Germany's Digital Revolution: E-invoicing Requirement Will Come into Force in 2025

Germany is currently undergoing a significant change towards mandatory electronic invoice exchange between companies. With the approval of the Growth Opportunities Act in March 2024, the gradual introduction of the e-invoicing requirement has also been decided. Paper-based invoices will soon be a thing of the past.

The obligation stipulates that German companies must be able to receive electronic invoices in the formats of the CEN standard EN 16931 from January 1, 2025. The invoice recipient no longer has the opportunity to reject electronic invoices, as paper invoices no longer have priority.

From January 1, 2027, sending electronic invoices in Germany will be mandatory for larger companies with an annual turnover of more than EUR 800,000.

From January 1, 2028, the B2B obligation to exchange e-invoices will be extended to all other companies, so that from this date all companies must issue and receive electronic invoices in formats compliant with the CEN standard EN 1693.

What transition periods and exceptions apply?

The era of paper invoices is coming to an end in Germany. A transition period of around three years applies to existing EDI (electronic data interchange) invoices.

• Until December 31, 2026: Paper invoices and e-invoices in non-compliant formats may still be exchanged, although the priority of the paper invoice no longer applies.
• Until December 31, 2027: The exchange of paper invoices and e-invoices in non-compliant formats is only possible for companies with sales of less than EUR 800,000 per year, and paper invoices will no longer be given priority.
• Until December 31, 2027: Transition period for existing EDI connections

These e-invoicing obligations apply to B2B transactions and invoices whose sender and recipient are both VAT registered in Germany. This means that cross-border invoices are excluded from the obligation. There are also exceptions for invoices under EUR 250 in accordance with Section 33 UStDV and for tickets in accordance with Section 34 UStDV.

Invoices to consumers (B2C) are excluded from the obligation. In addition, invoices to public clients (B2G) are not affected by this obligation, as there are independent regulations for electronic invoicing for B2G.

How should the obligation to receive be implemented?

Regarding the receipt obligation, by January 2025, companies must ensure that they are able to receive invoices in formats that comply with the CEN standard and also check whether the incoming invoice complies with these requirements.

Currently, these are the acceptable formats: ZUGFeRD, Xrechnung and EDIFACT. Syntax is binding for UN/EDIFACT INVOIC D16B. However, there are different versions of the formats mentioned, not all of which comply with the CEN standard. If in doubt, it is important to use the latest version. The EDIFACT formats frequently used in business are not compliant with the CEN standard EN 16931.

In addition, companies must determine how they will receive e-invoices. A distinction based on the size and type of invoice issuer makes sense:

• A technical EDI interface between the invoice issuer's IT system and the invoice recipient's IT system (classic EDI) is common, especially in large companies, even before the planned e-invoicing requirement and is particularly suitable for business partners with whom many invoices are exchanged.
• Web portals (WebEDI) offer SME suppliers the opportunity to fill out an invoice form via a web-based portal, from which a legally compliant invoice format can be automatically created and sent to the recipient.
• Email as a classic transmission method is suitable for business partners with whom very few invoices are exchanged in comparison.

As soon as companies receive an e-invoice, it must be transferred to the company's IT systems to ensure further processing. It is therefore necessary to ensure that IT systems support the required formats. If this is not the case, there are two options:

• Commissioning an internal or external developer, or directly from the manufacturer who enables the processing of the required formats in the IT system.
• Engaging an EDI/e-Invoicing service provider to convert the received invoice into a format that can be processed by the company's IT system. Both on-premises converters and software service providers are ideal for this purpose as a bridge between the reception channels and the company's IT systems.

Smaller businesses often worry that they won't be able to read these structured, machine-readable formats in person. In fact, the e-invoices can be made human-readable using an appropriate program. This is even possible with common Internet browsers and the editor program on Windows.

What needs to be taken into account when sending e-invoices?

In order to meet the obligation to send electronic invoices, it must be ensured that the IT system is able to create invoices in the required formats. Here, too, it is possible to force the creation of the desired formats directly in the IT system used or to ensure that the invoices are converted into the necessary formats with the help of a service provider.

After the invoice is in the correct format, it must be transmitted to the recipient. Depending on the circumstances, invoices can also be sent via a technical interface (classic EDI), a web portal (WebEDI) or email. In all cases, it must be ensured that the IT system with which the e-invoice is created is able to transmit it via an interface directly to the solution used for issuing invoices. These options can be created either by the company itself or with the help of an EDI service provider.

In business relationships in which many invoices are exchanged, a format is typically agreed upon in order to reduce the effort involved in processing different formats.

There’s more you should know about e-invoicing in Germany – learn more about the new and upcoming regulations.