infrastructure?

• Operations monitoring
• Data backup
• Change Management

Technical system documentation

Which systems did you use to implement the process digitally?

• Software
• Hardware
• Configuration of the solution used
• Interfaces

Internal control system

How did you implement the process quality assurance?

• Organisational regulations and random checks
• Roles of employees involved in the process
• Competencies and areas of responsibility

Next steps

Open a business bank account ->

Get GoBD-compliant accounting software ->

Where can you get help?

• Your local IHK can answer most of your business-related questions. They offer free support to businesses in Germany.
• A tax advisor charges a consultation fee for their advice. However, they can help you with all the tax-related questions.

Next steps

• Learn about accounting in Germany ->
• Open a business bank account ->
• Get a GoBD-compliant accounting software ->

References

• https://www.d-velop.de/themen/verfahrensdokumentation
• Neumann, Melchior. Selbstständig machen – Der perfekte Start: Der praxisnahe Leitfaden für die Selbständigkeit: Setup, Steuern, Buchhaltung, Versicherungen, Gewerbe anmelden u.v.m. (German Edition)