White paperThe introduction of electronic invoicing (e-invoicing) is based on the Growth Opportunities Act, which is one of the most significant legal innovations in VAT law. As of January 1, 2025, German entrepreneurs who supply services or goods to other German entrepreneurs will be obliged to issue invoices exclusively in a structured electronic format. This legislative change aims to promote digitalization and efficiency in business transactions while modernizing tax processes. Exempt from this obligation are invoices that are exempt from tax according to § 4 nos. 8 to 29 UStG, as well as invoices for small amounts up to EUR 250 and tickets.
What You Should Know About E-Invoicing
1. Executive summary: e-invoicing
Digitalized invoicing processes promise huge cost savings of between 60 and 80 percent compared to paper-based invoicing processes. The benefits of switching to e-invoicing include reduced entry errors, shortened processing times and an increase in cash discounts. Increasingly, e-invoicing is also becoming a legal obligation (e.g. European Directive 2014/55/EU).
But what exactly is an electronic invoice, what are the challenges in e-invoicing, what components should an e-invoicing solution have and what is Peppol? The following guide to e-invoicing answers these questions and more.
2. What is an electronic invoice?
An electronic invoice is an invoice that is issued, transmitted and received in an electronic format. A distinction is made between:
- structured data (e.g. EDI, XML),
- unstructured data (e.g. invoices in PDF, TIF, JPEG, Word format or e-mail text)
- hybrid data (e.g. ZUGFeRD or Factur-X).
The available transmission/reception channels include e-mail, DE-Mail, computer fax, fax server, web download, Peppol or web service. Invoices received in paper form and converted to electronic formats do not fall under the definition of electronic invoices under the VAT Act.
It is not very efficient to print, envelope, stamp and send a digital invoice on paper only to have it manually captured and digitized again by the recipient before it can finally be paid.
Such an invoice process is complex, expensive and not environmentally friendly due to the use of paper and transportation resources. Due to this, German legislation has placed the electronic invoice on an equal footing with the paper invoice (July 01, 2011). Since then, electronic invoices have been sent without an electronic signature and, for example, by e-mail.
In response to the European Directive 2014/55/EU the legislator defines an electronic invoice in the Act to promote electronic government (E-Government Act - EgovG) as follows:
An invoice is electronic if:
- it is issued, transmitted and received in a structured electronic format and
- the format enables the invoice to be processed automatically and electronically.
Source (translated): §4a Para.2 German EGovG
Sending invoices as PDF files does not meet these requirements, because the recipients cannot automatically process PDF files. Businesses expect to receive electronic invoices in a structured format that can be understood automatically.
Structured invoice formats with Electronic Data Interchange (EDI) data are not readable by humans. Recipients must visualize structured electronic invoices for internal invoice verification, release and subsequent archiving.
Hybrid invoice formats avoid this disadvantage by combining the machine-readable structured format and the human-readable visual representation. Technically, this can be achieved by embedding an XML structure in a PDF file. The following figure 1 shows, for example, a ZUGFeRD invoice containing a human-readable PDF with structured invoice data in an XML format.
3. Digitalization with e-invoicing – future-proof into the digital age
"It's difficult to make predictions, especially about the future." This quote by Mark Twain also applies to e-invoicing, except that it is a matter of "when” and not “if” electronic invoicing will replace paper invoicing on a large scale.
The European Commission has already done everything necessary to encourage the move away from paper invoices by gradually making e-invoicing mandatory. Whereas in the European Union in 2017, 70 % of all invoices were still exchanged on paper and 22 % in the form of PDF files that cannot be processed electronically, the tide has been turning. Structured and hybrid invoice formats now account for more than 50 % of invoices. The prediction is that this trend will continue and the number of paper invoices and PDF invoices will be reduced to a bare minimum.
Germany is by no means one of the pioneers when it comes to e-invoicing. The southern and eastern EU countries, such as Italy, Spain, Croatia and Hungary, are outpacing Germany in the implementation of the European Directive 2014/55/EU. Nevertheless, electronic invoicing in public administration has also become widely accepted in Germany since 2020 and 2021, and companies are well advised to equip themselves promptly with appropriate digital solutions for e-invoicing, if they have not already done so.
- Since July 01, 2011, invoices can also be transmitted without an electronic signature by email or e-invoicing. You can use digital signatures but are not required to. Since 1 July 2011, paper and electronic invoices are to be treated in the same way for VAT purposes.
- June 26, 2013: Proposal for EU Directive
- April 16, 2014: Directive on electronic invoicing for public contracts
- From 2018, public administrations must accept and process e-invoices (B2G).
- From 2020, e-invoices will also become mandatory between companies (B2B), and the federal government and certain federal states.
4. The biggest driver on the subject of e-invoicing is the government
Are you a public sector supplier? Is your company internationally active? If your answer is yes to either question, it is very likely that you will need to send invoices electronically, either now or in the near future.
Despite the enormous cost savings potential through the digitalization of incoming and outgoing invoices, governments are the driver of e-invoicing.
The EU standard 2014/55 regulates e-invoicing for public contracts and required more than 300,000 public administrations in EU countries to be ready for e-invoicing since November 2018, in terms of systems, and since November 2019, in terms of processes. Since 45 to 65 percent of all companies in a country are typically public sector suppliers, the aforementioned EU standard is predicted to be the driving force behind e-invoicing. However, unstructured e-invoices are not electronic invoices within the meaning of this Directive.
24 out of 27 EU countries (as of February 2020)
- have implemented a solution for electronic invoicing in the B2G sector,
- offered suppliers electronic invoicing or
- already requireed a solution for electronic invoicing in the B2G sector.
More and more countries are demanding e-invoicing: The main reason for the growing number of invoicing or e-invoicing regulations is trivial.
Governments are increasingly looking for new ways to enforce their tax laws and collect more of the expected VAT. The VAT GAP Report 2022 shows that EU member states are estimated to have lost €93 billion in VAT revenue in 2021 - or in relative terms, 9.1% of total expected VAT. The so-called tax gap between the expected VAT (also known as the VAT Total Theoretical Liability, abbreviated as "VTTL") and the actual VAT collected is likely to continue its downward trend.
In view of strained national budgets and flattening economic growth, the motivation in the EU member states to actually collect more of the expected tax will certainly increase further.
The easiest way for the EU member states to do this is by requiring companies that operate within their national borders to provide all invoices electronically and, as is already the case in some countries, to report either the entire invoice, or at least the VAT information, electronically to the tax authorities in real time.
5. What are the advantages of e-invoicing?
The main advantage of e-invoicing lies in the enormous cost savings. Printing and shipping costs are eliminated, invoices can be delivered faster and errors in incoming invoice processing are reduced. If there is an order reference to an incoming invoice, the invoice can be booked fully automatically. In addition, e-invoicing shortens the time from invoicing to payment and thus increases liquidity of the supplier and increases the chance for the customer to meet the requirements for a trade discount.
All the advantages of e-invoicing at a glance:
Lower costs & faster ROI:
More efficient processes and higher compliance:
More security:
Better cash flow:
Complete transparency & fast booking:
Compliance with legal requirements:
6. E-invoicing for outgoing invoices
The creation and delivery of paper invoices are highly manual and inefficient business processes for suppliers. These processes result in high costs, errors and late payments.
E-invoicing for outgoing invoices optimizes these internal processes, saves costs, increases the transparency of internal processes and improves the environmental footprint. Companies can improve their customer loyalty and secure market opportunities and competitive advantages.
The process of digital invoice delivery can be divided into four simplified steps: entry, preparation, portal and transfer/export.
After the invoices have been created with an ERP system, the outgoing invoices are automatically transferred via an interface to the e-invoicing solution for digital outgoing invoices.
Depending on the e-invoicing standard (e.g. ZUGFeRD), the received invoice data is converted into the desired format.
In a portal application, the outgoing invoice book can optionally be viewed centrally and an audit-proof archive can also be connected.
In the last step, the electronic invoice is sent to the invoice recipient, for example by email as an attachment or as a secure download link. A connection of invoice recipients via EDI (EDIFACT) is also a common approach.
By using an e-invoicing solution for outgoing invoices, manual outgoing invoice processes are eliminated and the time for invoices to become due is considerably shortened by immediate delivery.
7. E-invoicing in invoice receipts
The processing of incoming invoices is in a continuous, automated process from the recording of invoice receipts to the final posting:
The digital invoice receipt process can be categorized into three steps: receipt, preparation and processing.
Receipt
The invoices are automatically received via different input channels. These are:
- EDI invoices
- Hybrid invoices (e.g. ZUGFeRD)
- PDF invoices
- Scanned paper invoices
Preperation
After invoice receipt, the invoice contents are converted into an internal standard. Electronic invoices, which already contain structured data, are converted. Scanned paper invoices and PDF invoices are identified and extracted using OCR/text recognition software.
Processing
The prepared invoice data is enriched with master and order data from the ERP system and automatically checked for order reference, quantity and price deviations or country-specific rules. At best, invoices can be automatically transferred for posting. All other invoices must be routed to an integrated clarification or approval process.
All steps that an invoice goes through in the verification process are logged. The invoice content required for the booking is transferred to the customer's ERP system. The invoice, attachments in the editing process, conversion and editing protocols must be archived in a revision-proof manner in accordance with the applicable national requirements.
8. Global e-invoicing
Internationally active companies are increasingly required by government regulations to create and send their invoices electronically. However, different legal regulations apply in each country. E-invoicing regulations already exist in more than 65 countries worldwide, and that number is growing.
In many countries, the heterogeneity of the respective regulations and local specifics in the context of e-invoicing, related to accurate and up-to-date data, security requirements, system integration, status monitoring and documentation lead to high complexity. There are basically two types of audit models for electronic invoicing, commonly known as clearance and post-audit models.
Post audit: The regulations of the individual countries specify a minimum period over which electronic versions of invoices must be stored for possible automated auditing. Currently, the post-audit procedure is still predominantly used in the EU.
However, the move away from the highly time-delayed post-audit process and reorientation towards a centrally regulated e-invoicing model and real-time and near real-time transaction-based tax reporting and controls (clearance processes, also known as Continuous Transaction Controls 'CTC') are becoming increasingly entrenched in the EU.
Continuous Transaction Controls to reduce the tax gap
Combating tax fraud and tax evasion under simultaneous pressure of stagnant economic growth, rising government spending and inflation increases the motivation for EU members to rapidly implement Continuous Transaction Controls ("CTC" or "CTCs").
Real-time e-invoicing and e-reporting are expected to reduce the €134 billion tax gap in 2019 (European Commission VAT Gap Report of 2021) in the future.
EU-wide standardization and harmonization of CTCs – current status
In a plenary session on March 10, 2022, the EU Parliament called on the EU Commission to immediately implement an EU-wide, harmonized e-invoicing standard by 2022. E-invoicing is to play a defined role in real-time e-reporting and an e-invoicing obligation is to be successively introduced by 2023 in order to significantly reduce the compliance costs of companies through state-operated or certified systems.1
This effort towards EU-wide standardization and harmonization of CTCs in e-invoicing and e-reporting is very welcome.
Lack of cross-country CTC standards in practice
To the chagrin of many multinationals, the clearance procedures have so far varied greatly from country to country. This is because the focus of existing CTC models is mostly on the domestic market, and serves first and foremost the state interest of tax optimization. Subordinately, existing CTCs take into account the following aspects, for example:
- User friendliness
- Support of indirect tax controls for cross-border and transnational operations
- Harmonization for reusability for other countries by applying existing format standards, exchange and interoperability
- Business acceleration and supply chain optimization through efficient end-to-end integration of electronic invoice data as it is created, exchanged, received and processed across all sizes of organizations
Trend towards the introduction of CTC systems
The trend toward CTC requirements is gaining momentum. With CTCs, countries require business entities to report invoice data directly from their transaction processes to tax authority systems and portals to supplement or even replace regular VAT returns. E-invoicing and electronic reporting requirements, the so-called "e-reporting" of invoice data in (near) real time to the tax administration for reporting purposes, are often referred to as continuous transaction controls (CTC) and transaction-based tax reporting. These real-time controls on transaction-based reporting often include digital signatures, unique document reference numbers and QR codes. CTC requirements for economic operators exist in Mexico, Brazil, Italy, Turkey, Portugal, Spain and Hungary, for example.
In Europe and Asia, the CTC trend, which originated in Latin America, has only just begun.
Existing e-invoicing and CTC models
Existing e-invoicing and CTC models can be categorized as follows, as outlined by a group of experts in the document “A Next Generation Model for Electronic Tax Reporting and Invoicing":
- Interoperability Model
- Real-time Invoice Reporting Model
- Clearance Model
- Centralised Exchange Model
- Decentralised CTC and Exchange
The following examples illustrate the process of reporting VAT data and exchanging e-invoices.
Interoperability Model
The exchange of invoices between trading partners is standardized across formats, content, subscriber directories, exchange protocols and interoperability criteria between certified providers. There is no involvement of the tax authorities or their platform, as in the traditional Peppol 4-corner model, for example.
Real-time Invoice Reporting Model
The taxable entity reports the invoice or a subset thereof to a government agency shortly after the invoice is issued and exchanged between trading parties. The exchange of invoices between trading parties is not regulated.
Clearance Model
The invoice is checked and cleared via the tax authority's central platform. If applicable, only certified providers are allowed to perform the communication with the platform. The exchange of invoices between trading partners is not regulated.
Centralised Exchange Model
Verification, clearance and exchange of the invoice are carried out via the central platform of the tax authority.
Decentralised CTC and Exchange Model: “DCTCE”
As with the Interoperability Model, the DCTCE model relies on a decentralized network of certified providers that provides for user-friendliness, investment protection, interoperability, reusability of solutions in other countries and connectivity to tax administrations' platforms that may already exist or be under development, ensured by the certified providers. An example of a DCTCE model is the new Peppol Continuous Transaction Controls Reference Model. This is a Peppol-based 5-corner model, which combines interoperability (known from the classic Peppol 4-corner model with the four corners: 1. supplier, 2. access point from the supplier, 3. access point from the customer, 4. customer) with the connection of the control platforms (corner no. 5) in one model.
International regulations are changing at a rapid pace. The number of countries that require some form of e-invoicing is constantly increasing, and the numerous regulatory details of individual countries that need to be taken into account increase the complexity of e-invoicing for internationally active companies.
One of the biggest challenges in international business is keeping up with regulatory changes. Our blogs about country-specific regulations are always up to date:
| Austria | There is a legal obligation for all B2G suppliers based in Austria to transmit their invoices in electronic form in accordance with the Austrian ICT Consolidation Act (IKTKonG). The national XML invoice standard for Austria is ebInterface. |
| Belgium | A draft law creates conditions for a B2B e-invoicing mandate in Belgium. This obliges counterparties to send, receive and process e-invoices. |
| Brazil | Brazil introduced a total clearance model for e-invoicing back in 2005. Before suppliers can issue an invoice to their customers, they must first transmit it to an "ok-to-issue" clearance platform of the tax authorities. |
| Europe | On March 10, 2022, the European Parliament (EP) adopted in plenary a resolution on the European Commission's (EC) Action Plan for Fair and Straightforward Taxation in Support of Economic Recovery Strategy (2020/2254(INL)). In 2022, the Commission presented the first draft on ViDA. |
| Finland | Since 2010, the use of business-to-government (B2G) e-invoicing has even been mandatory in Finland. The country relies on the specific formats Finvoice and TEAPPSXML as well as a 4-corner delivery model. |
| France | France plans to extend the current B2G e-invoicing mandate to B2B invoices. The obligation will take place in several waves and will be based on the size of the company. From a certain date, CTC B2B e-invoicing and e-reporting will become mandatory for all companies. Invoices to government (B2G) will be sent via the Chorus Pro platform. |
| Germany | Since November 2020, the use of XRechnung in the B2G sector has been mandatory in Germany. |
| Greece | Contracting authorities in Greece have been obliged to accept invoices in an EN-compliant format since 2020. E-invoices must be sent to the MyDATA platform. Recognized formats for invoices to the federal government are PEPPOL-UBL and ebInterface. |
| Hungary | In Hungary, the electronic VAT reporting of outgoing invoices to the Hungarian tax system NAV (National Tax and Customs Administration, NTCA) has been mandatory under certain conditions since 2018. The National Tax and Customs Administration of Hungary (Nav Nemzeti Adoes Vamhivatai, in short: NAV) offers the online szamla system (IT system/procedure of the Hungarian tax authority) for these reports. |
| India | Since 2020, it has been mandatory to use the e-invoicing reporting system in India. It is based on the new Invoice Reporting Portal (IRP) for the registration of domestic B2B and B2G invoice transactions and export invoices. Since 2022, all taxpayers have to ensure B2B e-invoicing. |
| Italy | Since 2019, all domestic invoices in Italy must be issued in a defined electronic format (FatturaPA) and exchanged via a government-operated invoice portal (SdI). Italy went one step further in 2022 by introducing the "Crossboarder Invoice." Invoices sent from Italy to another EU state or received in Italy from another EU state are subject to VAT reporting to the invoice portal (SdI). In 2020, Italy created the e-order mandate through the NSO platform, which is mandatory for suppliers of the national healthcare system. |
| Japan | In 2022, the Japanese E-Invoice Promotion Association (EIPA) joined the Peppol network. Starting October 1, 2023, a new electronic invoice system for the purpose of input tax deduction will apply. |
| Luxembourg | Since 2023, the obligation for B2G e-invoicing applies to companies of all sizes. The Peppol BIS Billing 3.0 standard is used to create a uniform basis for the exchange of invoice data. |
| Mexico | Since 2017, Mexico has had CFDI version 3.3 in use without any modifications. The term CFDI stands for "Comprobante Fiscal Digital por Internet", which translates as "digital tax certificate via the Internet." |
| Poland | In Poland, B2G e-invoicing has been mandatory for suppliers since 2020. In January 2022, the KSeF platform ("Krajowego Systemu e-faktur") started in Poland on a voluntary basis for B2B e-invoicing. The B2B e-invoicing obligation is expected to start on 01.02.2026. |
| Portugal | In Portugal, eSPAP (Entidade de Serviços Partilhados da Administração Pública) is taking on the important role of coordinating body for the introduction of electronic invoicing. Mandatory since 2019, recognized formats to public administrations are UBL 2.1 "CIUS-PT" and CEFACT "CIUS-PT". |
| Romania | As of July 1, 2022, B2B deliveries of high-risk products must go through the e-Factura system, regardless of whether or not their buyers are registered in Romania's electronic invoicing registry. |
| Saudi Arabia | The first of the e-invoicing roll-out phases in Saudi Arabia (FATOORAH) started in 2021. The e-invoicing mandate includes "Standard Tax Invoices" for B2B and B2G and "Simplified Tax Invoices" for B2C transactions, as well as the debit or credit notes associated with each of the two invoice types. |
| Switzerland | Electronic invoicing in Switzerland has existed for more than two decades. Switzerland officially advises the use of a hybrid invoice format based on the German/French standard ZUGFeRD/Factur-X. |
| Serbia | Since 2022, e-invoicing is mandatory in Serbia for B2G and B2B. "Sistem E-Faktura" (SEF) is an IT solution for the Clearance e-Invoicing model provided by the Serbian Ministry of Finance for sending, receiving, capturing, processing and storing electronic invoices. |
| Slovakia | In Slovakia, the information and communication system for electronic invoices "Informačný system elektronickej fakturácie" (IS EFA) has been introduced for the exchange of electronic B2G and B2B invoices. Since April 2023, e-invoicing to public sector customers (B2G) has been mandatory. In 2024, B2B and B2C domestic transactions will become mandatory via IS EFA. |
| Spain | E-invoicing has been mandatory in the B2G sector in Spain since 2015. This is expected to be extended to B2B from 2024. The autonomous region of the Basque Country maintains its own tax system alongside that of the Spanish tax authority. With Ticket BAI, the Basque Country has introduced a new system for e-reporting invoices since January 1, 2022. |
| United Kingdom | Since 2019, electronic reporting of VAT-related data to HMRC (the so-called Move To Digital 'MTD' for businesses) has been mandatory in the UK. NHS suppliers and their suppliers are encouraged to use Peppol or GS1 standards for e-procurement, including e-invoicing. |
9. International standards for e-invoicing: Peppol
Peppol is an open, cross-border network. Through a single interface, Peppol enables the exchange of electronic procurement documents with all partners registered in the Peppol network. Peppol covers not only electronic invoicing (e-invoicing) but the entire process of tendering and procurement (e-procurement). Peppol also supports the EU Directive 2014/55/EU on electronic invoicing in the context of public contracts (Public eProcurement).
To become part of the Peppol network, you need a connection to a Peppol Access Point. A Peppol Access Point takes on the role of both the sending and receiving access point, enabling the electronic exchange of documents such as catalogs, orders, shipping notifications and invoices.
Learn more about Peppol in our guide: What is Peppol?
10. Which operating model is optimal for your e-invoicing?
One of the preliminary considerations for the introduction of electronic invoicing concerns the mode of operation of the e-invoicing solution. Three strategic questions should be answered in advance:
Hosting:
Should the e-invoicing solution be located in your own data center or should the operation be outsourced to a data center operator?
Operating mode:
Should the solution be operated as a licensed product on-premises or as a cloud service on a pay-per-use basis?
Standards and formats:
Which e-invoicing standards and formats are currently needed and may be needed in the future
If maximum control over your invoicing and settlement processes is your top priority, the classic, license-based on-premises installation is a good choice. For the greatest possible flexibility, a cloud solution is a good choice. There is even more to be said for cloud-based invoice processing: fast implementation, simple integration and high operational security.
In contrast to flexible cloud operations, the overhead for an on-premise operation includes the acquisition costs of the hardware and software, as well as the implementation and technical setup. Don’t underestimate the running costs for personnel and maintenance with an on-premise e-invoicing solution.
11. Summary: e-invoicing
In this guide, you have learned what an electronic invoice is and why e-invoicing is relevant today and in the future. The drivers of e-invoicing are the legislator and international regulations. But the many advantages, especially the cost-saving potential, also make e-invoicing an interesting topic for companies.
Manual outbound invoice processes are eliminated through digitization, thus immensely shortening the receivables cycle time through immediate delivery.
Digitizing incoming invoices increases processing quality, as manual errors can be avoided. Our data surveys also show that from as few as 12,000 incoming invoices per year, costs are reduced by up to 85% through the use of e-invoicing - compared to conventional manual invoice processing.
Internationally active companies face the problem of being able to support and process the different e-invoicing standards. The Peppol initiative could counteract this problem if it gains acceptance. To cope with the constantly changing regulations, the use of a cloud-based e-invoicing solution is recommended.
1Source: https://www.europarl.europa.eu/doceo/document/TA-9-2022-0082_DE.html#title1 (Date: 11.08.2022)
12. Frequently Asked Questions
The introduction of electronic invoicing (e-invoicing) in Germany
I. Overview
1. What is the basis of the requirement for electronic invoicing in Germany?
2. What types of invoices will exist from January 1, 2025?
The Growth Opportunities Act differentiates between two main types of accounting:
- Electronic invoice (e-invoice): This corresponds to a structured, machine-readable format that enables the automatic processing of invoice data. Typical formats for this are XML files following the requirements of the European standard EN 16931.
- Other invoices: These include invoices in paper form or non-structured electronic formats such as PDF, image files, or simple emails. However, these invoice formats are only permitted under certain conditions and can no longer meet the legal requirements of a proper invoice if an e-invoice obligation exists.
3. Are there transitional arrangements for the e-invoicing requirement?
Yes, the law provides for a transitional regime until the end of 2026. During this period, invoices between domestic companies may continue to be issued as "other invoices", provided that this is agreed between the issuer and the recipient of the invoice. The purpose of this transitional period is to allow businesses to gradually adapt their systems and processes to the new requirements before the full e-invoicing obligation comes into force.
4. What are the acceptable formats for e-invoices?
To be considered an e-invoice, the invoice format must be in a structured electronic format that meets the requirements of EN 16931 and is machine-readable. The most common formats in Germany are
- XRechnung: A format specifically developed in Germany based on EN 16931. It allows fully automated data processing and is exclusively machine-readable.
- ZUGFeRD: A hybrid format that also meets the requirements of EN 16931 version 2.0.1. The invoice document contains both a structured XML data part and a human-readable PDF document, allowing the format to be used in different contexts.
- Other European formats: The e-invoicing obligation also includes other formats recognized in Europe, such as Factur-X (France) or Peppol-BIS Billing, which are also based on EN 16931
5. Are invoices for small amounts also required to be e-invoiced?
Small invoices with a total value of up to 250 euros are exempt from the e-invoicing requirement. Such invoices can still be issued on paper or as a PDF document without a structured data format. However, the exemption only applies if the amount does not exceed the €250 limit and is not prohibited by other VAT legislation. For invoices that contain a mix of taxable and exempt services, the total amount of the invoice is used to determine the e-invoicing requirement.
II. Invoice sender
1. Who is required to issue an e-invoice?
The obligation to issue an e-invoice applies to all domestic traders who supply services or goods to other domestic traders. This includes all B2B transactions where both parties are established in Germany and the transactions are taxable, unless they are exempt under Section 4 UStG. This regulation is binding and no longer requires the consent of the recipient of the invoice - a decisive innovation that reduces the administrative burden and accelerates the switch to electronic invoice formats.
2. What options are available if an e-invoice needs to be corrected?
If the issued e-invoice contains incorrect information, the biller has the option to correct the invoice. However, the correction must also be made in a structured form, i.e. as an e-invoice. A simple addition or correction in a text document is not sufficient. The corrected invoice must be clearly marked as a correction and refer to the original invoice. The input tax deduction from a corrected e-invoice is generally retroactive to the date of the original issue, making a correction efficient and compliant.
3. Does the invoicing party have to obtain the recipient's consent to receive the e-invoice?
As of January 1, 2025, the recipient's explicit consent to the e-invoice will no longer be required if both parties are domestic businesses. The invoice issuer can assume that the recipient is able to receive and process e-invoices. However, this also means that the recipient must create the technical requirements for receiving e-invoices. The administrative burden on the invoice issuer is significantly reduced, as additional confirmations are no longer required.
4. What is the role of the customer's VAT number?
The use of the recipient's VAT identification number (VAT ID) can serve as an indicator to the invoice issuer that the recipient is acting as a business. For the invoice issuer, this is an essential feature that contributes to the verification of VAT requirements. In the absence of information to the contrary, the issuer can rely on the accuracy of the information provided by the recipient to ensure that the latter is correctly fulfilling its e-invoicing obligations. In addition, the use of the VAT ID number in the invoice can simplify the company's invoice verification processes.
5. What formats can the invoice sender use?
As of January 1, 2025, the issuer of the invoice may only use structured electronic formats that comply with the legal requirements for electronic invoices. The permitted formats are
-
- XRechnung: This format fully complies with the requirements of the European standard EN 16931 and is the primary format for e-invoices in Germany. It is based on an XML format and enables direct, automated processing of invoice data.
- ZUGFeRD (from version 2.0.1): This hybrid format combines a human-readable PDF with a structured XML data record. ZUGFeRD in the COMFORT and EXTENDED profiles is EN 16931-compliant and is widely used in Germany. It allows both visual inspection and machine processing of the data.
- Peppol BIS Billing 3.0: This format is commonly used in many European countries and is also based on EN 16931. It enables the secure and standardized exchange of invoice data over the Peppol network.
- Factur-X: A variant of the ZUGFeRD format that is mainly used in France, but is also accepted in Germany. Factur-X also combines PDF and XML to meet the requirements for an e-invoice.
- EDI: The EDI format (e.g. EDIFACT) can be used for invoices until December 31, 2027, as long as all mandatory VAT information is included in a structured form and the recipient has given their consent. After 2027, an e-invoice format such as XRechnung or ZUGFeRD must be used. Under certain conditions, EDI formats that deviate from the EN 16931 standard can also be used, e.g. in accordance with the EU Commission Recommendation 94/820/EC.
6. What special features apply to the issuer when invoicing low-value invoices?
The obligation to issue an e-invoice does not apply to invoices whose total value does not exceed EUR 250. These low value invoices can still be issued on paper or as a PDF document. However, it should be noted that the exemption only applies to invoices with a total value of up to EUR 250. For invoices containing a combination of taxable and exempt services, the total amount of the invoice is relevant. If this amount exceeds the limit, the invoice must be issued as an e-invoice.
7. What if the issuer does not comply with e-invoicing requirements?
If a biller fails to comply with the obligation to issue an e-invoice, it is a violation of VAT regulations. This may result in the denial of input tax deduction, as the "other invoice" issued will not be recognized as a proper invoice. In the worst case, this could lead to tax consequences that could have both financial and legal consequences for the company. Therefore, it is essential for entrepreneurs to strictly comply with the legal requirements for e-invoicing to avoid unnecessary complications.
III. Invoice recipient
1. What are the technical requirements for the invoice recipient to receive an e-invoice?
As of January 1, 2025, invoice recipients will be required to have the technical capability to receive and process e-invoices. The simplest option is to provide an email inbox for receiving e-invoices. However, this does not have to be a dedicated e-invoice inbox; any email address used for business transactions can be used. In addition, companies can use other transmission channels, such as exchange via a central storage portal or electronic interfaces. The key is that the invoice recipient ensures that the e-invoice format can be processed automatically.
2. What happens if the invoice recipient cannot or will not receive an e-invoice?
If the invoice recipient is unable to receive or refuses to accept e-invoices, he/she is not entitled to an alternative invoice. The issuer of the invoice fulfills its tax obligation as soon as it can be proven to have created an e-invoice and initiated the transmission process. Even if the invoice recipient is unable to receive or process the e-invoice for technical reasons, the invoice issuer's obligation remains fulfilled. Proof, such as a transmission log, can document that the transmission attempt was successful, even if the invoice does not reach the recipient.
3. If the invoice recipient is unable to accept the e-invoice, can they request an alternative issue?
No, as of 2025, the invoice recipient will no longer have the right to receive an alternative invoice if an e-invoice is required by law. This means that an invoice recipient who is not technically able to process e-invoices will not be entitled to receive an "other invoice" on paper or as a PDF. It is therefore essential that invoice recipients adapt their systems and internal processes in good time to comply with the new legal requirements and avoid any obstacles to receipt.
4. What are the recipient's retention requirements for e-invoices?
The invoice recipient is obliged to store the e-invoices in their structured electronic format without any changes. The storage must ensure that the data can be analyzed by machine and that the file cannot be modified. This means that all relevant invoice data, as it exists in the structured XML format, must be archived in the original version and according to the legal retention period. If the invoice is a hybrid format (e.g. PDF with embedded XML), both components must be stored. The tax authorities must be able to fully evaluate the data, so the integrity and authenticity of the stored file is particularly important.
5. Can the invoice recipient claim input tax deduction on a corrected e-invoice?
Yes, a correctly issued corrected e-invoice allows the recipient to deduct input tax under the usual conditions. The correction must also be made in the structured form of the e-invoice and have a clear reference to the originally issued invoice. After the correction, the e-invoice is considered correct retroactively to the date of first issue, which means that the invoice recipient can claim the input tax deduction for the original period. However, the corrected record must contain all mandatory VAT information and be formally identical to the original invoice.
6. Are there any requirements for the recipient's consent to e-invoice transmission?
Since the introduction of mandatory e-invoicing no longer requires the recipient's consent, the recipient of the invoice no longer has the right to request a specific invoice format. Both parties can still agree on certain delivery methods and transmission formats under civil law. However, the recipient's consent is still required for invoices that are to be issued as "other invoices" in a non-structured format (e.g. as PDF), for example for small value invoices or during the transitional periods until the end of 2026. In these cases, implied acceptance is sufficient, but does not affect the legal obligation to issue a structured e-invoice if required for the transaction.
7. What are the rights and obligations of the party to be billed when using service providers?
The invoice recipient can also use external service providers to process and archive e-invoices. However, they remain responsible for ensuring that all VAT requirements are met and that invoices are stored in a complete, unaltered and machine-readable form. When selecting a service provider, care must be taken to ensure that the legal requirements for archiving and data security are met to guarantee compliance with the e-invoicing obligation. External service providers must comply with legal requirements and guarantee the technical security and immutability of the stored e-invoices.
8. What steps should the invoice recipient take to ensure that they can properly receive and process e-invoices?
Invoice recipients should ensure that their internal IT systems, processes and people are ready to receive and process e-invoices. Several steps are recommended:
- Check technical infrastructure: The company should assess whether its current email and IT systems can handle the structured format of the e-invoice (e.g. XML).
- Train employees: It is important that the employees concerned are informed and trained on the requirements and handling of e-invoices.
- Coordinate with business partners: Companies should ensure that their suppliers and customers are aware of the preferred formats and delivery channels for electronic invoices.
- Set up interfaces and software: If not available, appropriate interfaces and software solutions should be implemented to import e-invoices directly into accounting systems to support automated processing and reduce manual intervention.
9. What if the invoice recipient is in receipt of an e-invoice that is not compliant?
If the recipient receives an e-invoice that does not comply with the legal requirements (e.g. missing mandatory information, unstructured format), input tax cannot be automatically deducted from this invoice. The recipient can ask the issuer to correct the invoice. If the issuer is unwilling to correct the invoice, the recipient may be able to claim the input tax deduction on the basis of other documents, but must ensure that all relevant information is visible to the tax authorities. The responsibility for correct invoicing lies with the issuer, but the recipient is obliged to check the completeness and formal correctness of the invoices received.
10. What special rules apply to public legal entities receiving invoices?
Legal entities under public law, like private companies, are obliged to receive and process e-invoices for all VATable services purchased for their business activities. In cases where the service is used for both business and non-business purposes, the invoice must be issued as an e-invoice. If the proportion of business use is below a certain threshold (e.g. one to two percent), the obligation to issue an e-invoice remains. This regulation supports the uniform treatment of transactions subject to VAT by public institutions and ensures that all taxable transactions are documented as part of the legally required e-invoices.
11. How long does an e-invoice need to be stored and what needs to be considered?
E-invoices are subject to the general tax retention periods, which require a minimum retention period of ten years. It is essential to store e-invoices in their original format and unaltered to ensure that they can be analyzed by machine. It is not enough to simply store a paper copy or PDF of the invoice. Digital archiving should be designed in such a way that subsequent processing is impossible and the origin of the data can be verified. Companies can use certified archiving solutions or external service providers, but must ensure that legal requirements are met.
12. Can the invoice recipient reject digital formats that are not e-invoice compliant?
Yes, the invoice recipient can reject digital formats that do not meet the legal requirements for an e-invoice, such as unstructured PDF files or image files. The purpose of the e-invoicing mandate is to ensure that invoice data is available in a structured format that can be processed automatically. A recipient may therefore reject formats that do not meet this requirement and require a proper e-invoice instead. In cases where the issuer insists on a non-compliant format, the recipient can take legal action to obtain a proper invoice.
13. How important is machine readability of e-invoices for the invoice recipient?
Machine readability is a key requirement of the e-invoice mandate, as it enables automated processing of invoice data. For the invoice recipient, this means that the structured data can be imported directly into the accounting system and processed automatically, increasing efficiency and reducing errors. Machine readability also facilitates documentation and auditing by tax authorities, as all relevant invoice data is available in a standardized format. Machine readability is therefore an essential prerequisite for taking full advantage of digitization in accounting and reaping the benefits of automated accounting.
14. What to consider when the bill-to party receives hybrid invoices?
Hybrid invoice formats, such as ZUGFeRD, combine both a human-readable document (e.g., PDF) and a structured data format (e.g., XML) in a single file. The structured part of the invoice takes precedence over the human-readable image part. If there are discrepancies between the machine-readable and human-readable parts, the data in the structured part is considered to be authoritative. This gives the invoice recipient the advantage of being able to automatically process the data for accounting purposes, while the PDF can be used for simple visual inspection. Hybrid formats provide flexibility by meeting both e-invoice and user-friendly presentation requirements.
IV. Transitional provisions and special cases
1. Are there any special transition rules that invoice recipients and issuers should be aware of?
Yes, the Growth Opportunities Act provides several transitional provisions to allow businesses to gradually adapt to the new e-invoicing requirements:
- By the end of 2026: Businesses will still be able to issue and transmit domestic invoices as "other invoices" if both parties agree. This allows the use of unstructured formats, such as PDF or paper, which will no longer be allowed from 2027.
- Turnover of small businesses: If a small business had a total turnover of less than 800,000 euros in the previous year, it can issue invoices in paper or other formats until the end of 2027.
- Exemption for established formats: Formats such as EDIFACT can be used as an e-invoice format until the end of 2027, provided they transmit all the information required by VAT law in a structured way and the recipient has given his consent.
2. What applies to invoicing for companies based outside of Germany?
The e-invoicing requirement only applies to invoices between domestic companies (so-called B2B transactions within Germany). For international transactions (e.g. exports), there is no e-invoicing requirement under German tax law. However, companies can voluntarily issue e-invoices if they comply with international standards and are advantageous for both parties. In some cases, however, a German company can also issue an e-invoice to a foreign service recipient if the latter fulfills the necessary technical requirements and a corresponding agreement exists.
3. What are the requirements for correcting an e-invoice?
If an e-invoice contains incorrect or incomplete information, the issuer must correct it in the correct form. Correction is not done by simply adding or annotating, but by issuing a new, complete e-invoice that replaces the original record and contains all required information. For input tax deduction and tax documentation purposes, it is crucial that the corrected e-invoice is clearly marked as a correction and refers to the original invoice. If the correction meets all the requirements, the input tax deduction can be claimed retroactively.
4. What to consider with respect to the e-invoice reporting system?
In parallel with the introduction of mandatory e-invoicing, a reporting system for invoice data is expected in the future. This system is designed to enable rapid and transaction-based reporting of certain invoice information to the tax authorities in order to increase tax transparency and efficiency. Companies should prepare for the fact that invoice data may soon have to be reported in real time or on a regular basis. The specific technical and legal requirements of the reporting system will be published at a later date and should be considered early in order to comply with all legal requirements.
V. Best practices and recommendations
1. When moving to e-invoicing, what best practices should companies follow?
- Early adaptation of IT systems: Companies should adapt their accounting and IT systems in time for the e-invoicing obligation and check whether they can process the XRechnung or ZUGFeRD formats.
- Employee training: Ensure departments are fully informed and trained on e-invoicing requirements and practices to reduce errors and increase efficiency.
- Standardized processes for invoice verification and storage: Define and document internal processes for auditing and archiving e-invoices to ensure compliance with regulatory requirements.
- Regular communication with business partners: Companies should inform their business partners of their preferred invoice formats and transmission channels in order to avoid misunderstandings and facilitate the transition.
- Cooperation with service providers: If external service providers are involved in the creation or processing of invoices, there should be clear agreements regarding compliance with e-invoicing requirements.
VI. Risks and penalties
1. What are the risks of delaying e-invoicing?
Businesses that delay the move to mandatory e-invoicing run the risk that their invoices will not be accepted as correct from 2025 and their business partners will no longer be able to deduct input tax. This can result in financial penalties and potential fines. In addition, non-compliant invoices can result in additional administrative work as corrections or adjustments are required. Moving to e-invoicing early reduces the risk of penalties and ensures that all tax requirements are met without disrupting business.
13. More information
