On 14 June 2024, Germany’s Federal Ministry of Finance released a draft guidance on the mandatory implementation of electronic invoicing (e-invoicing) for domestic business-to-business (B2B) transactions, effective from 1 January 2025.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