Many companies have not yet realized that they will have to transmit their balance sheet data to the tax office electronically in future.

Complaints about this new requirement are heard everywhere. Businesses fear the extra time they have to spend when introducing new processes for electronic data transmission and join tax consultants and federations in criticizing the larger amount of information which the fiscal authorities intend to obtain. Policy makers praise this decision as a major step towards cutting red tape.

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September 2011

The final version of the application decree from the Federal Ministry of Finance was received. Accordingly, it will not be objected that balance sheets and income statements are transmitted electronically for the first time in the financial year 2013.

Decree of the Federal Ministry of Finance dated 28.09.2011:
Topic: „Electronic transmission of balance sheets and income statements“ (German text only)

July 2011

The fiscal authorities are expected to postpone the initial application of the e-balance sheet by another year. Accordingly, data would have to be transmitted electronically for the first time with effect from the financial year 2013. Submitting balance sheets and income statements in hardcopy form will still be accepted for the financial year 2012.

This information is based on a draft application decree by the Federal Ministry of Finance published on the internet on 4 July 2011.

December 2010

In its 878th session on 17 December 2010 the German Bundesrat (Federal Council) adopted the "Ordinance for postponing the applicability of the obligations from Sec. 5b of the Income Tax Act to a later date" [Anwendungszeitpunktverschiebungsverordnung - AnwZpvV]. Consequently, the application of Sec. 5b of the German Income Tax Act (e-balance sheet) will be postponed by one year.

Moreover, on 16 December 2010 the Federal Ministry of Finance [BMF] issued a decree titled "E-balance sheet; announcement of the taxonomy, piloting", which sets out that in the first half of 2010 selected companies will participate in an e-balance sheet pilot-test. Simultaneously, the taxonomy will be announced. After completing the pilot test a further BMF decree containing the application rules and a revised taxonomy is said to be issued.

As a matter of fact:

1. The e-balance sheet, which is the electronic transmission of balance sheet data to the tax office, has been regulated by law since 2008.
2. Getting prepared in time can save time and money.

Most deadlines and exemptions are certain

In 2008 German legislature laid down in the Tax Bureaucracy Reduction Act [Steuerbürokratieabbaugesetz – SteuBAG] that  all enterprises have to transmit their balance sheets and income statements and reconciliation statements, as the case may be, to the tax office in electronic form, i.e. they are required to file an e-balance sheet.

In early November the Federal Ministry of Finance published a draft regulation concerning the effective date for the companies’ obligation to transmit these figures electronically, according to which it is very likely that companies are under obligation to file e-balance sheets for financial years starting after 31 December 2011. Currently the 31 December 2010 is considered to be the effective date. For capital accounts of partnerships and co-entrepreneurships an electronic transmission is required only for financial years starting after 31 December 2013.

Non-compliance with these legal requirements will lead to coercive fines (pursuant to Sec. 328 et seq. of the Federal Fiscal Code [Abgabenordnung – AO]. Currently it is to be assumed that exemptions are merely granted to small enterprises and only in special hardship cases (see also exemption clauses).


In principle, the basis for decision of Federal Ministry of Finance is the classification scheme for large capital corporations. The comprehensive regulations, however, are intended to be applicable for all companies, whether large or small.

Data to be transmitted in e-balance sheet not yet certain

The Federal Ministry of Finance (BMF) plans to decide next year, which data exactly has to be transmitted and in which scope. Currently there is only a draft decree of the BMF in this respect (dated 31 August 2010). The actual decree will be issued only after the experimental games and the test phase, which is expected to be decided in December, for selected enterprises.

It is furthermore uncertain in how far the fiscal authorities will respond to the criticism by the federations. Tax consultants, auditors and entrepreneurs do not only criticize the enormous scope of data to be transmitted according to the draft, but also the Ministry’s approach to define a tax balance sheet by decree; in professional literature such procedure is considered questionable in terms of constitutional law.

The fiscal authorities will use the xbrl standard (extensible business reporting language) for recording and transmission of the electronic data, which is an xml-based language for electronic documents of financial reporting. So as to be able to provide the enterprises with suitable computer software for such electronic documents, the software companies need exact information about the nature and scope of the data, though. Without the publication of the corresponding BMF decree there will be no computer software either.

Acting now still worthwhile

Even though an obligation to file an e-balance sheet is to be expected in 2012 only, we should not put to the topic off and get back to it in late 2011 only. Also at this current stage the companies need a large number of additional information for the tax returns, which cannot be derived directly from accounting. The current organisation should therefore be examined at an early stage whether it meets all requirements in this respect.

Getting prepared in time helps to be ready at the moment when the e-balance sheet is finally introduced, with just the IT requirements left to be implemented. This would help to distribute the work required to introduce the e-balance sheet more evenly over time. But there’s more to it: A detailed tax data basis allows a better and more flexible tax planning. Additionally, it will be easier to assess the tax effect of measures planned within the company. In the field of business transactions, too, a sound tax data basis presents a valuable factor.

Companies contemplating a renewal or adjustment of financial accounting software, however, should wait until details of the future e-balance sheet are available before they decide for a final solution. This will help to avoid double work and additional cost.

What next?

• The e-balance sheet does not only mean more time to be spent on the tax return as such, but also on accounting. The accounting departments should get prepared and be in a position to work even more precisely in future.
• In future the tax offices will pay more attention to the key performance indicators. It is therefore useful to check one’s own financial data – possibly also those of previous periods – for plausibility and document this accordingly, as it is most likely that the authorities will use the collected data also in future for analysing the development of a company over several reporting periods or for comparison with competitors and ask corresponding questions. 
• A company can decide already now whether its commercial balance sheet should be transmitted together with a reconciliation statement or a tax balance sheet. 

Legal basis ...

• .. .of the electronic tax balance sheet is Sec 5b of the Income Tax Act [Einkommensteuergesetz – EstG]. Only in cases where Sec. 5b is not applied – and the documents may still be sent to the fiscal authorites in hardcopy form – Sec. 60 of the Income Tax Implementing Regulation [Einkommensteuerdurchführungsverordnung – EstDV] will be applicable. 

Electronic transmission to the fiscal authorities is required from ...

• ... all companies required to prepare financial statements (sole proprietors, partnerships and corporations) as well as
• … all businesses required to prepare cash basis accounts (only cash basis accounting pursuant to Sec 4 (3) EStG; Sec. § 60 (4) EStDV).

What needs to be transmitted electronically:

• As an option a commercial balance sheet may be filed together with a reconciliation statement or a tax balance sheet. 
• The e-balance sheet comprises a module with basic data and a module with accounting data. The content of the two modules still has to be decided by the Federal Ministry of Finance. 
• The basic data module contains general information about the reporting company and the financial statements as such.
• The accounting data module mainly includes the content of the balance sheet and of the income statement, which is probably more comprehensive as compared to the commercial balance sheet. But also information on contingent liabilities, appropriation of earnings, capital account development for partnerships and co-entrepreneurships, and the notes have to be included.
• The filing deadline for the e-balance sheet is the deadline for filing the tax return at the latest.
• Exemption clauses are applicable for undue hardship (Sec. 5b (2) EStG and/or § 60 (2) EStDV). Pursuant to Sec. 150 (8) AO an undue hardship is only granted if the electronic data transmission is economically or personally unreasonable for the taxpayer, for example if the creation of the technical means would be possible only at considerable financial expense.