Germany's E-Invoicing Mandate: Essential Insights for Businesses

With the introduction of mandatory electronic invoicing for business-to-business (B2B) transactions, Germany is poised for a significant transformation in its invoicing landscape. This move aims to achieve overarching goals of efficiency, transparency, and sustainability, offering numerous benefits for both the public sector and businesses. Here’s everything you need to know about the upcoming e-invoicing mandate in Germany.

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Adoption and timeline of the e-invoicing mandate

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The Growth Opportunities Act, which includes mandatory invoicing between businesses, was passed by the German Bundestag on November 17, 2023. After several amendments and a revision by the Federal Council's mediation committee on February 21, 2024, the law received final approval from the Federal Council on March 22, 2024. The mandate is now confirmed, and implementation is on track according to the planned schedule:

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• Starting January 1, 2025, all businesses must be able to receive electronic invoices (commonly referred to as e-invoices) in the EN16931 format. Buyer consent is no longer required for sending electronic invoices.

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• Until December 31, 2026: Paper invoices and non-EN16931-compliant e-invoices can still be used, but only with the consent of the recipient.

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• From January 1, 2027: Businesses with a previous year's turnover of at least EUR 800,000 must issue e-invoices to other businesses, otherwise the invoice will be considered non-compliant. EDI can still be used provided the VAT information is extracted in EN16931 format.

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• From January 1, 2028: Mandatory issuing of e-invoices for all companies. EDI remains permitted under the same conditions.

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Key aspects of the mandate

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Registered office of the business and scope of application:

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The obligation to issue e-invoices applies to businesses based in Germany, meaning those that have their registered office, central management, or a VAT business establishment in Germany and are involved in sales.

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The obligation to use e-invoices also applies to invoices for which the recipient is liable for VAT (§ 13b UStG) and to small business invoices (§ 19 UStG).

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Definition and requirements:

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The new regulations redefine an electronic invoice (e-invoice) and stipulate that it must comply with the EN16931 standard or another agreed format that enables the correct extraction of VAT information.

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Paper invoices will be categorised as "other invoices" and are set to be gradually phased out for B2B transactions.

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Receipt and archiving of electronic invoices:

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From January 1, 2025, businesses must be able to receive and store electronic invoices as defined above. The minimum requirement is an electronic mailbox for receiving invoices, but other transmission methods can also be arranged. With Banqup, our solution designed especially for small and medium-sized enterprises (SMEs), it is easy to receive, view, and archive electronic invoices in compliant formats. Watch our video to see how simple it is.

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Electronic processing in accounting is recommended, but not mandatory.

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Issuing electronic invoices:

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Starting January 1, 2027, businesses with annual revenue of at least EUR 800,000 must issue electronic invoices to other businesses; otherwise, the invoice will be considered non-compliant. From January 1, 2028, this requirement will apply to all businesses.

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Exemptions include  VAT-free services, small invoices up to EUR 250, and travel tickets. However, if opting for VAT, the mandate applies as well.

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Electronic invoices can be sent via email or downloaded, for example, through a customer portal. An e-invoice can be transmitted multiple times as long as it is the same invoice and the transmission involves only identical copies of the content. Transmission via external storage (e.g., USB stick) is not permitted. With our SMB solution, Banqup, you can already create and send EN-compliant structured electronic invoices (such as XRechnung and ZUGFeRD) through various channels, including email, Peppol, and directly through our own network to other users within our network.

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Technical and format specifications:

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E-invoices must be issued, transmitted, and received in a structured electronic format which allows for its automatic and electronic processing;. PDFs or text e-mails are no longer considered electronic invoices.

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The electronic invoice must be machine-readable; human readability is optional but recommended. The German-specific standards XRechnung and ZUGFeRD meet these requirements, with ZUGFeRD offering the additional advantage of including a human-readable visualisation by default.

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Benefits for governments and tax authorities

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Governments worldwide are increasingly adopting electronic invoicing and electronic reporting due to their numerous benefits. Notable examples include Italy, where electronic invoicing has been mandatory since 2019, and Belgium, where it will be introduced on January 1, 2026. Other countries like Spain, France, and Poland are also planning to implement similar regulations. The advantages of e-invoicing for governments and tax authorities are substantial:

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• Improved tax compliance: Real-time monitoring of transactions helps identify irregularities or potential tax evasion immediately.
• Reduced VAT gap: Enhanced accuracy in tax collection reduces the VAT gap, thereby increasing tax revenues.
• Enhanced tax transparency: A transparent digital tracking of transactions simplifies the oversight of economic activities and the detection of irregularities.
• Streamlined tax collection: Simplified and automated tax collection processes reduce administrative burdens.
• Cost savings: Reduced need for manual data entry and handling of paper results in significant cost savings.
• Minimised errors: E-invoicing decreases the likelihood of errors in tax calculation and reporting.
• More efficient audits: Easier access to electronic invoice data allows for more efficient and targeted tax audits.
• Data analysis and policy insights: Utilising electronic invoice data for analysis provides insights into economic trends and informs policy decisions.
• Integration with other systems: E-invoicing can be integrated with customs and electronic tax systems to streamline trade and regulatory processes.
• Environmental benefits: Reducing paper consumption aligns with sustainability initiatives.

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Preparing to switch

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For larger enterprises, adopting electronic invoicing can involve significant organisational changes. Companies should start preparing early to ensure a seamless transition. This shift to e-invoicing can also be viewed as an opportunity to enhance the efficiency of automated processing, including accounting procedures. Choosing the right partner for this transition is crucial to ensure compliance and fully leverage the benefits of the new system.

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For small and medium-sized enterprises (SMEs), our Banqup platform offers a tailored, user-friendly solution for e-invoicing. With Banqup, you can meet the new requirements today without the hassle of complex implementations or extensive adjustments. Equipped with robust features and adherence to the latest e-invoicing standards, Banqup is the ideal partner for a smooth transition into the digital invoicing era.

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Are you ready for electronic invoicing?

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Contact us with any questions about e-invoicing and e-reporting, whether they're related to regulations in Germany or abroad. We offer tailored solutions for your specific needs and ensure a smooth transition to the latest e-invoicing standards.

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‍Sign up today for a 30-day free  trial of our SME solution Banqup and see for yourself how easy and convenient the switch to e-invoicing can be with the right tools and the right partner. Contact us now to explore your options and get a head-start on compliance and efficiency.