This article explores everything you need to know about creating substitute receipts in Germany. We explain what a substitute receipt is, why it is important, what information it must contain, and how many substitute receipts are too many. We also provide you with a free template to help you create your own substitute receipt. Finally, we will provide important information about retention periods and input tax deduction on your substitute receipts.
What’s in this article?
- What is a substitute receipt?
- What is a substitute receipt for?
- What information does a substitute receipt need to include?
- How many substitute receipts are too many?
- Retention periods for substitute receipts
- Input tax deduction and substitute receipts
What is a substitute receipt?
A substitute receipt—also known as a replacement receipt or emergency receipt—is a document recognized in tax law that acts as a replacement for a missing invoice or receipt. In contrast, a third-party receipt is issued by an external third party and serves as direct evidence of business transactions. A substitute receipt can be used in situations where the original receipt (third-party receipt) for a business expense has been lost, became illegible, or never existed. Therefore, a substitute receipt is a key part of bookkeeping and helps to ensure correct accounting practices are carried out in accordance with Germany’s proper accounting principles (GoB).
The legal basis for creating a substitute receipt can be found in various legal texts. These include the German Tax Code (AO); the German Commercial Code (HGB); the Income Tax Act and Corporate Income Tax Act (EStG, KStG); tax policies and regulations; and the VAT Act (UStG). These regulations stipulate that professional or business expenses must be documented, and that no deduction shall be made without supporting documentation in the form of invoices and receipts. This obligation to submit evidence applies in all cases except flat rates.
What is a substitute receipt for?
A substitute receipt can be used when the original copy of a receipt can no longer be found. When receipts are used for even the smallest transactions, from parking meters to convenience stores, a substitute receipt is not just a means of creating a missing document. Rather, substitute receipts have a key part to play in the accounting process—ensuring that business expenses can be deducted even when you don’t have the original documentation to hand. Substitute receipts are also used to ensure the traceability of transactions and to support compliance with legal requirements, which helps to minimize risks during tax audits.
Ideally, substitute receipts are only used if an original receipt is not available. Although receipts are usually available for everyday expenses such as parking fees or vending machines, there are some exceptional cases in which you may need to use a substitute receipt. However, using a substitute receipt should be the exception rather than the rule, since there are receipts for most business transactions. However, if there are larger expenses or frequent use of substitute receipts, the tax office may decide to carry out a more detailed review.
In scenarios where the original receipt is missing, the substitute receipt provides a viable solution to allow business expenses to be properly recorded. This is particularly relevant if employees have received monetary compensation for business purchases, or they have had to incur expenses that should later be reimbursed. If an employee fails to obtain a receipt, a substitute receipt provides a way for them to still provide proof.
What information does a substitute receipt need to include?
In order to be recognized by the tax authorities, a substitute receipt must contain specific information that would also be found on the original invoice or receipt. These include:
- The name and full address of the payee
- The type of expense (e.g., tips, parking fees)
- The date the expense was incurred
- The amount (both individual and itemized if several items are included)
- Proof of the price if possible (e.g., via a price list)
- The reason for issuing a substitute receipt (e.g., loss, theft)
- The date of issue and the issuer’s signature.
It is important to ensure that your substitute receipts are plausible and credible, and that the expenses are business-related or professionally necessary. Using a substitute receipt should always be an exception. In order to maintain credibility and accuracy of accounting, you should only use a substitute receipt when absolutely necessary. For cashless payments, a bank statement can be used as additional proof.
How many substitute receipts are too many?
There is no fixed upper limit on the number of substitute receipts a business can use. However, excessive use can increase the risk of a tax audit. Therefore, you are advised to make every effort to obtain and archive original receipts. Businesses should strike a balance between correctly documenting their expenses and minimizing the risk of a tax audit. Small invoices of up to €250 (gross) are generally considered unproblematic, especially if payment was made by debit or credit card and can be proven by a bank statement.
If you would like to use a substitute receipt, we have provided a practical and customizable template.
Retention periods for substitute receipts
Proper storage of receipts is an important aspect of a business’s obligation to keep records. This also applies to substitute receipts created to replace missing original receipts. According to Germany’s proper accounting principles (GoB) and tax law requirements, substitute receipts must be carefully stored. The retention period is generally 10 years.
Key points of the retention period
Start of the period: The retention period begins at the end of the calendar year in which the substitute receipt was created. This means that a substitute receipt created in 2024 must be kept until December 31, 2034.
Digital vs. physical retention: Retention can take place both in digital and in paper form. The important thing is that documents can be made accessible and readable at any time and within a reasonable time frame. Digital documents must also meet the requirements for digital storage, particularly when it comes to inalterability and completeness of records.
Audit availability: During the retention period, your substitute receipts must be stored in such a way that they can be provided in the event of a tax audit. The receipts serve as proof of business transactions and must, therefore, be able to be found quickly when required.
Special cases: Different periods may apply for certain documents. Therefore, businesses are recommended to find out about specific retention periods in individual cases. However, 10 years should generally be considered the minimum period for most business documents as well as substitute receipts.
The importance of compliance
Compliance with retention periods is not only a legal requirement, but it also protects the business. In the event of a tax audit, complete and properly stored receipts are a key factor for the tax office to recognize proper accounting. They can also serve as important documentation for internal audits, as well as helping to clarify discrepancies. Carefully storing your substitute receipts and other business documents can improve legal security and help avoid running into problems with the tax authorities.
Input tax deduction and substitute receipts
Substitute receipts that are created to replace missing original invoices or receipts do not meet the formal requirements of Section 14 and Section 15 of the German VAT Act (UStG), which are necessary for input tax deduction. These regulations specify, in detail, what information an invoice must contain in order to allow input tax deduction. Since substitute receipts do not generally meet these specific requirements, they cannot be used for input tax deduction when it comes to value-added tax (VAT).
The main reasons for this are:
Lack of traceability: Substitute receipts do not provide a sufficient basis to prove the actual amount and payment of VAT by the vendor. Since the substitute receipt is not issued by the supplier or service provider, the information required for input tax deduction—tax number or VAT ID number, for example—is missing.
Formal requirements: According to the German VAT Act, invoices must contain specific information in order to be recognized for input tax deduction. This includes, among other things, the full name and address of the business providing the service and the recipient of the service; the date of the service; a precise description of the goods or services provided; the amount of VAT; and the gross invoice amount.
Consequences for businesses
Given the above, businesses must take particular care when documenting their expenses, so that they can avoid jeopardizing their input tax deduction. Failure to recognize input tax deductions can result in an increased tax burden. Therefore, it is important to carefully collate and archive all receipts for business expenses. Digital accounting systems can support this by enabling secure and systematic storage of digitized documents. Should you lose an original document, you are recommended to request a copy or duplicate document that meets the formal requirements from the supplier or service provider.
For more information and support with automating your tax processes, Stripe Tax is ready to help. To find out how Stripe can help you with your financial processes, please contact our sales team.