Germany e-Invoice Implementation

Starting on January 1, 2025, Germany will mandate electronic invoicing (e-invoicing) for B2B transactions, with transitional regulations extending until 2027 to help businesses handle implementation costs (refer to the April 2024 issue of Indirect Tax News for previous details). The Growth Opportunities Act, enacted on March 27, 2024, after lengthy negotiations and compromises between the Bundestag (Parliament) and Bundesrat (Federal Council), sets the foundation for e-invoicing. On June 14, the Ministry of Finance released draft rules concerning mandatory B2B e-invoicing.

Below is a summary of what businesses affected by this mandate need to know about e-invoicing and the steps they should begin taking to comply with these new requirements.

What is an e-invoice?

E-invoicing involves the exchange of an electronic document between a seller and a buyer. An e-invoice is generated, sent, and received in a structured electronic format that also facilitates electronic processing of the invoice.

Germany’s e-invoicing rules align with the EU’s “VAT in the Digital Age (ViDA)” proposals, which aim to make e-invoicing the default standard across the EU, and conform to the EU e-invoicing standard CEN 16931. Compliant formats under CEN 16931 include:

ZUGFeRD: A hybrid format combining a human-readable PDF/A-3 with an embedded XML file using the “Cross-Industry Invoice” (CII) syntax.
XRechnung: XML files in the “Cross-Industry Invoice” (CII) syntax.
XRechnung: XML files in the “Universal Business Language” (UBL) syntax.

Other electronic formats may be used if both parties agree to the format, complete and accurate information can be extracted in CEN 16931 format, and the format is interoperable with CEN 16931. Standard PDF invoices or paper invoices can still be used for B2C supplies as “other invoices.”

Who is required to issue e-invoices?

Currently, e-invoicing in Germany is only mandatory for public contracts. From 2025, businesses established in Germany (except those conducting only VAT-exempt B2B transactions) will need to assess whether they are subject to the e-invoicing mandate. Affected entities include:

Entrepreneurs with their registered office or place of management in Germany.
Businesses with a fixed establishment in Germany involved in the transaction, or if no registered office exists, their domicile or habitual residence in Germany.

If these conditions are met and the taxable supply occurs within Germany to another German-established business, an e-invoice must be issued, except for small-value invoices (gross amounts not exceeding EUR 250) or travel tickets serving as invoices.

Are there transitional rules?

Germany will introduce e-invoicing in phases, with some transitional measures:

January 1, 2025: Affected businesses must be capable of receiving e-invoices in CEN 16931 formats. There are no transitional rules for receiving e-invoices; if an invoice issuer sends an e-invoice from January 1, 2025, the recipient (if an entrepreneur in Germany) must be equipped to receive e-invoices for VAT purposes. Both e-invoices and paper invoices will temporarily be allowed. Paper invoices can be issued without the recipient’s consent, or PDF/other electronic format invoices can be sent with the recipient’s consent until December 31, 2026.
January 1, 2027: Businesses with annual turnover over EUR 800,000 must issue e-invoices. Paper invoices will still be permitted until December 31, 2027, for small and medium-sized enterprises with turnover below EUR 800,000 and for EDI invoices.
January 1, 2028: All businesses in Germany that meet the above criteria must issue B2B e-invoices.

What steps should be taken?

The shift to mandatory e-invoicing in B2B transactions will bring significant changes but also efficiency gains, including automation, faster invoice processing, and likely reduced administrative burdens.

Businesses should start by evaluating their ERP or invoicing systems to ensure they can generate e-invoices. This may involve updating current systems or adding new tools. Additionally, businesses must ensure they can receive e-invoices starting January 1, 2025.

Beyond IT system reviews, companies should assess other processes (e.g., purchasing, sales, accounting, invoicing) with a focus on centralisation, standardisation, and efficiency improvements, especially considering the broader reporting requirements under the ViDA initiative.

Entrepreneurs need to decide if manually creating e-invoices (e.g., via a federal platform) is sufficient or if an alternative solution is necessary based on the volume of e-invoices. This decision might involve: