Electronic Archiving Guidelines in Switzerland

Electronic archiving of accounting data has grown significantly in recent years due to the increasing amount of digital information generated and the need to manage it efficiently and securely. In Switzerland, the adoption of e-invoicing has become common practice. In this article, we discuss some practical guidelines and requirements of electronic archiving in Switzerland, explore the benefits of e-invoicing compared to traditional paper invoicing, and answer some important questions related to tax implications and other factors.

What is electronic archiving and why is it important?

Electronic archiving is the process of storing and managing electronic documents and records, such as emails, invoices, and contracts, in a secure and accessible manner. The trend towards electronic archiving in accounting has been driven by numerous factors, including cost savings, improved efficiency, and the need to comply with Swiss regulations.

The Swiss Code of Obligations (CO) allows accounting records to be stored electronically, and in some cases actually requires it. However, there are some considerations to keep in mind when it comes to electronic archiving, particularly around the various requirements for complying with Swiss accounting regulations.

E-invoices versus paper invoices

One area where electronic archiving has become particularly relevant is in invoicing. Traditional paper invoicing processes are time-consuming, costly, and prone to errors. In contrast, e-invoicing offers numerous benefits, including cost savings, faster processing times, and improved accuracy.

E-invoices are subject to certain requirements to be considered a valid form of accounting data. Firstly, they should be retained for a period of 10 years. There should also be a way to store them in such a way to ensure their authenticity and immutability. We will discuss the various requirements in more detail in later sections.

Cloud versus server storage

There are two options for storing your electronic archives: either on the cloud or on a local server. Cloud storage involves storing data on remote servers accessed via the internet, while server storage involves storing data on servers located on-site.

Usually, storage on the cloud is the preferred method, as it provides some key benefits compared to using an onsite server. These include lower costs, greater scalability, and increased accessibility. However, there are also some concerns around data security and privacy when using cloud storage, particularly if the cloud provider is located outside of Switzerland. Another disadvantage of cloud server data is that it is usually modifiable and subject to more stringent requirements than non-modifiable data. We will discuss this in more detail later.

In contrast, server storage offers greater control over data security and privacy, as the data is stored on-site. However, this can be more expensive and less flexible than cloud storage. There is also the risk of loss of data if there is physical damage to the premises or the servers themselves.

Is e-invoicing mandatory?

In Switzerland, e-invoicing is not yet mandatory for all businesses and types of transactions, although it is becoming increasingly popular. Since January 2016, e-invoicing has been mandatory for all business to government transactions (B2G). There may also be certain sectors which are required to use e-invoicing, such as public procurement and healthcare. The Federal Finance Administration is the primary authority on e-invoicing in Switzerland.

Advantages and disadvantages of electronic archiving

Electronic archiving offers numerous benefits, including cost savings, improved efficiency, and greater accessibility. Some of the specific benefits of electronic archiving include:

• Reduced environmental impact through less use of paper,

• Faster processing times and fewer errors,

• Improved data security and privacy,

• Greater accessibility and flexibility,

• Easier and simpler to manage, as there is no need to preserve physical paperwork,

• More affordable than traditional paper archiving methods.

Electronic archiving clearly offers many advantages compared to paper methods, but does it have any downsides? The following are a few drawbacks of electronic archiving:

• There is the potential for data loss or corruption due to hardware failures, software bugs, or malicious attacks. This is why it is vital to regularly create and maintain backups of the data.

• Security risks from hacking, unauthorised access, and other threats.

• Dependency on finding a reliable technology infrastructure and software tools to manage and access the records, which is a problem if the technology later becomes outdated, unsupported, or unavailable.

• Electronic records are subject to more stringent requirements for complying with laws and regulations.

• While electronic archiving is likely to save costs in the long run, it can be initially costly because it requires significant investment in hardware, software, and hiring employees to manage and maintain records. This is where it makes sense to outsource your electronic archiving to a professional service provider like Nexova AG.

Despite these drawbacks, electronic archiving, and specifically e-invoicing, is becoming the preferred method for most businesses and makes the entire accounting process smoother and more efficient.

Electronic archiving: guidelines and requirements

Compliance with the Swiss Code of Obligations

The Swiss Code of Obligations (CO) sets out the legal requirements for electronic archiving in Switzerland. Under the CO, electronic accounting data must be stored in a way that ensures its accuracy, completeness, and authenticity. The Federal Council has also issued regulations in the Ordinance (GeBüV) regarding keeping and retaining accounting records; electronic or otherwise.

Under these regulations, accounting records may be kept on paper, electronically, or any other similar form, provided it guarantees access to the transactions and other important data, and that the records are accurate, authentic, and independently verifiable.

Let us now explore these requirements in more detail:

How to ensure authenticity of electronic accounting data?

It is imperative that electronic accounting data is guaranteed to be always authentic. There are various methods to record and store electronic accounting archives, each with their own means of ensuring authenticity.

Fundamentally, to ensure the authenticity of electronic accounting data, businesses must take steps to prevent unauthorised access and modifications to their data. This can be achieved with digital signatures, encryption, and access controls.

We can broadly separate electronic accounting data into two types: non-modifiable and modifiable. Due to their distinct nature, these types of data each have their own specific regulatory requirements for how they are managed to ensure genuineness.

Non-modifiable electronic data

Non-modifiable electronic data is data that cannot be altered or deleted, without such alterations being easily detectable. Examples of non-modifiable data include:

• Non-modifiable optical media data carriers like CDs or DVDs, which can be burned with data in a “write-once” manner. Once the data has been written, it cannot be modified or deleted.

• Encrypted data that is archived in a secure and unalterable format is usually stored in a “read-only” state to ensure its integrity is preserved.

• Immutable blockchain records: one of the greatest new developments in the world of non-modifiable data is blockchain technology, which uses cryptographic techniques to create a decentralised and immutable ledger of transactions. Once data is added to a blockchain, it becomes virtually impossible to modify or remove it without detection.

GeBüv Article 9 stipulates that non-modifiable electronic accounting data is permitted with none of the additional requirements which apply to modifiable data, which we will now explore:

Modifiable electronic data

The GeBüv states that electronic accounting records may also be stored using modifiable data carriers, but it is then subject to additional requirements and conditions. In such cases, there must be processes in place which preserve the authenticity of the data and ensure that any modifications are detectable and trackable. Viable options include:

• Digital timestamps which provide proof of the existence of certain data at a specific point in time and cannot be falsified.

• Digital signatures can be used to authenticate the integrity and origin of electronic archives. Once a document is signed using a digital signature, any alterations to the document will invalidate the signature.

• Information such as protocols for data recording, log files, etc. should be retained to add authenticity to modifiable electronic data files. There are numerous software packages that provide such features.

All the above methods of ensuring integrity should be used together for modifiable data to safely be recognised as authentic. It is important to note that cloud storage does not meet the criteria of being non-modifiable, and so is subject to these additional conditions and procedures.

Formatting requirements

Electronic accounting data must always be stored in a way that ensures its integrity and authenticity and must be able to be reproduced in a legible form. This allows any authorised individual to inspect and audit the data at any time within the required retention period.

Certain file formats lend themselves better to fulfilling this long-term storage, legibility, and accessibility requirements. Most accounting software automatically generates file formats that are appropriate for long-term electronic archiving, such as: PDF/A, XML, ZUGFeRD, and S/FTP. These files can then be stored using a non-modifiable medium such as burning onto a CD, using read-only encrypted file storage methods, etc., or it can be stored on cloud servers, following the requirements pertaining to modifiable electronic data.

Timely recording of e-invoices

It is important that digital invoices are recorded in a company’s archive system in a timely manner. Ideally, the record should be stored as soon as possible after the creation of the invoice to prevent omissions, inaccuracies, manipulations, and other mistakes. The right accounting systems and software can help to automatically digitise and store invoices immediately when they are generated, and therefore protect from the risks mentioned.

Retention period

Digitised invoices and other archived accounting data is subject to legal retention periods, which vary in each country. In Switzerland, the CO sets the minimum retention period for e-invoices at 10 years. This means that the documents may only be deleted after this 10-year period has expired. The company may open itself to investigations, penalties, or lawsuits if it is suspected that they have deliberately deleted its records before the end of this retention period.

Invoices sent by email

When it comes to the electronic archiving of digital invoices, the means of delivery of the invoice is an important factor to consider, especially when dealing with invoices sent via email.

The rules surrounding the retention of emails containing digital invoices depend on the form it takes: If the email is used only as a vehicle for delivering the invoice (i.e., the body of the email does not contain any important accounting information additional to that which is contained in the invoice itself), there is no legal requirement to store and retain the email.

On the other hand, if the email contains relevant data or information not found in the invoice, it must be retained for the minimum 10-year period along with the invoice itself. Many companies also voluntarily choose to archive emails that contain e-invoices, as it helps to more accurately document and track the entire process.

Tax and VAT considerations

General tax, and specifically VAT treatment of e-invoices is identical to that of paper invoices. In other words, they are judged to be the same for tax purposes. The important factor to bear in mind is that any accounting data, regardless of whether it is in paper or electronic form, which has an impact on input tax deduction, collection, or levy, must provide proof of authenticity and integrity.

If an invoice is not accompanied by an electronic signature or other means of ensuring authenticity, the proof of the authenticity and integrity of the electronic invoice is not provided and the invoice thus does not constitute unequivocal proof.

Nevertheless, according to the principle of free assessment of evidence, it is possible to provide the required proof through other receipts or documents. These can be order or delivery notes, accounting documents, payment vouchers or similar.

The probative value of these receipts or documents must be assessed on a case-by-case basis. Bookkeeping in accordance with commercial law principles (Art. 957a CO) and in accordance with the rules of the Ordinance on the Keeping and Retention of Business Records generally ensures that the facts relevant for VAT can be proven.