Mandatory e-invoicing in Germany: what businesses must know
Starting 1 January 2025, all German-based companies must be capable of receiving electronic invoices (e-invoices) in the EN16931 format. The consent of the recipient will no longer be required for an invoice issuer to issue electronic invoices. Are you ready for the change?
What changes do businesses need to prepare for?
From 1 January 2025, all German-based entrepreneurs will be required to have the capability to receive, process, and store electronic invoices (e-invoices). This mandate necessitates the establishment of the necessary technical infrastructure to handle these e-invoices efficiently. At a minimum, businesses must set up an electronic mailbox for receiving e-invoices, but other transmission methods can also be agreed upon. Want to find out more about our solution? Book an appointment with the eezi-Powered by VAT IT team.
What steps should businesses take to prepare for the change?
It is important to be aware that there will not be any transitional arrangements or grace periods for recipients. This means businesses need to be fully prepared to comply with this mandate right from the start. Preparation involves updating or acquiring software systems that support the receipt and processing of e-invoices in the required EN16931, structured format.
Non-compliance with the new e-invoicing regulations can result in fines and penalties. Although Germany has not fully clarified the type of penalties and fines for e-invoicing non-compliance, it is crucial to stay updated on any announcements or guidelines regarding potential penalties.
Companies should start planning and implementing these changes well in advance to ensure a smooth transition and avoid any disruptions in their invoicing processes. This proactive approach will ensure businesses stay compliant and maintain efficient financial operations. If it still sounds daunting, don't worry – we are here to make the transition eezi-er for you!
Legal basis
The German Bundestag passed the Growth Opportunities Act, which mandates invoicing between companies, on November 17, 2023. Following several amendments and a revision by the Federal Council’s Mediation Committee on February 21, 2024, the law received final approval from the Federal Council on March 22, 2024. This ensures that the mandate will be implemented as scheduled.
As detailed in our previous blog post, the German Ministry of Finance (BMF) issued a draft letter in June 2024, guiding the upcoming e-invoicing mandate.
The letter, titled Ausstellung von Rechnungen nach § 14 UStG; Einführung der obligatorischen elektronischen Rechnung bei Umsätzen zwischen inländischen Unternehmern ab dem 1. January 2025 (Issue of invoices in accordance with Section 14 Value Added Tax Act; Introduction of mandatory electronic invoicing for transactions between domestic businesses from January 1, 2025) outlines the requirements and clarifies the terms for the forthcoming B2B e-invoicing mandate. Here are the main points:
- BMF outlined timelines for the implementation of mandatory e-invoicing in Germany (see more details on this later in the post).
- BMF explained when transactions will be exempt from e-invoicing obligations:
- Invoices up to €250
- Tax-free services under VAT Act Section 4 (numbers 8-29)
- Travel tickets
- BMF outlined the acceptable formats for e-invoicing:
· An electronic invoice must adhere to the EN 16931-2 syntax, such as Universal Business Language (UBL) or UN/CEFACT Cross Industry Invoice (CII), or any format agreed upon by the issuer and recipient, if it is interoperable and complies with the EN 16931-1 semantic data model. ZUGFeRD, a PDF/A-3 hybrid with embedded CII, also meets the EN 16931 standard from version 2.0.1 onwards and is widely used in Germany.
· Starting January 2025, invoices in formats like paper, PDF, and non-compliant electronic formats will be classified as “other invoices” and will be allowed only until the end of 2026, after which they will be invalid.
4. Transmission: E-invoices must be sent electronically, via email, an electronic interface, or a customer portal.
· Businesses can use external service providers for creating or transmitting e-invoices, and these providers must comply with VAT law requirements.
· Draft guidance allows businesses to resend e-invoice files multiple times if they are identical copies. However, providing the XML file on an external storage device, like a USB stick, does not meet electronic transmission requirements and is considered a different type of invoice.
· From 1 January 2025, domestic businesses must be able to receive e-invoices. If the recipient refuses or is unable to accept an e-invoice, they cannot demand an alternative invoice. The issuer’s VAT obligations are fulfilled if they issue an e-invoice and make a verifiable effort to transmit it properly.
5. Record-Keeping: Taxpayers must store the structured part of an e-invoice in its original form, ensuring it remains immutable. They must also ensure that tax authorities can evaluate it electronically. Any accompanying documents containing important tax records, like booking notes, must also be stored in their original form and meet immutability requirements.
The draft letter is now open for comments, with the final publication planned for the beginning of the fourth quarter of 2024, and the final version of the guidance is expected to be published at the beginning of Q4 of 2024. The draft guidance is available here (in German only).
Future developments to be aware of and prepare for include:
- Starting from January 2025, taxpayers will be required to have the capability to receive structured electronic invoices (e-invoices). However, there will be no obligation to issue structured e-invoices, and businesses will not need to obtain the recipient’s consent. If the invoice recipient refuses to accept an e-invoice or is not technically able to do so, he or she has no right to an alternative invoice being issued. In this case, the invoice issuer's VAT obligations are deemed to have been fulfilled if he or she has issued an e-invoice and has demonstrably made efforts to ensure that it has been sent correctly.
- Until the end of 2026, businesses can still send invoices as paper or in other electronic formats if the recipient agrees. There is no need for a formal or written agreement but both parties must be in agreement on the format. This agreement can be part of general terms and conditions or simply understood between both parties.
- By December 31, 2027, invoices for transactions made in 2027 can still be issued in paper form or non-structured electronic formats if the recipient agrees and if the issuing company’s turnover in the previous year was less than €800,000. If the company’s turnover exceeds €800,000, they must issue structured e-invoices starting from January 2027.
These developments highlight the importance of early preparation and adaptation to ensure compliance with the new regulations. Businesses should start planning and implementing the necessary technical infrastructure and processes well in advance to avoid any disruptions and ensure a smooth transition to the new e-invoicing requirements.
Contact our team of experts to ensure early compliance! Stay updated by following our blog for the latest news.
