Electronic invoicing becomes mandatory in Germany

Published: January 30, 2024

Reading Time: 8 min

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The electronic invoice: mandatory in Germany from 2025

It has been around for a few years for suppliers to the federal government, but now electronic invoicing is also becoming mandatory in the B2B sector: from 1 January 2025, mandatory e-invoicing will apply to all B2B transactions between companies based in Germany. According to the current status, there will be no exceptions: all taxable amounts will be affected, regardless of the size or turnover of the invoice issuer or recipient. Germany is thus following the EU strategy for the prevention of VAT fraud and the simpler, more sustainable processing of invoices.

German companies now need to get to grips with this change quickly and invest in the necessary infrastructure. It is therefore high important to prepare for the changeover and take the right steps. What exactly does this mean for your company?

What is an e-invoice?

The definition of an e-invoice will be adapted and specified in the new law: Electronic invoices are defined as those invoices that are created, transmitted and received in a structured electronic format. The data record must be able to be processed automatically. Specifically, the following is required: “The electronic invoice must comply with the European standard for electronic invoicing and the list of corresponding syntaxes in accordance with Directive 2014/55/EU of 16 April 2014.” The European standard EN-16931 standardises the content and format of the data set for e-invoices across Europe. According to the BMF[1], both XStandard and ZUGFeRD format invoices from version 2.0.1 fulfil the requirements.

  • XRechnung
    XRechnung is already in use in the B2G sector (Section 4 (1) E-RechV). The structured data format is open, free of charge and machine-readable.
  • ZUGFeRD (internationally known as Factur-X)
    The ZUGFeRD format is a hybrid form of machine-readable XML file and human-readable PDF file. In the B2G area, the format is accepted from version 2.1.1 in the XRECHNUNG profile.

XRechnung and ZUGFeRD are the most common e-invoice formats on the German market. Other formats can also fulfil the above requirements as long as the required information can be extracted correctly and completely from the agreed format in such a way that it complies with EN-16931 or is interoperable with it. One example of this could be EDI interfaces. The individual formats can only be better assessed once the law has been passed and all specific requirements have been finalised.

Paper invoices, PDF invoices and other electronic invoices with a different format will be considered “other invoices” under the new definition and may no longer be used.

Digital approval processes

The data of the electronic invoice can be processed automatically. Instead of sending physical receipts through the departments and submitting them for signature, all steps are carried out digitally. This provides the opportunity for a location-independent, clear and fast approval workflow.

The advantages of this include:

  • Integrated compliance and validity checks
  • Automatic account assignment proposals
  • Simple splitting of invoices and inline calculations
  • Fulfilment of documentation obligations through automatically generated audit reports

This can look like this, for example:

Requirements for the electronic invoice

The electronic invoice must fulfil the same requirements as conventional paper invoices:

(1) Authenticity of origin: the identity of the invoice issuer must be assured

(2) Integrity of the content: The required invoice details have demonstrably not been changed.

(3) Legibility: Invoices must be human-readable. Electronic invoice formats have a structured data record that is initially not readable (without special training). The data format can be converted accordingly.

What is changing?

From 1 January 2025, all companies must issue and receive e-invoices for B2B transactions if the turnover is not tax-exempt in accordance with Section 4 No. 8-29 UstG. Small businesses must also be able to receive electronic invoices.

This applies to companies based in Germany, i.e. registered office, management or a permanent establishment in Germany that is involved in the turnover. If there is no registered office, residence or habitual abode in Germany also applies. Accordingly, VAT registration in Germany without simultaneous residency does not trigger the e-invoicing obligation.

An invoice sent as a PDF by e-mail will no longer be considered an e-invoice in future!

Transmission of the e-invoice

According to current information, no platform is required for the transmission of e-invoices between companies. The structured data formats can be transmitted directly, for example via e-mail. This will simplify and speed up the entire process.

Avoid mixed solutions: different invoice formats

The upcoming e-invoicing obligation applies to domestic B2B transactions, but other invoice formats may still be received from abroad. It therefore makes sense to identify all of a company’s current and future sales markets and plan the changeover with these different requirements in mind. Otherwise, there is a risk of throwing together various individual solutions and scattering the process.

Solutions that can handle both electronic invoice formats and conventional unstructured data in PDF format or on paper can be used universally for all use cases. This standardised processing provides transparency, reduces effort and optimises the workflow in the long term. In addition, these bridging technologies can be used over a longer period of time, they amortise comparatively quickly and are also interesting for SMEs, as they can be used efficiently with a smaller total number of documents.

You can read about the entire process of such incoming invoice processing here. As experts in this field, we will be happy to advise you personally.

Advantages of e-invoicing

In order to fulfil the e-invoicing obligation, companies will have to invest in appropriate solutions in the coming months and years. However, this investment will also bring numerous advantages:

  • More error-free processing in less time: processing times for receipts are significantly reduced. As a result, deadlines are better met (cash discounts) and transactions are processed more quickly. Direct data transfer means that there are significantly fewer errors in the process.
  • Efficient use of resources: The acquisition costs are usually amortised in a short time. However, you not only save costs and effort (e.g. by eliminating manual processing steps, printing, paper, postage, etc.): Your employees can focus better on their more complex and important tasks.
  • Sustainability: The electronic invoice makes paper, printing and physical dispatch obsolete. Approval processes can be carried out directly digitally, for example with our intuitive workflow, regardless of location and flexibly adapted to your existing process. With the right solution, you can also archive your electronic invoices digitally. You then have an optimised business process without media discontinuity.

FAQs

All B2B transactions by companies based in Germany are affected by the change. Small businesses must also be able to receive invoices electronically.

Companies based in Germany are affected, i.e. their registered office, management or a permanent establishment (involved in the respective turnover) is located in Germany. If there is no registered office, residence or habitual abode in Germany also applies. Accordingly, VAT registration in Germany without simultaneous residency does not trigger the e-invoicing obligation.

The e-invoice obligation will be introduced in 2025, when paper or PDF invoices will no longer be permitted and companies must be able to issue and receive invoices electronically. Various transitional regulations will apply until 2028 to make the changeover easier.

Between 2025 and 2028, there are several stages with certain exemptions.

  • Until the end of 2026, other invoices may be sent for sales from 2025 and 2026 as long as the invoice recipient has given their consent
  • This exemption will continue to apply until the end of 2027 if the issuing company had a maximum turnover of EUR 800,000 in the previous calendar year (2026). If the limit was exceeded, invoices may still be transmitted this year via electronic data interchange (EDI interface), even if no extraction is possible or compatibility with the European standard is given (valid for turnover from the years 2026 and 2027).

Important: The relevant point in time for the transitional regulations for exported turnover is the point in time at which the invoice is transmitted.

It must be possible to receive invoices electronically, regardless of the size, sector or field of activity of the company. If the invoice issuer does not make use of the exemptions, this must already be the case from 1 January 2025. The electronic invoice is no longer subject to the consent of the recipient.

Between 2025 and 2028, there are various transitional regulations that should make the changeover easier for companies. There are no general exceptions to the obligation; from 2028, the e-invoicing obligation will apply to all companies.

Yes, invoicing by credit note, where the service recipient issues the invoice, is still possible. As before, these must have been previously agreed between the parties.

The two formats XRechnung and ZUGFeRD from version 2.0.1 fulfil the necessary requirements for electronic invoicing. Other formats may also be valid as long as the required information can be extracted correctly and completely from the agreed format in such a way that it complies with EN-16931 or is interoperable with it. This may include EDI interfaces, for example. The final draft legislation remains to be seen for a final judgement.

Electronic invoices must contain the same information as conventional paper invoices in order to be able to deduct VAT as input tax. This includes:

  • The full name and address of the supplier and the recipient of the service
  • Consecutive invoice number
  • Tax number or UID number of the invoicing party
  • Date of issue
  • Type/scope of the services
  • Date/period of the services
  • Tax amount or reference to tax exemption, if applicable

… among others.

Here you will find further information and links to our solutions:

Digital invoice processing

Digital invoice processing with SAP

Audit-proof archiving with SharePoint / M365