Germany’s Digital Transformation: The Shift to Mandatory e-Invoicing

In the heart of Europe, Germany is undergoing a significant transition, shifting away from paper-based invoices to embrace a mandatory electronic invoicing framework tailored for B2B transactions. As legislative changes unfold, Germany’s journey towards e-invoicing becomes a matter of compliance and a crucial element in the nation’s broader strategy for economic digitization.

The Rising Wave of Mandatory e-Invoicing in Europe

Keeping up with the developments in e-invoicing doesn’t require meticulously following the news – the trend is unmistakably sweeping across Europe. An increasing number of countries are edging closer to implementing mandatory e-invoicing and e-reporting systems. While heralding a new era of economic digitization, these legislative shifts also offer tax authorities a significant advantage in effectively combating tax fraud.

For individuals working in EU countries undergoing invoicing changes or collaborating with business partners in such regions, proactive preparation to meet compliance requirements is paramount. Ignoring these mandates is not a viable option, especially considering the potential for incurring costly penalties. Therefore, it is crucial to familiarize yourself with both the current and upcoming invoicing mandates to navigate these transformative regulatory landscapes seamlessly.

Germany’s e-Invoicing Transformation: Introduction

Two years ago, the German Ministry of Finance recognized the imperative for digitization to combat VAT tax fraud effectively. Presently, Germany is undergoing a deliberate transition towards mandatory electronic invoicing in the business-to-business (B2B) sector. Concurrently, parliamentary discussions are underway to formulate an act to fortify the country’s economy. This act encompasses diverse initiatives on digitization and additional support, notably addressing climate-related issues. Collectively, these efforts form part of a broader strategy aimed at digitizing the invoicing process.

In its initial phases, the primary focus of this strategy isn’t solely on combating tax fraud. However, it is anticipated that a comparable approach, successfully implemented in Italy several years ago, will resurface as Germany progresses with the ViDA initiative and the implementation of Central European cross-border reporting. This strategic alignment reflects Germany’s commitment to addressing financial discrepancies and ensuring the integrity of cross-border financial transactions.

Mandate Coverage and Transition Phases

The era of paper invoices is drawing to a close in Germany, with a designated transition period of approximately three years for existing Electronic Data Interchange (EDI) invoices. However, this allowance will not persist indefinitely.

The forthcoming system will cover all domestic B2B invoices, with companies obligated to send e-invoices solely to other German entities. The transitional phase is not rigidly regulated, allowing flexibility in the transformation or submission of invoices, though email delivery may not be the optimal choice. Nevertheless, the evolution of the Peppol network holds promise for potential enhancements in the future.

ViDA Initiative and Cross-Border Reporting

The ViDA initiative, slated for implementation around 2028, underscores the European government's commitment to a cross-border reporting system combating VAT fraud in cross-border business. This initiative extends to the introduction of a digital reporting system for domestic invoices, strategically aligning with broader efforts to combat tax fraud on both cross-border and domestic fronts.

Timelines and Compliance Plan

Key dates include January 1, 2025, when paper invoices are to be phased out, and companies will have to be equipped to receive electronic invoices in the CEN norm 16931 formats, with various XML structures under consideration. Invoice recipients will no longer have the option to decline, given that the precedence of paper invoices is no longer in effect.

By January 1, 2027, sending electronic invoices in Germany should become necessary for larger companies boasting an annual revenue exceeding €800,000. Additionally, these companies will be mandated to issue e-invoices from this date onward.

Looking ahead to January 1, 2028, the B2B mandate will extend to all other companies, necessitating acquiring the ability to receive and issue electronic invoices exclusively in the CEN norm 16931 format.

Anticipating future developments, Germany is poised to introduce a digital reporting system akin to those implemented in other European countries. This system, the Continuous Transaction Control system, will be established for domestic and cross-border invoices.

In summary, from 2025 onward, the allowance for sending and receiving paper invoices persists under specific conditions. However, the future direction unmistakably favors electronic invoicing as the predominant method.

Transitioning Formats: CEN Norm 16831 and More

Examining the landscape reveals paper-based and other EDI formats set for elimination by January 1, 2028. In domestic transactions, every German company must be equipped to receive electronic invoices, authorizing issuers to initiate the e-invoicing process.

Concerning the CEN norm 16931, permissible formats shall include the X-Rechnung, the official German government invoicing format. Its compatibility with Peppol Bis messages, especially in the latest version, ensures continuous compatibility with all other formats.

Official legislation will permit formats aligned with the CEN norm 16931. The exchange of EDIFACT messages will remain possible, contingent on the precise German interpretation of EN16931 standards.

The Implementation of CEN Norm 16931 and Its Impact on Invoicing

The standard EN16931, an EU-led initiative, mandates e-invoice exchange with government authorities and has been incorporated into local law. Its most widely used flavor is known in Germany as X-Rechnung. The norm designates core invoice formats and mandatory data fields extended to Germany and others as CIUS. The German CIUS is influenced theoretically by X-Rechnung.

The Complex Realities of International Document Exchange

Understanding and integrating diverse requirements become paramount for businesses engaging in document exchange across borders. The complexity arising from infrastructure and format variations, as seen in Italy and anticipated in France, highlights the need for companies to navigate these challenges for seamless global commerce.

Comarch’s Tailored Solutions for Ensuring Compliance

Comarch offers tailored solutions based on specific business requirements and partner countries. Conducting pre-analyses and providing recommendations, Comarch ensures that businesses can exchange invoices internationally while complying with diverse regulations. The company’s comprehensive support and global connections facilitate a seamless transition to electronic invoicing.

Additionally, Comarch can establish connections with all business partners in selected regions, leveraging our existing connections. We offer comprehensive support by providing an overview of each country. Ensuring compliance is crucial, and the Comarch e-Invoicing platform is a valuable assistant.

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