Digital tax inspection and the German Principles of Data Access and the Auditability of Digital Records (GDPdU)

In carrying out an external tax inspection (company audit) or a search of company premises for VAT purposes, the tax office may consult your company’s electronic accounting data and study this data closely and efficiently using appropriate software.

The tax authorities have far-reaching access rights in respect of your company data here. As well as having direct access (Z1) and indirect access (Z2) to the taxpayer’s computer system, the tax authorities can also demand that all tax-relevant data be handed over (Z3) on a data carrier (CD/DVD). The rules governing the powers of the tax authorities are set out in detail in the German Principles of Data Access and the Auditability of Digital Records (GDPdU), a set of administrative instructions issued by the German Federal Ministry of Finance in 2001.

If you are unable to provide the data demanded during the company audit within a reasonable time or if the accounting data are held on a server outside Germany without prior consent having been given, then the tax authorities may levy a default penalty of up to EUR 250,000.

As can be seen from the PwC study entitled “Digitale Steuerprüfung: Herausforderung oder Erleichterung?” (“Digital tax inspection: help or hindrance?”), the tax authorities now make use of their right to access data in the vast majority of company audits, and the trend is rising. It is therefore becoming increasingly important for companies to prepare for the demands of digital auditing in good time.

The expertise and experience of PwC mean that your company can be fully prepared and supported in all aspects of digital auditing. With our GDPdU specialists Heiko Schäfer and Dr Tobias Taetzner, the team of experts at PwC has the skills and ability to help your company in any audit and ensure that it meets all compliance requirements.

Our comprehensive service is tailored to your individual requirements:

Data & systems

Identification: Do you know your tax-relevant data?

The tax authorities may only demand access to tax-relevant data. This data should therefore be identified and segregated in advance because, without a clear division, there is the risk that data that are protected under other legislation (e.g. the German Federal Data Protection Act) or that should not in principle be made accessible to the auditor for other reasons will be used. “Isolating” the tax-relevant data in this way ensures that data that are not subject to data access requirements are not used.

Data storage: Is electronic usability guaranteed?

Tax-relevant data have to be stored for the statutory archiving period of at least 6 or 10 years in electronically usable form. When making changes to an IT landscape (e.g. retiring old systems or implementing new ones), it is necessary to ensure that usability is not restricted. We will help you identify the best possible solution for long-term archiving at your company and ensure effective electronic usability of data to the minimum degree required by law.

Documentation: Is your system documented?

The tax office may ask to see the documentation for your systems and procedures. We will help you document your systems and procedures efficiently and thereby meet your duties under commercial and tax law.

Data access: Do you have a plan for ensuring data access?

When carrying out an audit, the tax office can use all three forms of access together. We will help you provide Z1, Z2 and Z3 access for all tax-relevant systems. Appropriate permission planning ensures that access is restricted to tax-relevant data for the audit period in question.

Preparation for and assistance with digital audits

GDPdU-readiness: Are you ready for the digital audit?

Our GDPdU-readiness check provides you with a meaningful and objective assessment of the GDPdU measures you have taken to ensure the successful handling of digital audits. Our comprehensive analyses and clear recommendations will help you draw up a targeted GDPdU strategy, address any weaknesses in your processes and computer systems more efficiently, and reduce risks. You will then be as well prepared as you can be for any future digital audit.

Function test: Can your company provide the tax-relevant data required?

Given the computer systems used at your premises and the general technical capabilities available, our experts will assess how your company can provide for the forms of access needed. This examination will ensure that the technical requirements for data export are also met. Your company will therefore be operating properly and will be able to respond adequately to the audit.

Completeness test: Can your company supply all of the tax-relevant data required?

The exported data are checked for completeness by our experts. To do this we use the data analysis software IDEA, which is also used by the tax authorities. This avoids the need for protracted inquiries, prevents technical difficulties and speeds up the auditing process.

Data analysis: What can the auditor discern from your data?

Working closely with your company, we carry out standard tax assessments and general assessments. The comprehensive data analysis carried out by our specialists makes it easier for you to estimate the consequences of the audit and avoid any unexpected outcomes.

Relocating accounting operations

Accounting abroad: Have you taken appropriate account of the GDPdU?

When moving accounting data abroad, it is particularly important to ensure that the data can be accessed. There is the risk that consent to the relocation previously granted by the tax authorities will be withdrawn. We will assist you in all phases of a move, from requesting the necessary consent to proving that the legal conditions for the move have permanently been met.

What are the advantages and benefits to you?

• Only those data for which a duty of disclosure exists are made accessible to the auditor
• Guarantee that data can be accessed at any time and hence avoidance of default penalties
• Support before, during and after the audit
• Implementation and documentation of provision processes and technical implementation
• Transparency as regards the technical options in digital auditing
• Security in relation to detection risk resulting from digital auditing
• No nasty surprises through regular analysis of electronic data
• Opportunity to address problems recognized
• Reduced audit times and improving the general climate of the audit
• More efficient use of company resources