Get Ready for Mandatory e-invoicing in Germany from 2025
It took some time for Germany to get mandatory e-invoicing for B2B transactions approved. Initially, this process received a setback in November 2023 when the Bundesrat (Federal Council) did not support the projected legislation due to disputes in other regions. This appeal was brought to the Mediation Committee and the appeal was then further postponed to 2024. This proposed law has now been approved by Bundesrat. Moreover, mandatory e-invoicing will be implemented in phases, starting 2025.
National e-invoicing obligation in Germany from 2025
Since November 2020, e-invoicing has been mandatory in Germany for business-to-government (B2G) transactions; from January 2025, the e-invoicing obligation will now include B2B supplies as well. Starting 1 January 2025, all German-based companies must be capable of receiving electronic invoices (e-invoices) in the EN16931 format. The consent of the recipient will no longer be required for an invoice issuer to issue electronic invoices. E-Invoicing will be mandatory for national B2B supplies where both the supplier and recipient are established in Germany.
What is an established business?
A business is considered to be established if it has a registered work office, place of management, residence in Germany or a national fixed establishment (for VAT purposes).
Exceptions to the e-invoicing obligation:
Transactions that will be exempt from e-invoicing obligations are:
- Invoices for small amounts up to €250 (sec. 33 of the German VAT Implementing Regulation)
- Invoices for travel tickets (sec. 34 of the German VAT Implementing Regulation)
- Tax-free services under VAT Act Section 4 (numbers 8-29)
What is an e-invoice
An e-invoice might sound quite simple, but let’s dive into what is actually required. Documents that businesses might currently deem to be acceptable invoices now, might not be acceptable e-invoicing in the future. An e-invoice will only be acceptable if it conforms to the requirements of Directive 2014/55/EU. Only invoices abiding by the EN16931 standard will be considered as acceptable e-invoices (new sec. 14 para. 1 sentence 6 no. 1 of the German VAT Act). In addition, it will also be acceptable if the invoice issuer and recipient agree on a fixed, specific e-invoice format. There is, however, certain prerequisites for this format. The format must enable the correct and complete extraction of the mandatory information in accordance with Directive 2014/55/EU.
Similarly, any invoices that do not meet the above-mentioned conditions, such as PDF or paper invoices, will be defined as “other invoices.” “Other invoices,” even in electronic format, still require the consent of the invoice recipient during the transitional periods mentioned below.
Transitional provisions
The e-invoicing obligation will take effect from 1 January 2025, but the invoice issuer will be provided with transitional provisions. Moreover, it will be mandatory for the invoice recipient to accept e-invoices from 2025 without any constraints. This is only if they receive supplies from other taxable traders established in Germany.
The following transitional provisions apply to sellers in Germany:
- 2025 – 2026: Paper invoices and other electronic invoices (with the permission of the invoice recipient) will continue to be permitted, in addition to e-invoices.
- 2027: EDI invoices may also remain with the approval of the invoice receiver. Additionally, EDI invoices may only be used if they are consistent with the EN standard, and the issuer and receiver have agreed to their use.
In conclusion, the e-invoice mandate will cause a gradual impact until 2027, but invoice recipients established in Germany will have to alter their ERP systems to receive e-invoices, without constraint, starting 1 January 2025.
Make sure that your business is ready ahead of time. Contact our team of experts to help make this transition a seamless one.
