The German Bundesrat passed the Growth Opportunities Act (Wachstumschancengesetz) on March 22, 2024, promoting business growth, simplifying taxes and ensuring tax fairness/combat tax fraud. In January 2027 B2B e-invoicing will be mandatory for companies with a turnover of more than €800.000 and in January 2028 B2B e-invoicing will be mandatory for all companies located in Germany. However, all German companies must be able to receive electronic invoices from January 2025.
Though in line with the European proposal VIDA (VAT in the Digital Age), using formats compliant with the european standard EN 16931, the new legislation does not mandate sending information to the tax authorities.
What is an e-invoice under the new German rules?
An electronic invoice is defined as an invoice that has been issued, transmitted, and received in a structured electronic format that contains data in a machine-readable format that can be automatically imported into the buyer's system without manual entry.
A PDF sent via email will no longer qualify as an e-invoice, but will remain valid in the transition period, up until January 2027.
The law distinguishes between e-invoices (invoices in XRechnung and ZUGFeRD, and those compatible with the European standard EN 16931) and “other invoices”, as only e-invoices will be accepted.
Implementation timeline
January 1, 2025
- All businesses must be capable of receiving e-invoices.
- Paper invoices can only be used with the recipient's consent.
January 1, 2027
- Companies with an annual turnover exceeding €800,000 must issue e-invoices for B2B transactions.
January 1, 2028
- All German businesses must issue e-invoices for B2B transactions.
Who is affected by the mandate?
The mandate covers domestic B2B transactions between German-established companies, but excludes invoices under €250, and tickets for transportation functioning as invoices.
The e-invoicing mandate applies to:
- Entrepreneurs with their registered office or place of management in Germany
- Businesses with a fixed establishment in Germany that is involved in the transaction
- Companies whose domicile or habitual residence is in Germany
Accepted formats
E-invoices in Germany must comply with the European standard CEN 16931. The most common formats are:
- ZUGFeRD: A hybrid format combining a human-readable PDF with an embedded XML file. Compliant with EN16931 since March 2022 (version 2.0.1 and higher)
- XRechnung: XML file in the "Cross-Industry Invoice" (CII) syntax or the "Universal Business Language" (UBL) syntax
- Peppol BIS Billing 3.0: The e-invoice format in Peppol, based on UBL syntax.
- Other formats compliant with the European standard
Once the B2B e-invoicing mandate is fully implemented, only compliant e-invoices will be eligible for VAT deductions. Non-compliant invoices (e.g., PDFs or paper) will not be considered valid for tax purposes unless specific transitional rules apply.
Note:
- Electronic archiving: The electronic invoice must be stored in its original, unaltered format.
- Corrective invoices: An electronic invoice cannot be corrected or modified by non-electronic means - the correction must be done in the same format as the original invoice.
What businesses should do to prepare
The shift to mandatory e-invoicing represents an important modernization of Germany's business infrastructure. To adapt the German companies should:
- Review current systems: Examine the ERP systems and invoicing software to determine whether they can create and receive e-invoices in the required formats.
- Assess implementation options: Decide whether to update existing ERP systems to directly create e-invoices or use external EDI service providers for e-invoice creation.
- Analyze business processes: Take this opportunity to review purchasing, sales, financial accounting, and invoicing processes with a view toward centralization and standardization.
- Consider the broader landscape: While Germany has not yet announced digital reporting requirements connected to the e-invoicing mandate, businesses should monitor developments as authorities align their approach with the EU's ViDA initiative.
As the receiving of electronic invoices is already mandatory, the companies need to decide whether they are equipped to handle e-invoices - or select a suitable EDI service provider for assistance.
Benefits of the transition
Despite the initial challenges of adjusting to receiving and creating e-invoices, mandatory e-invoicing offers significant advantages: faster document processing leading to quicker payments, reduced paper and shipping costs, greater process automation, and real-time invoice information for business management. From the authorities' perspective, structured e-invoicing will help reduce VAT fraud and improve tax compliance.
While the transition requires careful planning and system updates, the long-term benefits of increased efficiency and automation make it a worthwhile investment for businesses operating in Germany.