On 14 June 2024, Germany’s Federal Ministry of Finance released a draft guidance on the mandatory implementation of electronic invoicing (e-invoicing) for domestic business-to-business (B2B) transactions, effective from 1 January 2025.

Key Points of the E-Invoicing Mandate:

  1. E-Invoice definition:
    • An e-invoice must be in a format that allows for complete electronic processing.
    • Formats should adhere to the European standard (EN 16931) or be mutually agreed upon by both parties.
    • E-invoices must be machine-readable, though a human-readable version is optional.
  2. Mandate scope:
    • This applies to all domestic business transactions in Germany or specified areas under German VAT law.
    • No consent from the recipient is required, but they must have the technical capability to receive e-invoices.
    • Excludes transactions with at least one party outside Germany or the specified areas.
  3. Exceptions and special cases:
    • Exceptions include transactions with non-taxpayer legal entities, small transactions under EUR 250, and tickets for passenger transport.
    • Paper invoices or alternative electronic formats are allowed with recipient consent.
  4. E-Invoicing formats:
    • Acceptable formats include the European standard, Germany’s XStandard, and ZUGFeRD from version 2.0.1 onwards.
    • Hybrid formats (e.g., ZUGFeRD) can combine structured data and human-readable parts.
    • XML is the primary data format for hybrid invoices.
  5. Transmission requirements:
    • E-invoices must be transmitted electronically (e.g., via email or customer portals).
    • External service providers can be used, but compliance with VAT law requirements is mandatory.
    • Simply providing an email inbox is sufficient for compliance.
  6. Record-keeping:
    • Structured parts of e-invoices must be stored in their original form and be immutable.
    • Additional relevant documents must also be stored as per legal requirements.
  7. Impact on VAT deductions:
    • Issuing incorrect invoice formats may hinder VAT deductions unless corrected with proper e-invoices.
    • Transitional rules allow for flexibility until full implementation.
  8. Transitional rules:
    • Until the end of 2026, businesses can issue different invoices with mutual consent.
    • Small businesses with receipts under EUR 800,000 can continue this practice until 2027.
    • Full compliance with e-invoicing requirements is mandatory from  1 January 2028.