The eInvoice as a basis for an electronic reporting system
The Growth Opportunities Act is intended to comprehensively amend 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 explanatory notes to the draft legislation of the Growth Opportunities Act indicate that 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.
Note: The Growth Opportunities Act was passed by the German Federal Parliament on 17 November 2023; it remains to be seen when the Federal Council will give its outstanding approval.
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 to be mandatory in principle from 1 January 2025.
As the short deadline for the changeover has been criticized by leading trade associations, the draft law 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. 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 are to 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 government draft.
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 would like to open 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.
Since, in addition to the ViDA proposals on electronic invoicing, there is now also a specific legislative proposal for domestic sales and services, companies that conduct B2B sales in Germany should familiarize themselves with the planned changes in a timely manner.
In the course of the changeover, the companies affected should first carefully analyze 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.
At the same time, legislators and the financial administration must define the technical framework conditions in good time. In this regard, the trade associations are calling for the protection of investments made to date by linking them to existing electronic invoicing systems. It remains to be seen to what extent government IT applications will be made available free of charge for eInvoicing processes, especially for SMEs.