Germany’s Mandatory E-Invoicing System: What to Expect in 2025
Germany is set to implement its mandatory e-invoicing system in a phased approach, starting January 1, 2025. During this initial phase, businesses engaged in domestic business-to-business (B2B) transactions will be required to accept structured electronic invoices that align with the EU e-invoicing standard EN 16931.
While this requirement may seem quite straightforward, there are critical nuances that businesses must consider. Notably, Germany’s e-invoicing strategy presents significant differences when compared to mandates in other EU nations, such as Romania and Italy, as well as upcoming implementations in neighboring countries like France and Poland, scheduled for 2026.
Key Nuances of the E-Invoicing Mandate
Understanding the e-invoicing mandate is essential for compliance, as several aspects are often misinterpreted, including:
Compliance with VAT Law: A structured electronic invoice that meets EN 16931 standards may still fall short of fulfilling the German VAT regulations.
Small Business Obligation: Small businesses that are VAT-exempt must still adhere to the e-invoicing mandate.
Receiving Invoices: An email address is all that is necessary for receiving structured e-invoices—no specialized software is required.
Invoice Formats: Even if you agree with a supplier to use XML invoices, it’s still possible to receive invoices in PDF format instead. These nuances underscore the importance of properly understanding the requirements of Germany’s E-invoicing regulations and adequately preparing for compliance.
Understanding the Scope of the E-Invoicing Mandate
The E-invoicing mandate will apply to invoices for taxable supplies of goods and services transacted between businesses within Germany.
However, certain transactions are excluded, such as those involving exempt supplies like financial services, healthcare, education, and social services. Additionally, invoices amounting to less than €250 or those for tickets do not fall under this regulation.
Another area of compliance includes the requirement for electronic invoices for shipments of goods outside the EU or to another EU member state when the recipient is a German business. Notably, businesses that qualify for the small business exemption Kleinunternehmerregelung are still obligated to comply with the e-invoicing mandate.
For businesses established outside of Germany, the E-invoicing regulations also apply if they maintain a physical presence in Germany that engages in transactions. This presence can be defined as a fixed establishment equipped with the necessary resources to conduct business activities.
Formats Permitted Under the E-Invoicing Regulations
As Germany rolls out this mandate in 2025 and 2026, businesses will have the flexibility to issue invoices in one of three formats:
1. Paper Format
2. Structured Electronic Format: This must comply with or be interoperable with the EN 16931 standard.
3. Alternative Electronic Formats: These include graphic formats like JPG, PDF, or TIFF, as well as structured data formats that may not align with the EU e-invoicing standard.
However, using these alternative formats will require the recipient’s consent. The recipient’s consent can be granted informally and even retroactively. For instance, if a recipient pays an invoice issued in a non-standard format, that action is interpreted as an implicit agreement to use that invoicing method moving forward.
Conclusion
Germany’s upcoming E-invoicing requirements present both challenges and opportunities for businesses. As the implementation date approaches, companies must familiarize themselves with the shifting regulations and prepare to adapt their invoicing practices to ensure compliance. Understanding these requirements is essential for any business operating within or engaging with the German market.
The article ‘How E-Invoicing Can Address the Late Payment Challenge‘ might provide helpful insights
