In December 2008, a law was signed in Germany to reduce the administrative burden of taxation (Steuerbürokratieabbaugesetz, or SteuBAG). Processes that used paper must now be replaced by electronic media.
In compliance with SteuBAG, Germany’s tax administration selected XBRL as the mandatory data standard for filing income statements and balance sheets. This requirement applies to all companies independent of size and industry. (However, companies that use cash-basis accounting – mostly small entities like restaurants, beauticians, etc. -- are not required to file in XBRL.) In some situations, XBRL filing will start in 2011, but the majority of companies will begin using XBRL in 2012 for filing 2011 financial statements to the tax authority.
To prepare for this transition, Germany’s tax administration has worked closely with the German XBRL jurisdiction to establish an appropriate taxonomy, including several industry-specific modules. The tax administration has invited all relevant German associations to join the working groups from the beginning to develop this taxonomy, a project called E-Bilanz.
During 2009 and 2010, the German local GAAP taxonomy was extended by positions and functionality to be in line with German tax law and regulations. One example of this work was identifying concepts that are mandatory for all companies. Subsequently, in February 2010, the tax authority announced that companies may choose to file either their local GAAP financial report plus reconciliation to tax values, or just the tax financial report.
Notably, the taxonomy contains both GAAP reporting positions and tax reporting positions as XBRL concepts. The legal context is that, in Germany, national GAAP has to be used for taxation purposes so long as no tax rule requires something different. This affords companies the opportunity to use XBRL with the same taxonomy for dual applications, i.e., filing to the business register and tax filing.
Using XBRL with the same taxonomy for both purposes aims to achieve a favorable cost/benefit relationship for the German economy, but there is the opportunity to improve this cost/benefit relationship further if XBRL is used for supervisory (i.e., regulatory) reporting too. As an example of one opportunity, consider that the reporting concepts for taxing insurance companies are based on supervisory reporting regulations. This could make it comparatively easy for insurance companies to file XBRL to their supervisory authorities in the future. It is a possible, next logical step, though it will depend on other developments, including those in the broader European context.
Within the next few weeks, German companies expect the tax authority to publish the draft taxonomy together with a proposed ruling about its usage.
(Editor's note: Readers may also enjoy Mr. Kesselmeyer's post The Use of XBRL for the German Business Register, published last week.)
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