Germany: Guidelines for complying with first phase of e-invoicing mandate

The Federal Ministry of Finance (BMF) on October 15, 2024, published the final version of guidance for implementing the country's electronic invoicing (e-invoicing) mandate, which will apply to domestic business-to-business (B2B) transactions and is set to be gradually introduced from January 1, 2025. 

The guidance confirms that this mandate will apply to B2B sales between domestic taxpayers. Starting January 1, 2025, the issuance of an e-invoice will no longer require the permission of the recipient, and all businesses should be ready to receive invoices in electronic format. For the purpose of the mandate, businesses are considered established in Germany if they have their residence, management, a permanent establishment, or domicile in Germany or one of the areas designated in the German value added tax (VAT) Act. In the absence of a registered office, the place where the party has its domicile or habitual residence will also be considered. 

The guidelines clarify that in the following cases the issuance of an electronic invoice is not required:

• Invoices for low amounts (invoices of less than €250)
• Tickets issued for the transport of passengers
• Transactions to a legal person that is not an entrepreneur
• Certain taxable sales of goods and services in connection with immovable property

In such cases, as well as in others where the mandate to issue invoices in electronic format is not imposed, the seller can issue them in paper or any other agreed format with the recipient.

E-invoices can be created in both a purely structured and hybrid format. The guidance specifies that the definition of “electronic invoice” will be changed to cover only invoices that are issued, transmitted, and received in a structured electronic format and enable electronic processing. Invoices in other formats will be considered “other invoices” and only accepted for a period of time for regular B2B transactions or for the cases allowed by the law. The guidelines do not impose the use of any specific format but mention the most common national e-invoices formats used in Germany: the XRechnung and the ZUGFeRD. The guidelines allow taxpayers to agree on using a different format and syntaxes if they comply with the conditions set in the Norm EN 16931 or are interoperable with it, as defined in the EU Directive 2014/55/EU (e.g., Factur-X (France) or Peppol-BIS Billing). 

The guidelines underline the need to guarantee the authenticity of the origin of the invoice and its integrity. For that purpose, the guidelines indicate that invoices can include a qualified electronic signature or a permissible EDI procedure. However, the guidelines also allow the authenticity to be guaranteed by internal control procedures.

The guidelines indicate that the addition of a graphic representation of the invoice is not mandatory for the issuer. The remittance of the XML file for an invoice that complies with the EN 16931 series of standards and is machine-readable is enough for compliance. An additional PDF document is therefore not necessary but optionally possible.

Parties should agree on the method of delivery of the e-invoice. Among the methods of transmission allowed are sending e-invoices by e-mail, making the data available via an electronic interface, shared access to a central storage location within a group of companies, or the possibility of downloading via an Internet portal. Submitting e-invoices on physical media (e.g., pen drive) is not allowed. However, it is sufficient for the invoice recipient to provide an e-mail inbox. If the invoice recipient refuses to accept an e-invoice or is technically unable to do so, the recipient has no right to have another invoice issued.

Once the mandate is applicable, the general rule is that only invoices issued in the proper format will be accepted to apply the corresponding VAT deductions. However, the guidelines provide several flexibilities. If the issuer of the invoice provided an invoice in a format other than electronic (e.g., an invoice generated by a POS system), it can correct that invoice by issuing an e-invoice in accordance with the provisions of the law. The guidelines further clarify that the VAT deduction will not be denied if the recipient assumes, based on the information available that the issuer leveraged the transitional provisions.

The structured part of an e-invoice must be stored in such a way that it is in its original form and that the requirements for immutability are met. If additional documents sent (e.g., the image part of a hybrid invoice) contain records that are important for taxation (e.g., accounting notes), these must also be stored in such a way that they are in their original form and that the requirements for immutability are met.

The guidelines clarify that until the end of 2026, an invoice can still be issued and transmitted as a conventional invoice. Moreover, the recipient's consent to the issuance of the invoice in another electronic format does not require a special form, only agreement between the issuer and the recipient on the format to be used. The requirement to issue e-invoices will be effective from 2027, except for businesses with gross receipts in the previous calendar year that did not exceed €800,000. Effective January 1, 2028, all businesses in Germany will be required to issue e-invoices. 

Kathya Capote Peimbert | kcapotepeimbert@kpmg.com

Philippe Stephanny | philippestephanny@kpmg.com

Ramon Frias | ramonfrias@kpmg.com