Obligation to retain private capital gains – Tax consultancy – Holzwickede – Kamen – Dortmund – Hagen – Lünen

Tradesmen and other self-employed persons

are regularly required by law to retain accounting and business documents as part of their accounting obligations; a retention period of 10 years applies (for annual financial statement documents and accounting vouchers) and 6 years for other documents.

By way of exception, retention obligations also apply to private individuals such as employees, landlords, and recipients of investment income and other income if the sum of the positive income exceeds the threshold of 500,000 euros (per spouse, if applicable). In this case, all records and documents related to income and income-related expenses must be kept for 6 years from the following calendar year.

To be noted,

that investment income (e.g. interest,dividends, capital gains on shares) is not included in the determination of the income limit for the retention requirement if it has been subject to the final withholding tax procedure (see Section 32d (1) EStG). If, on the other hand, the favorable tax assessment is applied for the capital income (e.g. to take losses into account for tax purposes), the (remaining) capital income increases the relevant value.

This regulation has now been confirmed by the Federal Fiscal Court.

In the case in question, a recipient with high income applied for a favorable tax treatment test for his investment income. The court included investment income in the threshold, which meant that it was exceeded and the conditions for the retention requirement were met. This meant that the tax office had to issue an external audit and/or provide all the necessary documentation.
could request.

If documents that must be kept are not available, the tax office can estimate the basis of taxation (see § 162 AO).

(Further comments & information on this can be found in our information letter 05/2018 under the item 2.)