E-Invoice: Requirements for Mandatory E-Invoicing in Germany
Published: June 25, 2024
Reading Time: 11 min
Contents
- E-Invoice, PDF Invoice & Paper Invoice – These are the Differences
- Optimizing Costs and Workload
- Formats for the E-Invoice
- The Most Important Legal and Organizational Requirements for Electronic Invoicing
- What Mandatory Information is Required for an E-Invoice?
- Introducing Electronic Invoicing: Step by Step
- E-Invoice Checklist: What to Consider During the Changeover
Inhalt
- E-Invoice, PDF Invoice & Paper Invoice – These are the Differences
- Optimizing Costs and Workload
- Formats for the E-Invoice
- The Most Important Legal and Organizational Requirements for Electronic Invoicing
- What Mandatory Information is Required for an E-Invoice?
- Introducing Electronic Invoicing: Step by Step
- E-Invoice Checklist: What to Consider During the Changeover
The Electronic Invoice: Requirements for Mandatory E-Invoicing in Germany
E-invoicing has been mandatory for all federal suppliers in Germany since 2020. It will now also be introduced in the B2B sector from January 1, 2025 as part of the Growth Opportunities Act. This means that from 2025, all domestic companies in the B2B sector must be able to receive and process electronic invoices (e-invoices). There is a transitional arrangement for issuing e-invoices until 2027, which is intended to facilitate the switch to the new system.
Switching to e-invoices not only offers financial benefits, but also the opportunity to optimize and automate your financial accounting. The use of e-invoices also brings a number of logistical advantages, such as processing without media discontinuity, shorter throughput times, less paper consumption and reduced storage requirements for archiving invoices.
There are a number of requirements to consider when switching to electronic invoicing. We have summarized these for you below.
You can also find further relevant information in our article on mandatory e-invoicing in Germany.
E-Invoice, PDF Invoice & Paper Invoice – These are the Differences
The definition of an e-invoice often leads to confusion. This is probably due to the fact that, according to Section 14 of the German Value Added Tax Act (UStG), any invoice that is issued and received electronically is an electronic invoice. According to tax law, a simple PDF invoice that you send to your service recipients by email is therefore also considered an electronic invoice. However, this definition does not correspond to the new guidelines that come into force on January 1, 2025.
The most important difference between an e-invoice and a conventional PDF or paper invoice is the data format. According to the E-Invoice Regulation (E-Rech-V), which will come into force in the B2B sector from January 2025, e-invoices must meet the requirements of the international standard EN16931. This means that only invoices issued in a structured electronic format (e.g. XML, UBL, EDIFACT) are considered e-invoices. Electronically issued invoices that do not contain a structured data set, such as PDF or image files, are therefore no longer permitted. Specially developed formats that do not comply with the official standards are also not normally permitted.
The structured format of e-invoices enables automated electronic data processing, which is associated with high cost and time savings in the long term.
Optimizing Costs and Workload
You can save a considerable amount of money on both outgoing and incoming invoices. For example, the costs for printing, enveloping and sending invoices are eliminated for outgoing invoices. Your employees’ workload is also reduced as invoices are issued and archived automatically. When receiving invoices, you save on process costs, as processes such as processing, checking and archiving the invoice are handled automatically.
Thanks to the automatic and electronic processing of procedures, you not only save money, but also time. As less space is required for archiving invoices (folders, rooms, buildings, etc.), your employees are spared long trips to the archive and time-consuming searches for invoices. Processes such as the processing of complaints, entry into invoice receipt monitoring and dunning runs and the selective retrieval of invoices during a tax audit can also be handled more quickly thanks to automatic processing. These time savings allow you and your employees to make better use of your time.
Formats for the E-Invoice
The two most commonly used standards for electronic invoices in Germany are XRechnung and ZUGFeRD. The EDI format, which has been in use for several decades, can also still be used for the time being. However, as EDI invoices do not always meet the requirements of the EN16931 standard, it is not yet clear whether this format can continue to be used after 2027.
The XRechnung is a pure XML file that contains all relevant invoice information. XRechnung has already established itself as the standard for exchanging invoices with public clients in Germany. It can only be read by machines and only be read by humans after conversion or with appropriate training.
ZUGFeRD (“Zentraler User Guide des Forums elektronische Rechnung Deutschland”) is a standard for electronic invoices developed in Germany. ZUGFeRD combines structured electronic data (XML) with the visual representation in the form of a PDF/A-3 document. By combining these two file formats, the invoice can be read by humans (PDF) as well as read by machines and processed automatically.
The Most Important Legal and Organizational Requirements for Electronic Invoicing
By switching to an electronic invoice format, you can optimize your accounting and save time, space and resources. However, there are some important requirements that you should bear in mind when making the switch. Electronic invoices, like paper invoices, must meet certain requirements in order to be recognized for tax purposes. The most important guidelines for e-invoices are Section 14 of the German VAT Act, EU Directive 2014/55/EU and the Principles for the Proper Keeping and Storage of Books, Records and Documents in Electronic Form and for Data Access (GoBD).
Time Frame of the Mandatory E-Invoicing
From January 1, 2025, every company based in Germany must be able to receive e-invoices. However, the obligation to issue e-invoices will only be introduced gradually. The following timetable applies for the time being:
Tax Law Requirements for an (Electronic) Invoice
Every invoice, whether electronic or in paper form, must meet three requirements according to the UStG:
(1) Authenticity of origin: the identity of the invoice issuer must be clearly ensured
(2) Integrity of the content: Proof that the required tax information has not been changed after receipt of the invoice.
(3) Legibility: An invoice is considered legible if it can be read by humans. This is particularly important for formats such as XRechnung, as these can only be read by machines in their original form and must therefore first be converted. Readability must be guaranteed during the retention period stipulated by tax law (ten years).
In addition, the recipients of your electronic invoice must agree to the transmission procedure. You can obtain this consent explicitly, through prior or subsequent communication. However, consent is also deemed to have been granted if the invoice recipient pays the invoice without objection.
Control Procedure
Your company must have an internal control procedure in place to be able to prove the authenticity of the origin and the integrity of the content of the invoice. The control procedure must provide a reliable audit trail that establishes a traceable link between the invoice received and the service provided.
Since there are no legal requirements for the type of control procedure, this can be determined individually by the entrepreneur. In order to avoid media disruptions, it is advantageous to carry out this control procedure electronically. However, you are also free to use a manual procedure.
Since such a procedure must also be carried out for paper invoices, in most cases it is not necessary to introduce a new control procedure when switching to an e-invoicing system.
Data Storage and Web Download
In order to prove receipt of the invoice, the emails or other relevant data should be saved. If you use a document management system (DMS), electronic documents are automatically time-stamped, which allows you to prove receipt of the invoice – but you should still not delete the corresponding emails, as they often contain important additional information that could be relevant for a tax audit.
Invoice receipt must also be documented if an invoice is downloaded online via a web download.
Electronic Archiving
Just like paper invoices, e-invoices must also be properly archived. According to the UStG, they must be kept unchanged and legible for at least ten years (Austria: seven years) (from the end of the calendar year) for possible audits. The authenticity of their origin, integrity of their content and legibility must be guaranteed throughout the entire retention period. The necessary programs must therefore always be available, especially for the legibility of e-invoices.
When archiving, the original condition of the invoices must be preserved and verifiable. The most important regulations to be followed are Section 14 of the German VAT Act (UStG), Sections 146, 147 and 200 of the German Fiscal Code (Abgabenordnung) and the Principles for the Proper Keeping and Storage of Books, Records and Documents in Electronic Form and for Data Access (GoBD).
Exceptions to the E-Invoice Obligation
Invoices with a gross amount of less than €250, tickets and tax-exempt services according to § 4 No. 8 to 29 UStG are exempt from the e-invoice obligation.
What Mandatory Information is Required for an E-Invoice?
Business invoices are important documents for both service providers and business customers. In order to be recognized under tax law, they must comply with the provisions of the Value Added Tax Act. The same requirements apply to e-invoices as to paper invoices. However, the E-Invoicing Regulation (E-Rech-V) specifies additional requirements for e-invoices, which must also be included in the invoice.
According to Section 14 of the German Value Added Tax Act (UStG), every invoice must contain the following information, among others:
- the full name and address of the service provider(s)
- the full name and address of the service recipient(s)
- the tax number or VAT identification number of the service provider(s)
- the invoice date
- a consecutive invoice number
- description and quantity of the products supplied or the service provided
- the invoice amount
- tax rate and tax amount, or a reference to any tax exemption
In addition to these VAT-related invoice components, E-Rech-V § 5 stipulates that e-invoices must contain the following additional information:
- a “Leitweg-ID” – identification number
- bank details of the invoice issuer(s)
- terms of payment
- De-Mail or e-mail address of the invoice issuer(s)
Introducing Electronic Invoicing: Step by Step
When introducing e-invoicing in your company, there are a few prerequisites that you need to consider. First of all, your system must be prepared for processing e-invoices.
Outgoing Invoices
Follow the steps mentioned above when creating and processing outgoing invoices. Create separate directories for clear processing.
E-Invoice Checklist: What to Consider During the Changeover
There are a variety of software solutions for sending, receiving and processing e-invoice formats. When choosing software, you should consider factors such as the size of your company and the complexity of the accounting processes. There are a few points to consider when switching to an e-invoicing system.
- First, check whether the process in your company can stand up as an audit trail during a VAT audit. If not, you should optimize your audit trail.
- Ask your customers whether they agree to electronic invoicing. Take this opportunity to clarify the data format.
If you receive a request for an electronic invoice from your suppliers, you should consider the following requirements:
- Check whether your system can receive, read and process the selected data format.
- Check whether you need additional software and whether the storage capacity of your system is sufficient.
- Check whether you need to make any changes to your audit trail.
- Check whether your company’s current hardware is powerful enough for processing and archiving.
If you use a tax consultant to handle your accounting, please consult with them about the procedure for receiving invoices electronically and clarify any additional requirements.
When introducing e-invoices, preparation is everything. You should therefore prepare yourself and your employees for the changeover, including all the requirements, as early as possible. There are already a number of training courses and seminars that will provide you with detailed information on the topic.
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