Tax Document Archiving

Archiving as a Critical Point of Corporate Legal Security

However, in the current legislative climate, this perspective is not only outdated but also poses a direct threat to a company's existence. Archiving tax and accounting documents is not a mere administrative task; it is the fundamental pillar of your company's legal defence in the event of an audit, dispute, or insolvency.

If the archiving system fails, it is not just a loss of paper or data. It is a loss of the burden of proof. The moment the tax authority, customs administration, or law enforcement authorities launch an investigation, your archive becomes the only shield standing between your assets and state power. Failure in this area leads to a tax assessment using so-called "aids," which is almost always the least advantageous option for the taxpayer, associated with maximum penalties.

The ARROWS law firm, with over twenty years of experience and a portfolio including more than 150 joint-stock companies, 250 limited liability companies, and dozens of municipalities, sees these scenarios daily. We see how the neglected duty to retain documents turns into criminal prosecution for distorting data on the state of business and assets (Section 254 of the Criminal Code). 

Our goal is not to cause panic, but to provide you with a robust, expert, and internationally proven framework that eliminates these risks. Given that ARROWS is insured for damages up to CZK 500,000,000, we represent a partner for our clients who not only advises but also bears real responsibility.

Do you want to be sure that your company can withstand any audit? For an immediate solution to your situation, write to us at consultation@arws.cz. 

Navigating Complex Legislation: Where Obligations and Risks Lie Hidden

Navigating archiving obligations is extremely difficult for a layperson, and even for a typical in-house counsel. There is no single "law on corporate archiving" that would consolidate all deadlines and duties in one place. The legislation is fragmented across many regulations that complement each other, but in some aspects, also conflict.

The Basic Legal Framework

The foundation is Act No. 563/1991 Coll., on Accounting, which defines the basic obligations of accounting entities. This Act requires accounting records to be kept correctly, completely, demonstrably, comprehensibly, clearly, and in a manner that guarantees the durability of the accounting records. 

However, for most of our clients who are VAT payers, the overriding legislation is Act No. 235/2004 Coll., on Value Added Tax. This Act places much stricter demands on the archiving of tax documents, especially in proving the authenticity of origin and integrity of content.

Furthermore, Act No. 582/1991 Coll., on the Organisation and Implementation of Social Security, comes into play, introducing extremely long retention periods for payroll records, and Act No. 499/2004 Coll., on Archives and Records Management, which regulates the process of document disposal (shredding) and communication with state archives. Ignoring any of these regulations opens the door to penalties.

Conflict of Deadlines: Why "10 years" is not enough

There is a myth in the business community that "everything is archived for 10 years." This generalization is dangerous. The periods vary depending on the type of document and—more importantly—on the running of limitation and preclusive periods.

It is necessary to distinguish between the archiving period set by the Act on Accounting and the period for tax assessment under the Tax Code. While the Act on Accounting may state 5 years for accounting documents, the Tax Code allows for tax to be assessed even after this period has expired if an action has been taken to initiate a tax audit, or if a tax loss has been reported. 

In such cases, the archiving period is effectively extended, and if you shred documents exactly after 5 or 10 years, you will find yourself in a state of evidentiary distress. Individual steps that seem simple (e.g., shredding after 10 years) have hidden exceptions and links to other regulations in the real world that a layperson often does not see.

Do you need a legal audit of your archiving system to be sure that you meet all legal requirements, also with regard to running deadlines? Contact us at consultation@arws.cz. 

You can read more about this service HERE.

A Detailed Guide to Retention Periods: What to Keep and for How Long

To bring order to the chaos, we have prepared a detailed overview of retention periods for key types of documents. These periods are based on the current legislation valid in 2025.

Financial Statements and Annual Reports (10 years and more)

The financial statement is the "birth certificate" and "report card" of your company for each year. According to Section 31 of the Act on Accounting, financial statements and annual reports must be kept for 10 years, starting from the end of the accounting period to which they relate.

You must keep the financial statement for 2024 at least until the end of 2035. In our legal practice, however, we at ARROWS recommend that clients keep these documents permanently. They serve as a key basis for the sale of a company (Due Diligence), when negotiating loans with banks, or for retroactively proving the company's history to investors. The loss of historical financial statements can reduce the company's valuation during an exit.

Tax Documents Relevant for VAT (10 years)

For VAT payers, this is a critical category. The VAT Act in Section 35 et seq. stipulates the obligation to keep tax documents for 10 years from the end of the tax period in which the transaction took place.

Here it is necessary to emphasize the risk associated with the reverse charge mechanism and international transactions. If you trade within the EU or use the OSS (One Stop Shop) scheme, the ten-year period is an absolute minimum, and its violation can lead to a VAT assessment not only in the Czech Republic but also in other member states.

Do you export or use OSS? We will provide you with legal advice on international taxation and archiving. Contact us at consultation@arws.cz. 

Accounting Documents and Books (5 years vs. 10 years)

The Act on Accounting sets a 5-year period for accounting documents (invoices, cash receipts), accounting books (journals, general ledgers), depreciation schedules, and inventory lists.

And this is where the most common mistake occurs. Most invoices are also tax documents for VAT purposes. If you are a VAT payer, the longer period always applies, i.e., 10 years according to the VAT Act. The five-year period thus in practice applies primarily to non-VAT payers or to internal documents that do not affect VAT. We recommend unifying the archiving period to 10 years for all primary documents to avoid errors during shredding.

Payroll Records (up to 45 years)

In the area of HR and payroll, the retention periods are the longest, and failure to comply with them can harm your employees when calculating their pensions, which can lead to claims for damages for which you, as the employer, are liable.

• Payroll sheets and pension insurance registration sheets: Must be kept for 30 years (in some cases up to 45 years for pension insurance purposes).

• Copies of registration sheets: 3 years.

• Documents for payroll (attendance, leave slips): Usually 3–5 years, unless they serve to prove pension claims.

Documents of Permanent Value

Certain documents can never be destroyed without the express consent of the state archive. These are documents of category "A" (Archive), which include founding documents, statutes, minutes of general meetings, contracts on the transfer of shares, patents, trademarks, and extraordinary documentation on the company's history. These documents form the corporate memory, and their loss can mean a legal challenge to the very existence or ownership structure of the company.

Electronic Archiving and Audit Trail: A Technical Necessity

The transition to digitalization is not a choice, but a necessity. Within the ARROWS International network, we see that paper archives are becoming unsustainable for modern corporations. However, digital archiving brings specific risks. In the eyes of the law, an electronic document is much more fragile than paper.

The Trinity of a Valid Electronic Document

For an electronic tax document (e.g., a PDF invoice) to be recognized for tax purposes even after five years, it must, according to the VAT Act (Section 34) and the European directive, meet three criteria throughout the entire archiving period:

• Authenticity of origin: You must be able to prove the identity of the supplier.

• Integrity of content: You must prove that the content of the document has not been altered by a single bit since it was issued.

• Legibility: The document must be human-readable throughout the entire storage period (beware of proprietary formats that may not be openable in 10 years).

Audit Trail: Your Lifeline

How to ensure the above conditions in practice? The most common and recommended method is to create a reliable audit trail.

An audit trail is a documented flow of information and processes that links an accounting document to the actual transaction. It is not just the invoice itself, but a chain of evidence. If you only have a PDF invoice without an electronic signature, the tax administrator can challenge it. But if you supplement it with a robust audit trail (e.g., matching it with a purchase order and a bank statement in an ERP system), you prove that the transaction actually occurred. 

The ARROWS law firm can prepare an internal directive for your company on the circulation of documents, which defines the audit trail and thus protects you during an audit. Are you missing a directive for document circulation and an audit trail? For the preparation of a tailor-made directive, contact us at consultation@arws.cz. 

Time Stamps and Electronic Signatures under eIDAS

To ensure the immutability (integrity) of documents over time, the safest technical solution is the use of qualified electronic signatures and qualified time stamps.

The eIDAS Regulation (EU Regulation No. 910/2014) introduces a pan-European standard. A qualified time stamp is cryptographic proof that a given document existed at a certain time and in a certain form. Without a time stamp, the validity of an electronic signature's certificate may expire after several years, and the document becomes unverifiable. In the eyes of an auditor, this is as if it never existed.

The investment in automated "stamping" of archived invoices is negligible compared to the risk of having your entire accounting system challenged. Our IT lawyers, in cooperation with tax advisors, can assess whether your current solution meets the requirements of the eIDAS Regulation.

Changes on the Horizon: The New Act on Accounting

The legal environment is dynamic, and a recodification of accounting legislation is currently underway, which will bring revolutionary changes. Although originally expected in 2025, the legislative process has been delayed. According to current information from the Ministry of Finance, the new Act on Accounting is expected to take effect on 1 January 2026 or 2027 at the earliest.

Despite the delay, it is necessary to prepare for stricter rules, including higher fines (up to 6% of assets) and new obligations regarding sustainability information (ESG).

While the maximum fine for certain offences has so far been set at 3% of the value of assets, the draft act provides for an increase to up to 6% of the value of assets. This draconian change is primarily aimed at large corporations, but its impact will be felt by any entity that grossly neglects its duties.

Large companies will now also have to archive and publish non-financial information related to sustainability (ESG). These reports will be subject to auditor verification, and their absence or incorrectness will be penalized as severely as errors in accounting. Our lawyers and tax advisors monitor the legislative process of the new Act on Accounting daily. Prepare your company for the changes in time – write to consultation@arws.cz. 

Disposal Procedure: How to Legally Get Rid of Documents

Many companies believe that after 10 years, they can simply load documents into a car and take them to a recycling centre or put them through a shredder. This is a fundamental mistake, especially if you are a company registered in the Commercial Register.

According to the Act on Archives and Records Management, you are a so-called private-law originator and have an obligation to offer documents for archival selection to the relevant state regional archive. This process is called a disposal procedure.

The Course of a Disposal Procedure:

• Disposal proposal: You must prepare a list of documents to be disposed of and send it to the archive.

• Assessment by the archive: Archivists will determine which documents have permanent historical value (e.g., company chronicles, significant contracts, unique building projects, annual reports) and will take them into state care.

• Disposal consent: Only after the archive issues an official consent can you physically destroy the remaining documents (such as ordinary invoices).

If you destroy documents without this process, you risk a fine under the Act on Archives and Records Management. Moreover, in the event of a dispute, you will not have an "official stamp" to prove that you destroyed the documents legally, which could be interpreted as an attempt to conceal evidence. 

This issue is much more complex in practice than it seems. Disposal plans, records management rules, and communication with the archive require administrative capacity and knowledge of file reference numbers. We often encounter companies that "forget" about the disposal procedure and, upon liquidation, find that they cannot be deleted from the Commercial Register until they fulfill this obligation.

Let us prepare a Disposal and Records Management Plan for you and represent you in dealings with the State Archive. You will save time and avoid bureaucracy. Contact consultation@arws.cz. 

The Role of the ARROWS Law Firm: Your Safety Net

From the above, it is clear that archiving is not just about "boxes in a warehouse." It is a complex legal discipline intertwined with tax law, criminal law, IT security, and international law. The ARROWS law firm deals with this agenda daily, which allows us to significantly shorten the client's time and minimize the risk of errors.

It is crucial for us that you can focus on your business while we watch your back. We remind you that the ARROWS law firm is insured for damages up to CZK 500,000,000. It is therefore safer for the client to have the matter professionally handled by us than to risk it on their own. We also commonly partner with in-house lawyers to address special issues, such as setting up compliance processes in archiving.

Conclusion

Archiving tax and accounting documents is not a passive activity. It is an active process of risk management and protection of company value. In an era of increasing digitalization, tightening regulations, and more aggressive tax audits, relying on "common sense" is insufficient. It requires expert legal and tax expertise.

If you do not want to risk your company paying for a formal error in archiving, or failing to meet the burden of proof in a tax dispute, connect with professionals. At ARROWS International, we combine a deep knowledge of Czech law with an international reach and a practical approach to business. Our portfolio includes more than 150 joint-stock companies, 250 LLCs, and 50 municipalities and regions. We pride ourselves on speed and high quality.

At the same time, we are able to connect clients with each other if they have interesting investment or business opportunities. And we are also happy to listen to interesting entrepreneurial or business ideas. If you are looking for financing or a business partner for a purchase or sale in a given area, we invite you to contact our office – consultation@arws.cz.