paper bill
The global trend to mandate e-invoicing is gaining momentum as governments around the world realize the transformative potential of digitalization in modernizing tax administration processes. With increasing emphasis on transparency and compliance, mandatory e-invoicing regulations are being introduced to standardize billing operations and combat tax evasion.
Germany is actively embracing this global trend. The commitment to make electronic invoicing mandatory was originally outlined in the current federal government coalition agreement in 2021. Then, on July 25, 2023, Germany received approval from her EU Council to introduce regulations mandating the use of electronic invoices. In October 2023, the federal government proposed the Growth and Opportunity Act (Vahastam Chance Gesets), aimed at promoting business growth, simplifying taxes, and ensuring tax fairness. This law mandates the introduction of electronic invoicing for domestic business-to-business (B2B) sales. The Bundestag (lower house) approved the law on February 23, 2024, and a month later, the Bundesrat, Germany’s upper house representing the federal states, finalized the parliamentary process. In summary, the new law requires the issuance of electronic invoices for domestic B2B sales from January 2027 for companies with a turnover of more than 800,000 euros and from January 2028 for companies with a turnover of less than 800,000 euros. It starts from. However, all businesses must be able to receive electronic invoices from January 2025. The German government’s strategy is in line with the EU proposal for his VAT in the Digital Age (ViDA), as it plans to adopt the European e-invoice standard EN 16931. The law does not include an obligation to report data to tax authorities.
Current billing rules in Germany
Companies operating in Germany must issue invoices when supplying goods or services to other companies. However, an invoice is not required for the provision of certain exempt services, such as financial transactions, insurance transactions, and educational services. Even small and medium-sized enterprises (klein internemer) You are not allowed to display or charge VAT, but you must issue an invoice. Although there is no general obligation to issue invoices to non-corporate customers, a German company may be required to invoice goods it sells to individuals in other EU countries if it does not use the Union One Stop Shop (OSS) scheme. An invoice must be provided. The OSS scheme allows businesses to register in one EU member state for all their sales of goods and services within the EU to consumers in other EU countries.
Invoices can be issued electronically, provided the authenticity of the issuer, integrity of content, and readability are guaranteed. Currently, e-invoicing is only mandatory for public contracts. For other transactions, electronic invoices must be approved by the recipient. The current definition of e-invoice is broad and includes unstructured formats such as PDF files.
For sales within Germany, companies are obliged to issue an invoice to another company within six months of providing goods or services. If he supplies goods or services to a company in another EU member state, he must issue an invoice within 15 days from the end of the month in which the supply took place.
German VAT law requires detailed content requirements for invoices, such as seller and buyer information, unique sequential invoice numbers, VAT rate, taxable amount, split according to the applicable VAT rate, and total VAT payable. The outline has been established. Simplified invoices are subject to less stringent requirements and can be issued if the total amount (including VAT) does not exceed 250 euros.
Although it is not required to include payment due date or bank account details on your invoice, we recommend that you do so. If no deadline is specified, the customer must pay within 30 days from the date of invoice issue. There is no legal obligation to issue invoices in German, and customers cannot request invoices in German. However, if the invoice is issued in a foreign language, the tax authorities may request a translation during a tax audit. In most cases, auditors will accept invoices in English.
New electronic invoicing obligation
The Growth and Opportunity Act does not change who must issue a bill or when a bill must be issued. Additionally, the requirements for what information must be included on an invoice remain unchanged. Instead, focus on the format of your invoice. The law distinguishes between electronic invoices and “other invoices”, with compliance with the EU standard EN 16931 being the main distinguishing factor. This standard was developed and published by the European Committee for Standardization at the request of the European Commission. It consists of a semantic data model and two required syntaxes: UBL (Universal Business Language) and CII (Cross-Industry Invoice).
According to the Growth and Opportunity Act, an electronic invoice is defined as a structured electronic format that complies with EN 19631, provided that the required information can be extracted accurately and completely, or as agreed between the issuer of the invoice and the recipient. refers to those published in the specified format. Information that complies with or is interoperable with EN 19631. This flexibility allows businesses to continue sending invoices using electronic data interchange (EDI) procedures. Electronic invoices will become the default billing method in Germany from January 1, 2025.
“Other Invoice” means an invoice sent in another electronic format or on paper. Starting in 2025, electronic transmission of all other invoices will require recipient consent. Consent is not required for paper invoices. The use of “other bills” will be phased out by 2028.
Electronic billing obligations apply to domestic B2B supplies. This means that companies domiciled in Germany must issue electronic invoices for supplies taxed in Germany if the recipient of the invoice is also based in Germany. A company is considered to be domiciled in Germany if it has a registered office, place of management, domicile, habitual residence or fixed establishment involved in relevant transactions in Germany. There is no obligation to issue electronic invoices for business-to-consumer (B2C) sales, certain exempt B2B sales that generally do not require an invoice, transactions and tickets with an amount less than EUR 250. Non-resident companies with their VAT registration in Germany are not affected by the new rules. The obligation to issue electronic invoices generally does not apply to supplies within the EU. This is because it is covered by the digital reporting and invoicing obligations outlined in the ViDA project.
Implementation timeline
Electronic billing obligations will be phased in from 2025 to 2028. From January 1, 2025, companies involved in domestic B2B transactions must be able to receive structured electronic invoices that comply with the EN 16931 standard. The Federal Ministry of Finance has confirmed that electronic invoice formats commonly used in Germany, such as ZUGFeRD and XRechnung, meet the criteria for compliant structured invoices. ZUGFeRD, short for “Central User Guide of the German Electronic Invoicing Forum” (Zentraler User Guide des Forums elektronische Rechnung Deutschland) is a hybrid format that combines human-readable PDF and structured data with embedded XML to ensure both human and machine readability. ZUGFeRD follows CII syntax. In contrast, X-Rechnung is an XML data format that can be used in both CII and UBL syntax.
Starting January 1, 2025, all businesses should be able to receive invoices in ZUGFeRD and X-Rechnung formats. However, the obligation to issue electronic invoices will not come into force until 2027. From 2025 to 2026, businesses can choose to issue paper invoices or invoices in other electronic formats, but will need recipient consent to send the latter. Therefore, businesses that are reluctant to adopt electronic invoices should establish processes to ensure buyer buy-in. In 2027, companies with a turnover of more than 800,000 euros in the previous year will be required to issue electronic invoices. However, even if this limit is exceeded, he can still use EDI procedures as long as the recipient agrees, even if they do not fully comply with the EN 19631 standard. From 2028, all companies will be required to issue electronic invoices.
conclusion
The move to make electronic invoicing mandatory in Germany reflects the global trend towards the digitalization of tax processes and tax management systems. Germany has embraced this trend, but in its own way. Unlike other European countries such as Poland and Italy, Germany does not specify exactly how invoices should be exchanged and reported (this means, in theory, that companies could use email to send electronic invoices). It means you can also do it, but this isn’t really the safest or most efficient option). Instead, German regulations focus only on the formats allowed for electronic invoices and the conditions for their issuance and receipt. The obligation to send invoice data to the tax authorities will be introduced after the mandatory e-invoicing. This phased approach is intended to make the transition smoother and allow businesses to more easily adapt and comply with the new rules.
The opinions expressed in this article are those of the author and do not necessarily reflect the views of the organization with which the author is affiliated.
