Obligatory E-Invoicing in the German B2B Sector Starting in 2025: Are You Ready?
|| E-Invoicing
Jul 22, 2024
Reading time: 8 min
Update: Oct 30, 2024
As of January 1, 2025, electronic invoicing will be mandatory in the B2B sector in Germany. This measure is part of the Growth Opportunities Act, which aims to improve the efficiency and transparency of invoice processing and reduce tax fraud. It is important for companies to prepare for these changes in order to benefit from digitalization and ensure legal compliance.
Read our blog post for everything you need to know about E-Invoicing, including technical standards, transition timelines, business benefits, and requirements and challenges.
What Is an E-Invoice?
The term electronic invoice (also known as E-Invoice or E-Invoicing) is defined in § 14 (1) of the German Value Added Tax Act (VAT Act; German: Umsatzsteuergesetz | UStG). An invoice is considered electronic if it is issued, transmitted and received in a structured electronic format. This format must allow for automatic and electronic processing. The requirements are defined in the European standard EN 16931 of the CEN (Comité Européen de Normalisation, European Committee for Standardization).
An E-Invoice, unlike a paper invoice or image file, represents the content of the invoice in a structured, machine-readable record. This ensures that invoices issued in this form by the issuer can be further processed and automated for payment without media disruption. The structured electronic format must either comply with the European standard for electronic invoicing and the list of corresponding syntaxes in accordance with Directive 2014/55/EU or can be agreed between the invoice issuer and the invoice recipient, provided that it allows the complete extraction of the information required by the UStG and is interoperable with the EN 16931 standard.
In addition, the authenticity of the origin, the integrity of the content and the legibility of the invoice must be guaranteed. In this context, legibility means that the XML file must be machine-readable without the need to create an additional human-readable document.
What Is Not an E-Invoice?
As of January 1, 2025, all invoices in paper or electronic form that do not meet the requirements of § 14 para. 1 cl. 6 UStG will be considered as other invoices.
Here are some examples of documents that do not qualify as E-Invoices:
- Paper invoices: Even if scanned and sent as a PDF via email, they are not considered E-Invoices. Scanning converts them into image files that are not machine-readable.
- PDF invoices: Although PDF files are digital, they do not meet the criteria of a structured electronic invoice. PDF documents are often unstructured and can only be read manually or with special tools, which does not fulfill the requirements for machine processing.
- Image files: Invoices saved and sent as image files (e.g., JPEG or PNG) are also not E-Invoices. These formats are neither structured nor machine-readable and require manual data entry for processing.
- Emails: Text in an email does not meet the requirements for structured and machine-readable formats.
What Are the Technical Standards for E-Invoicing?
In order for an invoice to be accepted as an E-Invoice, it must be in a structured electronic format that can be processed seamlessly and automatically. In Germany, there are specific technical standards that ensure that E-Invoices can be created, transmitted and processed without media disruption. The use of structured invoice formats that comply with the EN 16931 series of standards is always permitted.
Examples of acceptable national E-Invoicing formats:
XRechnung
Developed by the Coordination Office for IT Standards (KoSIT), XRechnung is a structured data format without visual representation. It enables the direct electronic processing of invoice data and is widely used in public procurement. The format meets European requirements according to EN 16931 and is specifically tailored to the needs of public administration.
ZUGFeRD 2.0.1
ZUGFeRD, also known internationally as Factur X, is a hybrid invoice format. It consists of a visual representation in the PDF/A-3 standard and a machine-readable XML file. The PDF file looks like a traditional invoice, but also contains a structured XML record with all relevant information. This format is often used for communication between wholesalers and their customers because it is both human-readable and machine-processable.
As of version 2.0.1 (with the exception of the MINIMUM and BASIC-WL profiles), ZUGFeRD meets the requirements of EN 16931 and is therefore also suitable for e-invoicing.
EDIFACT
The EDI procedure EDIFACT (Electronic Data Interchange For Administration, Commerce and Transport) is an established format that is widely used in international business communication. The legislator announced in the BMF letter dated October 15, 2024 that EDIFACT will remain valid beyond the transition periods. However, this will only be the case if the information required by the VAT Act can be correctly and completely extracted from the electronic invoice.
The E-Invoicing format can be agreed individually between the invoice issuer and invoice recipient in accordance with Section 14 (1) sentence 6 no. 2 UStG. The chosen format can deviate from the specifications of the EN 16931 standard as long as it is interoperable with the EN 16931 standard and contains the correct and complete information in accordance with the VAT Act:
1. Acceptance of the procedure by the service recipient
2. Authenticity of origin and integrity of invoice content through
a) qualified electronic signature in accordance with the Signature Act,
or
b) compliance with guidelines for electronic data transmission
3. An additional internal control procedure that provides a reliable audit trail between the invoice and the service
What Are the Acceptable Transmission Methods for E-Invoices?
Various methods are allowed for the transmission of E-Invoices, such as
- Sending E-Invoice via email
- Provision of invoice data via electronic interfaces
- Shared access to central repositories within a group of companies
- Download via an Internet portal
How Can E-Invoices Be Received?
An email inbox is usually sufficient for receiving E-Invoices, but a special inbox just for E-Invoices is not necessary. Other electronic transmission channels can also be agreed.
If the invoice recipient refuses to accept the invoice or is technically unable to do so, the invoice issuer is not entitled to issue another invoice. However, the issuer fulfills its VAT obligations if it issues the E-Invoice and can prove that it has been properly transmitted.
When Do Companies Have to Switch to E-Invoicing?
Receipt of E-Invoices will be mandatory as of January 1, 2025. By this date, all B2B companies in Germany must be able to receive and process electronic invoices. This means that traditional paper invoices or simple PDF documents will no longer be allowed. However, there are no requirements for specific transmission channels or communication protocols.
Transitional Regulations for Obligatory E-Invoicing:
- Until December 31, 2026, businesses can issue and transmit their invoices as other invoices, if the recipient agrees. From a value-added tax (VAT) perspective, paper invoices are still permissible. There is no requirement for a specific form of consent from the recipient for an invoice to be issued in a different electronic format. An agreement between the issuer and the recipient on the format is sufficient, which can be established through a framework agreement (e.g. general terms and conditions) or implicitly (by action or conduct).
- Until December 31, 2027, there is a transitional period for invoicing companies whose total turnover in the previous calendar year was less than €800,000. Accordingly, an invoice may be issued and transmitted as another invoice for services already rendered. This threshold applies regardless of whether the issuer determines its turnover according to the accrual accounting method (§ 16 UStG) or the cash accounting method (§ 20 UStG).
These measures aim to ensure a smooth transition and prepare all companies for the new processes in time.
How Can Companies Benefit From E-Invoicing?
The introduction of E-Invoicing offers numerous advantages, , which in the long run will lead to a significant optimization of business processes in both the B2B and B2G (business-to-government) sectors.
Benefits for the B2B Sector:
- Increased efficiency by automating invoicing processes
- Future proofing
- Improved compliance
- Positive impact on sustainability goals
- Simplified archiving and data retrieval
- Reduced material costs and error rates
- Faster payment processing and enhanced liquidity
- Improved customer relations and service quality
Benefits for the B2G Sector:
- Standardization and regulatory compliance
- Transparency and accountability in public procurement
- Improved data quality
- Cost savings
- Faster processing times
- Environmental friendliness and contribution to sustainability
- Better control and monitoring of payment flows
Get Prepared for Mandatory E-Invoicing in Germany
The introduction of mandatory E-Invoicing in the B2B sector as of January 1, 2025 through the Growth Opportunities Act is an important step towards increasing efficiency and digitization in invoice processing. It is a comprehensive process that requires careful planning and implementation. Companies need to overcome technical, organizational and legal challenges in order to take full advantage of digitalization. A structured approach and a willingness to adapt are critical to the successful implementation of E-Invoicing. In the long run, however, companies will benefit from automated processes, improved data quality and accelerated payment processing.
As an experienced provider, eddyson offers customized software solutions to support companies in their transition to electronic invoicing. Our ERP-independent solutions comply with the latest standards, such as XRechnung and ZUGFeRD 2.0.1, providing flexible and comprehensive coverage of E-Invoicing requirements.
Need More Information on E-Invoicing?
We are here to help. Our experts are ready to guide you through a smooth transition to E-Invoicing so that you can quickly take advantage of all the benefits.
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