Definition: Tax retention policies refer to the regulations that mandate businesses and individuals to withhold or deduct tax at source on certain types of income such as employment income, dividends, and interest. The withheld amount is then paid directly to the government. These policies aim to ensure that tax is collected more efficiently, reduce the risk of tax evasion, and ease the administrative burden on taxpayers. The amount of tax to be withheld is typically calculated based on the taxpayer's earnings and other relevant factors as stipulated in the tax laws. Source: EIRA team Additional information: Tax retention policies refer to the rules and regulations governing the period for which businesses and individuals must keep their tax records. These policies are designed to ensure that taxpayers maintain accurate and comprehensive records of their financial transactions, which can be reviewed by tax authorities if necessary. Under these policies, taxpayers are required to retain all documents that are relevant to their tax returns. This includes invoices, receipts, bank statements, payroll records, and any other documents that provide evidence of income and expenditure. The purpose of these policies is to ensure that taxpayers can substantiate the figures they report on their tax returns, and to enable tax authorities to carry out audits and investigations where necessary. The duration for which records must be kept varies depending on the specific tax and jurisdiction. However, in many cases, taxpayers are required to retain their records for a minimum of five years. This period is considered sufficient to allow tax authorities to review past transactions if they suspect that a taxpayer has underreported income or claimed excessive deductions. In addition to the requirement to retain records, tax retention policies also stipulate the format in which records must be kept. In many cases, taxpayers are allowed to keep digital copies of their records, provided they are in a format that can be easily accessed and reviewed by tax authorities. However, in some cases, taxpayers may be required to keep original paper documents. Failure to comply with tax retention policies can result in penalties, including fines and prosecution. Therefore, it is important for taxpayers to understand their obligations under these policies and to ensure that they maintain comprehensive and accurate records of their financial transactions. Example: 1. Seven-Year Retention: This policy requires businesses to retain all tax-related documents for a period of seven years. This includes invoices, receipts, payroll records, and any other documents related to income and expenses. 2. Digital Record Keeping: Some jurisdictions require businesses to maintain digital copies of all tax-related documents. This policy is designed to facilitate easy access and retrieval of documents during audits or investigations. 3. VAT Records: Businesses are required to keep detailed records of all transactions subject to Value Added Tax (VAT). This includes sales and purchase invoices, credit notes, and records of goods removed from the business. 4. Employee Records: Employers are required to retain records of all wages, benefits, and expenses paid to employees. This includes payslips, contracts, and records of any tax deducted at source. 5. Capital Gains Tax Records: If a business sells an asset, it must keep records of the sale and purchase prices, as well as any costs associated with the sale. These records are necessary for calculating any capital gains tax owed. 6. Corporate Tax Records: Companies must keep records of all income, deductions, credits, and other information related to their corporate tax returns. This includes financial statements, annual reports, and records of dividends paid. 7. Special Tax Schemes: If a business participates in a special tax scheme, such as the Flat Rate Scheme for small businesses, it must keep specific records related to that scheme. This might include records of all flat rate expenses, or records of all sales and purchases made under the scheme. 8. Non-Resident Tax Records: Businesses that have non-resident employees or operations in other countries must keep records of all income earned and taxes paid in those countries. This includes records of any double taxation agreements in place. LOST view: SV-Data Policy Catalogue Identifier: http://data.europa.eu/dr8/egovera/TaxRetentionPoliciesBusinessObject EIRA traceability: eira:DataPolicyBusinessObject ABB name: egovera:TaxRetentionPoliciesBusinessObject EIRA concept: eira:ArchitectureBuildingBlock Last modification: 2023-07-27 dct:identifier: http://data.europa.eu/dr8/egovera/TaxRetentionPoliciesBusinessObject dct:title: Tax Retention Policies Business-object