Germany to implement mandatory e-invoicing starting January 2025

The Growth Opportunities Act, endorsed by the German Bundesrat on March 22, 2024, introduced various tax measures, notably the mandate for electronic invoicing. 

While the legislation’s framework has been established and companies have received approval, they must now address its implications on existing processes. This reform is poised to significantly affect operational workflows in several industries.

The e-invoicing requirement will exclusively apply to transactions among German taxpayers (business to business).

Exemptions from the mandate seem to include small-value invoices under €250 and travel tickets. Moreover, invoices linked to intracommunity deliveries or exports fall outside the mandate’s purview. Invoices associated with intracommunity supplies will likely be subject to the electronic reporting obligation outlined in the VAT in the Digital Age (ViDA) project.

Although the current legislation does not mention any e-reporting obligation, we anticipate changes in the coming year. Indeed, if e-invoices offer benefits to companies, this will inevitably alter the tax administration’s audit procedures and the types of documents it requests from companies.

With regard to the requirement to utilise electronic invoicing and the buyer’s consent, Germany has submitted a request to the European Commission for a derogation, thereby granting it the ability to waive the consent of the recipient. This means, in principle, and in comparison to other EU nations, the buyer’s consent will unlikely be required any longer. 

However, in the new law, Germany introduced a new concept of consent that will apply if the issuer is using non-structured e-invoices or paper invoices.

During tolerance periods, issuers of unstructured e-invoices or paper invoices must establish a process for obtaining the buyer’s consent to receive these types of invoices. The proposed procedure will probably be arduous, and companies will attempt to circumvent it by directly resorting to the exchange of invoices in structured formats, as stipulated in the new legislation.

Mandatory e-invoicing in Germany will be implemented in multiple phases, commencing with a mandate to receive structured e-invoices starting January 2025, followed by a broader requirement to issue structured e-invoices from January 2028.

To mitigate the impact and allow companies sufficient time for preparation, the law has established a phased approach to the invoicing obligation. Tolerance thresholds will be applied based on the company’s turnover or the type of e-invoices already issued.

• Starting from January 2025: Taxpayers will have the obligation to receive structured e-invoices. There will be no obligation to issue structured e-invoices and no obligation to get the consent of the receiver if the invoices are sent in a paper form or non-structured formats.
• By December 31, 2026: Invoices related to transactions made in 2026 can be issued in a paper form or non-structured electronic format, if the company receiving the invoice agrees to that. This applies independently of the turnover of the company, meaning the issuance of structured e-invoices is not mandatory.
• By December 31, 2027: Invoices related to transactions made in 2027 can be issued in a paper form or non-structured electronic format, if the company receiving the invoice agrees to that and only if the total turnover of the taxpayer issuing the invoice in the previous calendar year did not exceed €800,000. This means that if the company had a turnover of more than €800,000, it will be required to issue structured e-invoices starting from January 2027. 
• By December 31, 2027: Invoices related to transactions made in 2026 and 2027 can be issued in EDI formats, if the company receiving the invoice agrees to that. This applies independently of the turnover of the company, meaning the issuance of structured e-invoices is not mandatory to the issuer using EDI.  
  

The abolition of historical EDI formats seems to be causing a stir in Germany in certain business sectors that were pioneers of EDI electronic invoicing. While Germany is not the first country to introduce this format, it is perhaps the first country to explicitly state that this format will no longer be permitted. 

Article 14 of the VAT code pertains to two distinct types of invoices: structured e-invoices and other invoices (paper invoice or other electronic formats).

Regarding the definition of “an electronic invoice”, article 14 has been modified to introduce new concepts related to the fact that an e-invoice is also transmitted electronically in a “structured format” and allows for electronic processing. The e-invoice must comply with the European standard for e-invoicing and the list of corresponding syntaxes in accordance with Directive 2014/55/EU of April 16, 2014. 

As such, we can already conclude that UBL and CII, which are structured formats that comply with the EU standard, can be used when the reform comes into force on structured e-invoices. 

As for EDI, some of these formats are considered structured; however, they do not comply with EU standard EN 16931. Based on the new definition of an e-invoice, the invoices issued by using one of these formats will not be considered as electronic invoices. Companies in some industries that have been using these will need to identify the impact of this requirement on their business to identify the necessary corrective measures.  

Another format widely used in Germany as e-invoices is the hybrid ZUGFeRD, which contains both a PDF and a structured format that complies with the EU standard. At this point, it’s unclear whether the ZUGFeRD would be considered a structured format under German law, since it also contains unstructured data in the form of the PDF. 

Mandating specific means of exchanging invoices is common practice in countries that have already introduced e-invoicing obligations. This often involves establishing national platforms (e.g., Italy, Romania), exchange networks (e.g., Belgium), or private platforms (e.g., France). These platforms typically replace direct exchanges between suppliers and customers.

However, Germany does not appear to prioritise mandating a specific exchange channel, instead allowing German companies to choose their preferred method for transmitting invoices. While email exchange may seem the simplest solution, it is not a secure method. As a result, companies are encouraged to transition to more secure methods.

As a certified Peppol access point and member of the DBNA network, Avalara can assist you in ensuring tax compliance for your invoices in Germany and other countries. We offer support and expertise to help streamline your invoicing processes and ensure adherence to regulatory requirements. Contact us to learn more