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E-invoicing will be mandatory from 1.1.2025 – Urgent action is required by all companies

Ever since the promulgation of the German Growth Opportunities Act on 27.3.2024 it has been clear that e-invoicing will be mandatory in Germany - indeed, already from 1.1.2025. The long transitional periods that have been granted to invoice issuers should however not obscure the fact that a need for the requisite action will arise even before the end of the year because, as of 2025 already, incoming e-invoices in a specific format will have to be accepted.

What will change as of 1.1.2025?

Up to the end of 2024, the VAT Act (Umsatzsteuergesetz, UstG) will still give priority to paper invoices. The use of an electronic invoice (e-invoice) requires the consent of the recipient. As of 1.1.2025, there will be a requirement to submit e-invoices for payments between businesses that are resident in Germany for tax purposes. Consequently, the consent of the recipient will no longer be necessary in such cases. Only invoices that can be issued, transmitted and received in a structured electronic format that allows for electronic processing will be considered to be e-invoices. 

Invoices will have to conform to the European Norm (EN) 16931 [developed and published by the European Committee for Standardization (CEN)]. It is possible for the invoice issuer and invoice recipient to agree on a different structured electronic format. However, this would be on condition that it would be possible to extract the necessary information in such a way so that the result would conform to the CEN norm EN 16931 or be compatible with it. 

The legislation has thus been formulated in a way that is open to all technologies so that, for example, certain adaptations could be made to the EDI process that would enable it to also satisfy the format specification. It is the view of the fiscal administration that invoicing using the XRechnung format standard or version 2.0.1 and later of the ZUGFeRD format [an e-invoicing format developed by the Electronic Invoice Forum Germany (FeRD)] already conform to the required CEN Norm.

Please note: By contrast, a PDF invoice would not comply with the future format requirement. 

The obligation to submit an e-invoice will not apply to transactions that are exempt from VAT under Section 4 no. 8 to 29 UStG. Furthermore, invoices for small amounts (Section 33 of the VAT Implementing Ordinance [Umsatzsteuerurchführungsverordnung, UStDV]) and travel tickets (Section 34 UStDV) may continue to be submitted as so-called other invoices; these are ones that are submitted in paper form or in any form other than the electronic format described above. 

Please note: The submission of other electronic invoices will still require the consent of the recipient. 

Transitional provisions  

The following transitional provisions will apply for invoice issuers: 

  • up to the end of 2026, invoices for transactions executed in 2025 and 2026 may be submitted as previously, i.e., in paper form or - with the recipient’s consent - in an electronic format that does not conform to the new format;
  • up to the end of 2027, invoices for transactions executed in 2027 may be submitted as previously if the total revenues of the invoice issuer (pursuant to Section 19(3) UStG) in the preceding calendar year (2026) did not exceed €800,000; 
  • up to the end of 2027, invoices for transactions executed in 2026 and 2027 may be submitted - with the recipient’s consent - via electronic data interchange (EDI process).  

Action required in 2024 

There are no transitional provisions for invoice recipients. Therefore, if an invoice issuer does not make use of the transitional provisions, then, in the absence of a requirement to obtain consent, the recipient of the goods or services would have to be able to receive, process and archive e-invoices in the new format already from 1.1.2025.  

Recommendation: Companies should therefore urgently check if they are adequately prepared, from both organisational and technological perspectives, to receive e-invoices in the new format. Any necessary adjustments will already have to have been made by the end of 2024. 

Outlook - A comprehensive digital transformation process 

Once the mandatory use of e-invoicing has been implemented, the German federal government intends to subsequently introduce a requirement for timely reporting of each individual transaction to a national electronic reporting system (e-reporting). Notwithstanding this, within the scope of the ViDA reform proposal (VAT in the Digital Age), the EU Commission also wants to implement the EU-wide standardised use of e-invoicing and e-reporting. Within the next few years, it is therefore entirely possible that VAT will be fully digitalised. 

Businesses would be well advised to address the resulting challenges and opportunities holistically and at an early stage. Here, the extensive technological and organisational needs of such a transformation process could be offset by the considerable potential cost savings from an electronic accounts payable and receivable process that could conceivably be fully automated.

Recommendation: We would recommend considering the necessary process adaptations in conjunction with the creation of process documentation, which has been a requirement already since 2015. This can be doubly helpful,

  • firstly, in order to be able to identify the processes that need to be adapted and, 
  • secondly, when designing new processes that are not just effective and cost-efficient but, at the same time, also consistent with the German ‘Principles of Proper Keeping and Retention of Accounts, Records and Documents in Electronic Form’ (GoBD).
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