deen

Tax Advice

Introduction of Mandatory eInvoicing in Germany

The Ger­man go­vern­ment co­ali­tion in­tends to battle VAT fraud and mo­der­nize the VAT pro­cess. With the draft Growth Op­por­tu­nities Act pas­sed by the Ger­man Fe­deral Par­lia­ment on 17 No­vem­ber 2023, the first step is to in­tro­duce man­datory e-in­voi­cing for na­tio­nal B2B tran­sac­tions from 2025. Howe­ver, the Fe­deral Coun­cil of Ger­many re­fu­sed to give its ap­pro­val on 24 No­vem­ber 2023, so it re­mains to be seen when and in what form such a re­gu­la­tion will be­come law.

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).

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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.

Conclusion

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.

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