BE AWARE HOW LONG YOU HAVE TO KEEP AND RETAIN DOCUMENTS IN YOUR COMPANY

José DutilhManaging Partner, LeQuid, The J.Dutilh Law Firm For Social Impact

A company’s documentation can be very varied and we often wonder how long we must hold on to it. This newsletter compiles the most relevant time limits that companies must observe in retaining documentation.

Keeping accounting and commercial documents: in general, 6 years

There exists a legal obligation to keep a company’s documentation for a term of 6 years (article 30 of the Commercial Code). This retention obligation affects records of all types and nature, correspondence, documentation and supporting documents concerning the company.

This term of 6 years starts as from the last entry recorded in the books, provided there exists no other provision that extends such term.

Other terms for retaining documents:

  • Money-laundering. The Money-Laundering Prevention Act lays down a minimum retention period of 10 years for documentation that substantiates compliance with legal obligations in this respect. Specifically, it refers to copies of documents required in application of due diligence measures and an original or a copy of documents or records that sufficiently demonstrate operations and participants.
  • Data Protection. The General Data Protection Regulations stipulate that personal data should only be kept for the time necessary for the purposes of the processing for which it was collected. Furthermore, it requires a date to be set for destroying any documents that contain personal data, such as: clients, workers, suppliers …
  • Clinical histories. Healthcare centres are obliged to keep the clinical documentation for proper patient care for the appropriate time in each case and for at least 5 years as from the date of discharge from each healthcare process. However, data from the clinical history relating to the patient’s birth, the results of biometric, medical or analytical tests that determine a connection of maternal filiation, shall not be destroyed, and are transferred, once the patient’s death is confirmed, to the final records of the corresponding public authority.

Limitation and retention of documents

Sometimes, the same document can be used in exercising different types of actions which are subject to different limitation periods. A brief summary:

Matter

Limitation Period

Accounting and Commercial

6 years

Tax

·      4 years, for the purpose of tax debts/tax reclaims

·      10 years, for the purpose of verifying offset tax-loss carryforwards or deductions applied

Civil Liability Actions

5 years, in general

Labour

3 years, for the purpose of infringements

Social Security

4 years, for the purpose of infringements

Occupational Hazard Prevention

5 years, for the purpose of infringements

Offences Against the Tax Authorities and the Social Security

10 years

 

We must differentiate the document retention period (generally 6 years) from the limitation periods. In other words, for example, although the labour-related limitation for the purpose of infringements is 3 years, the corresponding supporting documentation must be kept for at least 6.

Tax-Related Documentation

We know the general period of limitation established by the General Tax Act is 4 years, calculated as from the end of the period for filing the declaration, so that the Tax Agency can determine the tax debt and demand payment thereof, or so that taxpayers can request and obtain a refund of their taxes.

Nevertheless, this period may be interrupted by any action of the Tax Agency or by taxpayers themselves, so we must verify whether the period of limitation has been interrupted. Furthermore, we must take into account other considerations and terms:

  • Deductions and tax losses. Since 2015, the period of limitation for verifying tax loss carryforwards and deductions is 10 years as from the end of the term for filing the declaration in which they were generated.
  • Loans. They must be kept until reimbursed or cancelled.
  • Guarantees. They must be kept until they have been cancelled.
  • Investment assets. They must be kept until the term for value added tax adjustments has finalised (which may be up to 9 years).
  • If the company is entitled to amortise certain costs or assets and record the corresponding costs in the income statement for future accounting periods, the inspector general is also entitled to verify the origin of such records, although they arise from prescribed accounting periods.

The verification activity may also involve obligations to provide information from third parties. Accordingly, all documentation with tax implications should be kept for the business period of six years.

Finally, we should remember that non-compliance with the Tax Agency’s information requirements can give rise to a penalty of 2% of turnover (minimum of 20,000 and maximum of 600,000 euros).

Civil liability actions

Since 2015, the period of limitation for personal actions that do not have a special term applicable has been reduced from 15 to 5 years, calculated as from when it was possible to exercise them. These types of actions are generally related to companies’ commercial activities.

Companies assume all liabilities arising from their activity, which may be claimed against in the future by third parties. Therefore, such companies will have an interest in retaining, during that period, the documents that support their actions.

Labor-related documentation, on matters of Social Security and Occupational Hazard Prevention

Retention of labour-related documents (labour contracts, visitors’ books, minutes of the Company Work Council’s meetings, notifications on opening the workplace, contracts made available through employment agencies, …), on matters of Social Security (notifications of registration and termination with the Social Security, documents substantiating contributions, …) or Occupational Risk Prevention (agreement with the Prevention Service, Prevention Plan, Preventive Activity Planning or Emergency Plan, documentation regarding information and training for workers, risk assessment, list of work accidents, records of work accidents or occupational illnesses …) are subject to the abovementioned minimum common term of 6 years.

However, the general statute of limitations for labour-related offences is 3 years, Social Security offenses prescribe after 4 years and occupational hazard prevention offences prescribe after 5 years, in very serious cases.

Offences against the Tax Authorities and the Social Security

For offences against the Tax Authorities and the Social Security, the Criminal Code stipulates a statute of limitations of 10 years.