Initiated by the EU Council Directive 2010/45/EU, the German Growth Opportunities Act introduced a binding standard for electronic invoices (e-invoices) as of 2025, which applies to all services provided between companies based in Germany (B2B). While staggered transition periods apply to active invoicing, there is an obligation to accept invoices in the prescribed format from 1 January 2025. After the German Federal Ministry of Finance (BMF) presented a draft circular in June 2024, the final circular has now been published on 15 October 2024.

Invoice issue

The obligation to issue e-invoices (including credit notes) among companies based in Germany theoretically already exists from 1 January 2025. However, the legislator has granted staggered transitional arrangements:

• large companies: Obligation to issue e-invoices from 1 January 2027
• smaller companies (total turnover of the previous year not exceeding 800,000 euros): Obligation to issue e-invoices from 1 January 2028.

In addition, there is a further transitional period until 31 December 2027 for the transmission of an invoice via Electronic Data Interchange (EDI) in formats that do not correspond to the e-invoice. The circular contains a number of additions and clarifications with regard to the transitional periods.

Residency in Germany as such is what counts here - it is irrelevant whether VAT is also to be charged, for example because an intra-community supply was made to a foreign permanent establishment of an entrepreneur based in Germany, or because a supply taxable in Germany is made from abroad without the involvement of a domestic part of the company. The BMF expressly confirms, among other things, that the taxable letting of a property also means that the trader is to be treated as "established in Germany".

There are some exceptions to the e-invoice obligation. There is no obligation to e-invoice for services to or from foreign entrepreneurs (not resident in Germany), nor for services to non-entrepreneurs. The previous invoice formats remain permissible for small-value invoices and tickets used as invoices as well as for transactions that are tax-free without the right to deduct input tax. However, an e-invoice may also be issued in cases where there is no obligation to issue an e-invoice if the recipient agrees (even implicitly). According to the German Ministry of Finance, however, this should not apply to the special regulation for small businesses, which will be designed as a tax exemption from 2025. According to the circular, small businesses will also be obliged to issue e-invoices once the transitional periods have expired. However, a remedy is in sight here: According to the current draft version of the Annual Tax Act 2024, the special small business invoices (Section 34a UStDV-E) are to be exempted from the e-invoicing obligation again.

In mixed cases, the e-invoicing obligation applies to the entire invoice, for example in the case of invoices that are issued for both services that are subject to e-invoicing and services that are not subject to e-invoicing, or if invoices are issued for services that were only partially provided for the invoice recipient's company and are partially not invoiced for the company. If there is no obligation to issue an e-invoice, an e-invoice can still be used if there is agreement between the invoice issuer and the invoice recipient.

Receipt of e-invoices

The transitional periods only affect the issuing, but not the receipt of invoices: German entrepreneurs are already obliged to accept e-invoices from other German entrepreneurs from 1 January 2025, subject to the other requirements. This applies regardless of whether the recipient can claim input VAT from these invoices. For the acceptance of e-invoices, it should be sufficient for the invoice recipient to provide an e-mail inbox, but other electronic transmission channels can also be agreed. If the invoice recipient refuses to accept the invoice or is technically unable to accept an e-invoice, the invoice issuer can leave it at having demonstrably endeavored to transmit it (e.g. by means of a transmission protocol). The invoice recipient has no right to issue an invoice in a different format.

Permitted formats

An e-invoice must be created in a standardised, machine-readable format that complies with European standard EN 16931 and is transmitted and received electronically. As before, the authenticity of the origin, the integrity of the content and the legibility of the invoice must be guaranteed. However, an e-invoice must only be machine-readable and not directly readable by the human eye. The additional transmission of a human-readable document is possible, but not necessary. However, in the opinion of the BMF, deviations in the human-readable part may result in a VAT liability due to incorrect tax disclosure (Section 14c UStG).

With regard to the invoice requirements, the mandatory VAT information required for a proper invoice must be included in the structured part of the e-invoice. However, additional information could be included in an annex contained in the e-invoice and apparently in an extension (e.g. a breakdown of timesheets in a PDF file). In the case of a contract that serves as an invoice, the German Ministry of Finance grants further exemptions. For standing invoices issued as other invoices before 1 January 2027, there is no obligation to issue an additional e-invoice as long as the invoice details do not change. In contrast, links do not fulfil the requirements of an e-invoice, meaning that the linked document is apparently not part of the invoice in the opinion of the German Ministry of Finance.

The German Ministry of Finance allows the XRechnung standard as a permissible format for e-invoices in Germany. The ZUGFeRD format should also be permitted from version 2.0.1 (with the exception of the MINIMUM and BASIC-WL profiles) - this is a hybrid format that contains a human-readable part in addition to the machine-readable part (however, it is the machine-readable part that is important). The use of electronic invoice formats is not limited to national formats; other formats that fulfil the requirements - the circular mentions the French Factur-X standard and Peppol-BIS billing as examples - are also eligible. However, compared to the draft circular from June 2024, the Italian standard FatturaPA is no longer explicitly mentioned.

By agreement between the invoice partners, other formats can be used, provided they can be correctly and completely extracted into a format that complies with the EN 16931 series of standards or is interoperable with it. "Interoperable" means that the information required under VAT law can be further processed from the originally used e-invoice format without any loss of information. The continued use of already established electronic invoice formats (the BMF mentions EDI procedures such as EDIFACT) should also be possible beyond the transitional period of 31 December 2027, provided that the requirements for the e-invoice format are met.

Input VAT deduction and invoice correction

Once the transitional periods have expired, only an invoice in this format should entitle the customer to deduct input VAT in the event of an e-invoice obligation. If another invoice was sent instead, an input VAT deduction is not categorically excluded, but it is subject to the condition that the tax authorities ("applying a strict standard") have all the information they need to check the material requirements for the input VAT deduction. However, if an invoice is not issued in the correct format (e.g. as a paper invoice instead of an e-invoice as prescribed), it can also be corrected by an e-invoice which expresses that it is a corrected invoice through a specific and clear reference to the original invoice. Under the other conditions, such a correction should have retroactive effect to the date of issue of the other invoice. If it is not the format of the invoice that needs to be corrected, but another invoice requirement, the e-invoice shall be corrected in the form prescribed for this (using the corresponding invoice type). It is not sufficient to transmit the missing or incorrect information in a different form. This correction also has a retroactive effect under the other conditions.

Miscellaneous

The circular provides for special regulations in the case of continuing obligations and contracts that serve as invoices, as well as for the storage of e-invoices, changes to the basis of assessment and invoicing to legal entities under public law. With regard to the latter, it should be noted that invoices for services provided to these persons have already been subject to an e-invoicing obligation for several years - the circular only deals with this in passing. According to the German Federal Ministry of Finance, the requirements for a final invoice in which tax amounts already recognised in advance and down payment invoices are deducted cannot yet be shown in the structured part of the e-invoice. However, this is apparently expected to be remedied in the next few years: Provided that a residual invoice is not simply issued, there will be no objection if a final invoice issued as an e-invoice by 31 December 2027 contains an attachment to the final invoice within the meaning of Section 14.8 (8) (2) German VAT Application Decree as an unstructured file in the e-invoice. The German VAT Application Decree is to be amended at a later date. The German Federal Ministry of Finance also makes it clear that the regulation now due to be introduced is more of a transitional nature: When the reporting system planned at EU level, but not yet adopted, is introduced, other transmission channels, namely e-invoicing platforms, are likely to be prescribed (apart from the fact that e-invoicing will then no longer be restricted to traders based in Germany).