Germany is set to significantly advance its electronic invoicing (e-invoicing) framework starting January 1, 2025. The Federal Ministry of Finance (BMF) has recently published draft regulations detailing the mandatory adoption of e-invoicing for business-to-business (B2B) transactions within Germany. This move aligns with the broader European Union initiative to digitalize VAT reporting under the “VAT in the Digital Age” (ViDA) proposal.
Key Requirements and Timeline
- Mandatory E-Invoicing from 2025: From January 1, 2025, all domestic businesses must be ready to receive e-invoices. This mandate includes transactions where both the supplier and recipient are established in Germany. E-invoices must be issued, transmitted, and received in a structured electronic format, with XRechnung and ZUGFeRD 2.0.1 recognized as compliant formats (BMF letter dated June 2024, III C 2 – S 7287-a/23/10001 :007).
- Transition Period: There will be a phased approach to the mandate, acknowledging the economic structure dominated by SMEs. While all businesses must be able to receive e-invoices starting in 2025, they have until December 31, 2027, to transition to issuing e-invoices exclusively. During this period, businesses can still issue traditional invoices, such as paper or standard PDFs (BMF letter dated June 2024, III C 2 – S 7287-a/23/10001 :007).
- Exemptions: Certain transactions are exempt from the e-invoicing mandate, including VAT-exempt transactions, invoices under €250, passenger transport tickets, and cross-border transactions (Section 14 UStG).
Technical Specifications and Formats
The regulations specify that e-invoices must be machine-readable, and hybrid formats like ZUGFeRD, which combine XML data with a PDF, are acceptable. The XML data will be considered the official invoice data if discrepancies arise between the machine-readable and human-readable parts (Section 14 UStG).
Transmission of e-invoices can be through various electronic means, including email and electronic interfaces. The requirement is that the transmission must be purely electronic; handing over invoices on physical media like USB sticks does not comply (BMF letter dated June 2024, III C 2 – S 7287-a/23/10001 :007).
Impact on Businesses
The shift to e-invoicing aims to enhance efficiency, reduce fraud, and streamline tax reporting processes. However, businesses must prepare for this transition by updating their invoicing systems to comply with the new standards. Those with a turnover below €800,000 in the previous year have a slightly extended deadline until the end of 2026 to fully adopt e-invoicing (BMF letter dated June 2024, III C 2 – S 7287-a/23/10001 :007).
Conclusion
Germany’s move towards mandatory e-invoicing reflects a significant step in digitalizing tax reporting and improving business efficiency. Companies should start preparing now to ensure compliance with the new regulations by the 2025 deadline. This preparation includes upgrading invoicing software and familiarizing staff with the new processes.
At WW+KN, a Baker Tilly Company, we are here to help you navigate these changes. For assistance and more information, feel free to reach out to us at info@vat-germany.com.
