Growth Opportunities Act: What Businesses Need to Know About the Mandatory B2B E-Invoicing in Germany From 2025
|| E-Invoicing
May 10, 2024
Reading time: 6 min
Update: Oct 15, 2024
The business world is undergoing a digital transformation that not only optimizes processes, but also places new requirements on companies. One current and widely discussed topic is the mandatory introduction of electronic invoicing in the B2B sector in Germany as of January 1, 2025. Electronic invoicing (also known as E-Invoicing) is a key measure of the Growth Opportunities Act, which aims to drive digitalization and process optimization in German companies, strengthen competitiveness and effectively combat VAT fraud.
This blog provides an overview of the history of the Growth Opportunities Act and the current legal framework for E-Invoicing in the B2B sector based on the Letter from the German Federal Ministry of Finance (BMF) dated October 15, 2024.
Growth Opportunities Act: Addressing Economic Challenges
Challenges such as labor shortages, digitalization, and international competitive pressures require adjustments in economic and tax policy to ensure sustainable growth. The Growth Opportunities Act is a legislative initiative of the current coalition government of SPD, Bündnis 90/Die Grünen and FDP. Its goal is to improve the business environment in Germany, thereby strengthening the competitiveness of the German economy and promoting economic growth.
It consists of a six-part package of measures:
- Tax relief for businesses
- Incentives for research and development
- Improved investment conditions
- Support for small and medium-sized enterprises (SMEs)
- Digitization and reduction of bureaucracy
- Sustainability and climate protection
E-Invoicing as a Central Component of the Growth Opportunities Act
The introduction of E-Invoicing is a key component of Point 5 of the Growth Opportunities Act and is directly linked to the objectives of the Act, in particular with regard to reducing bureaucracy, digitization and increasing efficiency. According to § 14 para. 1 of the German Value Added Tax Act (Umsatzsteuergesetz, UStG), an invoice is considered to be electronic if it is issued, transmitted and received in a structured electronic format that permits machine and electronic processing. These requirements are specified in the European standard EN 16931 of the CEN (Comité Européen de Normalisation).
The process began with the coalition agreement in December 2021, followed by the draft bill in July 2023, and led to the adoption of the law by the Bundestag in November 2023. Following approval by the Bundesrat in March 2024, the obligation to receive E-Invoices will come into force on January 1, 2025. This is expected to increase the efficiency of business processes and strengthen the competitiveness of the German economy.
December 2021 – Coalition Agreement
In the coalition agreement of the "traffic light" coalition (SPD, Bündnis 90/Die Grünen, FDP), the promotion of digitalization and reduction of bureaucracy are formulated as central goals. An important part of this strategy is the introduction of electronic invoicing to modernize and simplify business processes.
July 2023 – Draft Bill
In July 2023, a draft bill of the Growth Opportunities Act was published, which included specific measures for the introduction of E-Invoicing. The draft proposed that companies be required to create and receive electronic invoices to digitize and accelerate administrative processes.
November 17, 2023 – Approval by the Bundestag
On November 17, 2023, the Growth Opportunities Act was passed by the German Bundestag, laying the legal groundwork for the widespread introduction of E-Invoicing.
March 22, 2024 – Bundesrat Approval
On March 22, 2024, the Bundesrat approved the Growth Opportunities Act. This completed the legislative process, allowing the law to take effect. The law provides a preparation period for companies until January 1, 2025, and defines further transitional regulations.
E-Invoicing: Introduction and Transitional Arrangements
January 1, 2025 – Mandatory Receipt of Electronic Invoices
Starting January 1, 2025, the receipt of E-Invoices for domestic B2B transactions will be mandatory for all domestic companies. This marks the final transition to a digitized invoicing system aimed at increasing efficiency and reducing administrative costs. However, the following transitional arrangements apply:
- Until December 31, 2026 – Other Invoices Allowed by Mutual Agreement
An invoice can also be issued and transmitted as another type of invoice for a transaction carried out by then. Paper invoices are VAT compliant. The recipient’s consent to issue the invoice in another electronic format does not require a special form; it just needs an agreement between the issuer and the recipient. This agreement can be made in a framework agreement (e.g., in the general terms and conditions) or implicitly through actions or behavior. - Until December 31, 2027 – Other Invoices Allowed by Mutual Agreement and Total Sales Under €800,000
If the total sales of the invoicing company did not exceed €800,000 in the previous calendar year, an invoice can also be issued and transmitted as another type of invoice until the end of the calendar year 2027. The €800,000 threshold applies regardless of whether the issuer determines their sales under the rules of VAT reporting (§ 16 UStG) or cash accounting (§ 20 UStG).
For further details, see the BMF-Letter dated October 15, 2024 under Section III. Transition rules from paragraph 62.
General - Use of EDI Procedures Allowed by Mutual Agreement
The structured electronic format of an E-Invoice can be agreed upon between the issuer and the recipient and thus deviate from the EN 16931 standard.
The prerequisite is that the format enables the correct and complete extraction of the information required by the VAT Act from the E-Invoice into a format that complies with or is interoperable with the EN 16931 standard. This regulation allows the continued use of established electronic invoice formats (e.g., EDI procedures like EDIFACT) beyond the described transition periods.
Specific requirements include:
- Acceptance of the procedure by the service recipient
- 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 - An additional internal control procedure that provides a reliable audit trail between the invoice and the service
The Growth Opportunities Act sets clear standards to strengthen Germany's economic framework, increase competitiveness and drive the digital transformation of companies. The introduction of mandatory electronic invoicing in the B2B sector as of January 1, 2025, poses new challenges for companies, but also offers various opportunities.
In summary, the updated draft of the Federal Ministry of Finance dated October 15, 2024 shows a clear consideration of feedback from selected associations and further simplifies various issues.
For users and providers of EDI procedures, this is a clear confirmation that these procedures remain valid as long as the required information is transmitted correctly. The next step for companies is to assess whether their existing EDI processes already meet all relevant requirements or whether adjustments are necessary.
eddyson is here to support you as a trusted partner, ensuring a smooth and compliant transition to electronic invoicing. Benefit from our expertise to prepare your business for the future. Contact us today and shape the digital future of your invoicing processes.
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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