Electronic invoices are only eligible for VAT input tax deduction under certain conditions. Electronic accounting records must also be kept in accordance with certain requirements. Sandra Maurer, a fiduciary expert, explains.
It is essential for a company to be able to prove the authenticity and integrity of data that is transmitted and stored in paper or electronic form. In the case of value added tax (VAT), such proof can be provided by electronic signature or by means of other supporting documents. These can be purchase orders, delivery notes, accounting entries, proof of payment, etc. By keeping the books of account according to the principles of commercial law and the rules defined in the Ordinance on the keeping and preservation of books of account, it is generally possible to demonstrate the relevant information. Sandra Maurer, fiduciary expert and director of Tax&Company in Männedorf (ZH), explains how SMEs can fulfill their obligations in this area simply and practically.
What data carriers are allowed for the storage of invoices and accounting documents?
Sandra Maurer: In principle, all data carriers currently available on the market are allowed. Several questions arise in the case of long-term storage, and when data must be stored in accordance with the Swiss Code of Obligations and the Ordinance for keeping and retaining accounting records (Olico):
- For example, how can the integrity and authenticity of data recorded on a modifiable data carrier be guaranteed?
- How can premature or accidental deletion be prevented?
- How are processes properly documented?
In addition, the following rules must be observed and followed:
- The data must be kept for 10 years.
- The authenticity and integrity of the data must be provable.
- It must be possible to prove when the information was recorded without the possibility of modification or falsification.
- The readability of the data must be guaranteed.
- Data must be retrievable within a reasonable time.
- Information subject to data protection must be stored in encrypted form.
- Responsibility lies primarily with management.
These requirements can only be met through the use of appropriate software. The acquisition and maintenance of such software are costly. SMEs must therefore be aware that electronic archiving of invoices and accounting documents in accordance with Olico requires adequate planning, both in terms of human and financial resources. This is also certainly one of the reasons why many SMEs continue to opt for physical storage.
What can a small business do if it wants to minimize its bookkeeping expenses and costs?
Maurer: According to Olico Article 9, electronic media are permitted, without additional requirements, if they are non-modifiable, i.e. if they cannot be modified or erased without the operation being detectable on the data carrier itself.
SMEs can also generate non-modifiable files, such as PDF/A, from their electronic accounting records (books of account, invoices, salary slips, etc.) and then burn them to non-modifiable data carriers (CD-ROM, DVD-ROM, etc.).
Are some file formats more suitable than others for long-term retention? What are the retention periods?
Maurer: The PDF/A file format is ideal for the long-term preservation of digital documents. It fulfills essential requirements such as small file size, full-text searchability, and within the PDF range, it is the format that contains the most tools and solutions.
As mentioned above, the retention period is 10 years. Article 958f of the Swiss Code of Obligations defines the legal basis for this.
If a company saves its data on modifiable electronic media (e.g. on a cloud), what should it do?
Maurer: It must ask the cloud solution provider to confirm that data stored in the cloud is easily retrievable for 10 years. It should also be noted that a cloud solution does not meet the requirements of Olico Article 9, paragraph 1, letter a. Since the cloud is not an unmodifiable data carrier, data retention on the cloud is subject to the more stringent requirements concerning modifiable electronic media defined by Olico Art. 9, para. 1, letter b, and para. 2. Verification that the use of cloud-based data management software (DMS) can ensure proper archiving of documents is recommended, or as mentioned earlier, electronic accounting documents can be burned onto a non-modifiable data carrier.
What are the VAT requirements for invoices without an electronic signature?
Maurer: Whether available in paper or electronic form, transmitted and retained data that impact input tax deduction or tax collection or tax levy have to provide proof of authenticity and integrity. This is deemed to be proven if the principles of bookkeeping as defined in Art. 957 et seq. CO are complied with. Paper and scanned paper invoices, and electronic invoices are all considered the same, as the principles of bookkeeping are applicable to all types of accounting documents.
Digitalization is of interest at a policy level. Which policy issue is currently important for SMEs?
Maurer: National Councilor and TREUHAND|SUISSE President Daniela Schneeberger's motion 22.3004 "Bookkeeping. Facilitating digitization" has been widely supported. On March 2, 2022, the National Council unanimously adopted the motion "Facilitating digitization". With this motion, the Federal Council (who proposed the rejection of the motion in February 2022, editor's note) is instructed to amend the Ordinance on the keeping and preservation of books of account and other relevant acts to facilitate the process of digitizing account keeping. It must be possible to store documents on modifiable data carriers without electronic signatures or similar devices, provided that the authenticity and integrity of the data can be established in accordance with the principles of proper accounting as set out in Art. 957 et seq. CO. The use of electronic signatures or similar devices should be optional. The implementation of this motion by the Federal Council would make it much easier for SMEs to digitize their accounting. Instead of legal uncertainty, SMEs would be able to accept digital documents with ease. This could lead to a reduction in costs and increase the efficiency of internal processes. The motion will now be sent to the Council of States. The Council of States' Legal Affairs Committee will first rule on this motion before it is dealt with by the Council of States. The earliest this will occur is the summer of 2022, but possibly not until the fall.