The German government coalition intends to battle VAT fraud and modernise the VAT process. As a first step, the Growth Opportunities Act will now introduce mandatory eInvoicing for national B2B transactions from 2025.
The eInvoice as a basis for an electronic reporting system
The Growth Opportunities Act comprehensively amends the provisions on invoicing in the German VAT Act. In particular, a mandatory eInvoice is to be introduced for domestically taxable transactions between domestic companies (B2B). In this context, a domestic entrepreneur is considered any business or entrepreneur that has its registered office, management, domicile or habitual residence in Germany or a permanent establishment that is involved in the respective transaction.
The eInvoice is being implemented in anticipation of the subsequent introduction of a nationwide electronic reporting system for domestic transactions in Germany. This transactional reporting system is to be used to create invoices, check them for plausibility and forward them, as well as to transmit the relevant reporting data to government agencies.
An eInvoicing obligation is also being addressed in the EU Commission's initiative "VAT in the Digital Age" (ViDA). On basis of the eInvoicing regulations being pursued at EU level, a mandatory digital reporting for transactions among different EU member states is to be introduced.
Note: The national eInvoicing obligation to be introduced as part of the Growth Opportunities Act is limited to domestic transactions between entrepreneurs, whereas the eInvoicing obligation proposed by the EU Commission is to apply to cross-border supplies and services within the EU.
Introduction of eInvoicing with exceptions as early as 1 January 2025
Mandatory eInvoicing for affected national transactions is mandatory in principle from 1 January 2025.
As the short deadline for the changeover has been criticised by leading trade associations, the Grows Opportunity Act provides for special transitional arrangements: Thus, entrepreneurs may continue to use other invoice formats, including paper invoices, until 31 December 2026, for transactions executed in 2025 and 2026. Other electronic invoices may only be used with the consent of the invoice recipient. If the issuer of the invoice is an entrepreneur whose total sales in the previous calendar year did not exceed 800 000 Euro, this transitional arrangement applies until 31 December 2027, for sales and services executed by the end of 2027. In addition, another invoice format may also be used until 31 December 2027 for transactions executed in 2026 and 2027 with the consent of the invoice recipient, provided that the issued invoice is transmitted via electronic data interchange.
Exceptions to the eInvoice requirement apply to small value invoices up to 250 Euro for which any invoice format, including paper invoices, will continue to be permitted. General exemptions for certain entrepreneurs, such as small businesses subject to VAT, are not included in the new legislation.
Technical requirements for an eInvoice
According to the German legislator's understanding, an eInvoice is an invoice that is issued, transmitted and received in a structured electronic format and enables electronic processing. In accordance with the ViDA proposals of the EU Commission, an eInvoice must comply with the requirements of the CEN standard EN 16931.
Furthermore, the legislator opens up the possibility of agreeing the invoice format between the invoice issuer and invoice recipient. If such an individual agreement is reached, the selected format must enable the mandatory invoice details to be extracted into a format that complies with CEN standard EN 16931 or is interoperable with this format.
Note: This means that in future any invoice format that does not meet the requirements for an eInvoice will fall under the term "other invoice". In particular, this also applies to invoices that are issued in paperless electronic form but do not comply with the specified data format, such as invoices as PDF files.
Conclusion
Now that, in addition to the ViDA proposals for electronic invoicing, mandatory eInvoicing for domestic transactions in Germany has been decided, companies must deal with the introduction of eInvoicing in the near future.
In the course of the changeover, the companies affected should first carefully analyse their current billing and accounting processes in order to assess the extent to which technology will be used to improve the efficiency of their processes, the extent to which technical and human resources are required to adapt the current processes to the fully integrated systems envisaged by the legislator.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.