Retention obligation: what to keep and for how long?

The full text of this fact sheet in pdf format can be found here.

 

Everyone knows that the tax authorities require records to be kept (retention obligation). But to whom exactly does the retention obligation apply? How long do you have to keep everything and what exactly? How should you keep these documents?

You will find the answers to these questions in this note. We only describe the tax rules. We distinguish between:

  • individuals and;
  • accounting officers.

Private individuals

Non-administrative employees (private individuals) are not subject to the statutory retention obligation. In principle, they may decide for themselves when to dispose of documents.

But it is wise to keep financial records for at least five years. This is because the tax authorities are allowed to reclaim income tax and contributions up to five years after the end of a tax year. If you want to successfully challenge such an assessment, you need to have all supporting documents to hand.

A longer period applies to income received out of sight of the Dutch tax authorities (foreign income). The tax authorities can then reclaim up to 12 years back.

There are other situations where individuals would be very wise to keep documents longer than five years.

  • An annuity policy and proof of payment of premiums (until the policy pays out).
  • Details of an inheritance (especially when it is not (fully) claimable).
  • In the case of a gift on paper (debt acknowledgement), the donee must be able to prove in the context of the donor's inheritance tax return that the agreed interest was actually paid (using bank statements).

Interest on owner-occupied property

Supporting documentation for the deduction of interest and expenses relating to the (mortgage) debt on the owner-occupied property for tax purposes must be kept for five years after the (mortgage) loan has been fully repaid.

This substantiation includes all invoices and payments paid with the borrowed amount. The Supreme Court recently confirmed that the tax authorities may request this substantiation from you every year.

Accounting officers

The retention obligation applies to anyone required to keep records (the accounting officer). They are:

  • bodies (BV, NV, cooperative, association, foundation) and
  • natural persons, to the extent that they:
  • Carry on a business or profession and/or;
  • employ staff and/or;
  • making business available to companies of spouses, minor children or one's own B.V.

For private matters, the accounting officer is obviously a private individual.

Sanction

Failure to comply with the record-keeping and retention obligation carries the sanction of reversal of the burden of proof. This means that it is not up to the tax authorities to prove that you received income, but up to you to prove that you did not receive it.

How long?

Accounting officers must keep records for at least seven years. The retention period starts at the end of the calendar year or at the end of the entire duration of a project and applies with regard to basic data.

The basic data are:

  1. the general ledger,
  2. stock records;
  3. accounts receivable;
  4. accounts payable;
  5. procurement administration;
  6. sales administration;
  7. payroll administration;
  8. data relevant to the taxation of third parties.

The other details you must also keep for 7 years, but you can make arrangements with the tax authorities for a shorter retention period. CAUTION: With other government agencies, you may then still have to deal with the statutory seven-year period for this data.

Real estate

There is an exception for documents relating to immovable property. These are subject to a retention period of at least ten years. This period starts in the year in which the immovable property was taken into use by you. Incidentally, in view of the deadline for imposing additional tax assessments, it is wise to keep these documents for a further 5 years.

How?

Documents must be kept in their original condition:

  • what comes to you on paper should (also) be kept unchanged on paper;
  • what comes to you electronically should (also) be kept unchanged electronically.

Only under strict conditions may you transfer data to another data medium (conversion). Example physical documents, which are scanned or entered into the computer or if you switch computer systems.

Conversion is allowed only when the conditions below are met:

  • all data will be transferred;
  • the content is taken verbatim and transferred correctly;
  • throughout the retention period, the new data carrier is available;
  • the data must be reproducible and readable within a reasonable time.

If you do not meet the above conditions and still convert data, you are violating the legal retention obligation.

Regarding invoices that come in electronically, it is not allowed to print the files and then delete them from the computer. Unless your records are of small size so that a check of the printed files can be done within a reasonable time. Only then are you allowed to delete your data files. To avoid problems, do consult the tax authorities first.

Authenticity and integrity

The Tax Administration attaches very high importance to the authenticity (the originality of the origin) and integrity of the content of the data.

For example, the tax authorities must be able to establish during an audit that :

- an invoice in the records actually comes from the relevant supplier;

- this invoice is available in the records in the same condition in which the supplier sent the piece.

 

 

The purpose of this note is to outline a scheme. For the sake of readability, matters have therefore been simplified. VWG is therefore not liable for the consequences of actions taken or not taken as a result of this memorandum.

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