Current Invoicing Requirements in Germany
Under current German VAT law, there is a standard format for invoices. However, companies may deviate from this format with the recipient's consent. Paper invoices are presently the default format, though electronic invoices can be issued and transmitted if agreed upon by the invoice recipient. In practice, businesses frequently use PDF invoices, sent via email or other electronic means. Therefore, entrepreneurs increasingly deviate from the legally prescribed standard especially since the COVID19 pandemic.
One notable exception is in the case of B2G (business-to-government) invoices. Invoices sent to public authorities must be submitted in a structured electronic format (XML) that complies with the European standard EN 16931. In Germany, this format is known as "XRechnung" and is already mandatory for B2G transactions.
Changes Effective from 2025
Starting January 1, 2025, the rules governing B2G invoices will gradually expand to include specific domestic B2B transactions. However, the scope of the new regulations is limited. The changes will only affect certain local B2B transactions, while the existing rules will continue to apply to other transactions. Generally, the rules apply to B2B sales taxable in Germany with both contracting parties being in Germany i.e., German headquarter or German VAT fixed establishment (VAT FE). Furthermore, with the customers' consent, paper invoices and non-structured electronic invoices, like PDFs, will still be allowed until December 31, 2026, or if the supplier's annual revenue in 2026 is below €800k, even until December 31, 2027. The recipient's consent can be implicit (e.g., if they accept and pay a PDF-invoice without objection).
Content of the BMF Letter of October 15, 2024
The BMF letter1 outlines key aspects of the upcoming changes, albeit not all questions raised by stakeholders:
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Electronic Invoice Definition
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As of January 1, 2025, an electronic invoice (e-invoice) must
be in a structured format to qualify. This format must follow
either the European standard EN 16931 or an agreed format that
ensures the extraction of the necessary tax details.
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Obligations for Issuing E-Invoices
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For domestic B2B transactions, an e-invoice will now be
mandatory, and companies must ensure their systems can process such
invoices.
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Permissible Formats
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Alongside the structured formats, hybrid formats combining a
structured data file with a human-readable part (like ZUGFeRD) are
also allowed.
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Storage and Compliance
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The letter further stipulates that businesses must store the
structured parts of these e-invoices in a way that maintains their
integrity and readability for tax purposes.
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What's Next?
Currently, no additional guidance or clarifications from the German tax authorities are expected. However, the European Commission is actively working to update the EN16931 standard to cover not just B2G but also B2B invoicing fully. This updated standard is expected by the end of 2024, and Germany may subsequently adjust its XRechnung format to align with the new standard.
Other EU Member States, notably France and Poland, are moving toward mandatory e-invoicing as well, which could signal a broader EU-wide shift toward full digitization of invoices soon.
What Should Entrepreneurs Do Now?
As businesses wait for the new e-invoicing standard to be completed, their current focus should be on ensuring they can receive electronic invoices. Although some sources suggest that companies will be obligated to accept e-invoices from January 1, 2025, this is not entirely accurate. Businesses will no longer need to approve e-invoices for them to be valid VAT invoices, but companies can still request invoices in other formats for commercial or technical reasons.
By December 31, 2024, all companies in Germany, or those with VAT FE's in Germany, must be prepared to send and receive e-invoices. Implementing the necessary systems and processes to comply with these regulations should be a top priority. It's also important to consider how this transition could affect other areas of the business, such as contract management, purchase order specifications, invoice approval processes, and the archiving of business documents. This broader perspective will help companies ensure a smooth and compliant transition to the new invoicing standards.
Footnote
Originally published 5 November 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
