Germany’s e-invoicing revolution starting in 2025: What businesses need to know

Germany is undergoing a significant transformation in its invoicing practices, driven by recent legislative changes. The Growth Opportunities Act, passed by the German Bundesrat on March 22, 2024, marks a pivotal moment in the country’s tax landscape, particularly with the introduction of mandatory electronic invoicing.

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The new law mandates the use of e-invoices for domestic taxable sales between German businesses (B2B) starting from January 1, 2025. Although full implementation is scheduled for January 2028, transitional measures have been established to facilitate a smoother adaptation for companies. For example, exemptions are in place for small-value invoices and travel tickets from the e-invoice requirement, and businesses can continue to use other invoice formats until specified deadlines.

The implementation of mandatory e-invoicing will occur in different phases, with the following deadlines:

Beginning in January 2025, taxpayers will be required to receive structured electronic invoices for B2B transactions. However, there will be no obligation to issue these e-invoices in a structured format, and obtaining the receiver’s consent won’t be necessary for invoices sent in paper form or in unstructured electronic formats.

• By December 31, 2026, invoices for transactions carried out in 2026 can be issued in a paper form or non-structured electronic format, provided the recipient company consents to this method.
• 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.
• Also, 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.
• From January 1, 2028, issuing structured e-invoices is mandatory for all companies. All remaining businesses can no longer issue invoices on paper or in non-structured electronic formats. EDI invoices must be compliant with EN 16931.

One of the key objectives behind the move to e-invoicing is the anticipation of a nationwide electronic reporting system for tax administration. This system aims to streamline invoice creation, plausibility checks, and reporting to government authorities.

Germany’s approach to e-invoicing stands out for its flexibility, granting businesses the liberty to select their favored method of invoice transmission. While the legislation emphasizes structured electronic formats compliant with EU standards, such as the CEN standard EN 16931, it does not mandate a specific exchange channel. This adaptability allows businesses to choose secure and efficient invoicing methods that best suit their operational requirements.

Technical standards play a crucial role in the implementation of e-invoicing. The legislation encourages the use of structured electronic formats that enable electronic processing and interoperability. Common file formats like UBL, CII, and hybrid formats like ZUGFeRD are recognized for their compliance with EU standards and suitability for e-invoicing.

Businesses must adapt to these changes by assessing their current invoicing processes and preparing for the transition to e-invoicing. AR automation and digitalization offer opportunities for increased efficiency and time savings, but companies need to invest in the necessary resources and systems to align with regulatory requirements.