New e-invoicing requirement from 1 January 2025

What entrepreneurs and self-employed people should know for legally compliant electronic invoicing

Frankfurt am Main

November 30, 2024

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New obligation for electronic invoicing in the B2B sector from 1 January 2025

If an entrepreneur provides a service to another entrepreneur based in Germany for his company (B2B - Business-to-Business), he must in future generally issue an electronic invoice ( e-invoice ).

An electronic invoice is one that is issued, transmitted, and received in a structured electronic format—e.g., as an XML file that complies with the EN 16931 series of standards—and allows for electronic processing. An invoice in another electronic format, such as a PDF file, does not meet these requirements. E-invoicing is thus becoming the new invoicing standard for B2B services, and the creation of paper invoices is becoming the exception.

TaxPro Notes:

In addition to purely structured e-invoices, hybrid invoice formats can also meet the requirements for an e-invoice. A hybrid format consists of a structured data component (e.g., an XML file) and a human-readable data component (e.g., a PDF document). Both data components are combined in a single file.

The general requirement for electronic invoicing applies from January 1, 2025. However, extensive transitional provisions have been implemented. The tax authorities have issued an accompanying introductory letter, which clarifies practical questions, particularly regarding the transition to e-invoicing. Companies must ensure in a timely manner that the receipt and issuance of e-invoices will be possible. It is important to consider on an individual basis whether this can be achieved by implementing a corresponding process in their own ERP system/invoicing program or by using a separate software solution.

The e-invoicing requirement only applies to a specific group of customers and for certain services:

• In principle, there is only an obligation to issue e-invoices if entrepreneurs provide their services to a customer who is himself an entrepreneur and receives the invoiced service for his company (B2B).

• In the B2C sector, i.e. when services are provided to non-businesses/private customers, the e-invoicing requirement does not apply; however, an e-invoice or an invoice in a hybrid format can be sent in consultation with the customer.

• Furthermore, it is a prerequisite that the customer is resident in the country.

• The e-invoicing requirement only applies to services that are taxable and subject to tax in Germany, or that are tax-exempt according to Section 4 Nos. 1 to 7 of the Value Added Tax Act (UStG). Therefore, the German e-invoicing requirement does not apply to services that are not taxable in Germany or that are tax-exempt according to Section 4 Nos. 8 et seq. of the UStG—in particular, property leases, property transfers, services provided by doctors, dentists, and physiotherapists, hospital services, artistic services, and school and educational services.

In general, the e-invoice requirement does not apply to small-value invoices (up to €250.00) and travel tickets (with no limit). However, e-invoicing is possible in these cases.

The regulations on the mandatory use of e-invoices also apply to the issuance of invoices in the form of a credit note and, for example, to invoices

• on transactions for which the recipient of the service owes the tax,

• issued by small businesses ,

• Sales subject to average taxation for agricultural and forestry businesses,

• on sales for which the differential taxation is applied.

However, the prerequisite is always that the aforementioned sales are carried out to domestic entrepreneurs.

TaxPro Notes:

This means that even a small business owner who only occasionally provides services to other businesses must create the possibility of issuing e-invoices in the future.

The obligation to issue e-invoices also applies to entrepreneurs as invoice recipients who are themselves small businesses or who only carry out tax-free transactions, such as landlords of an apartment or doctors.

According to the transitional provisions for mandatory e-invoicing, an invoice can be sent (at your discretion) according to the previous standard, i.e. on paper or, subject to the recipient's consent, in another electronic format (e.g. as a PDF file).

• until December 31, 2026 for sales made after December 31, 2024 and before January 1, 2027 – this means that invoicing according to the previous regulations is generally still permitted in 2025 and 2026;

• until 31 December 2027 for a transaction carried out after 31 December 2026 and before 1 January 2028, if the total turnover of the entrepreneur issuing the invoice in the previous calendar year did not exceed 800,000 € - i.e. if the supplying entrepreneur made sales of more than 800,000 € in 2026, he must issue e-invoices from 1 January 2027;

• Until December 31, 2027, for sales made after December 31, 2025, and before January 1, 2028, if the invoice is transmitted via electronic data interchange (EDI). Beyond December 31, 2027, EDI invoices may only be used if they are compatible with the EN 16931 standard and the invoice recipient has consented to this.

The new e-invoice will generally apply from January 1, 2025, and if a domestic company issuing the invoice does not make use of the transitional arrangements, domestic business invoice recipients must be able to receive and process electronic invoices in accordance with the new requirements as of January 1, 2025.

In this regard, it should be noted that electronic invoicing is not tied to the consent of the invoice recipient. This means that in the future, small VAT-exempt businesses or businesses that provide exclusively VAT-exempt services, such as doctors or landlords, must also be able to receive and archive electronic invoices in a structured format.

TaxPro Notes:

For invoices to end consumers, their consent remains a prerequisite for electronic invoicing.

The tax authorities are offering relief for the transition to e-invoicing, including:

• Recurring invoices : For recurring invoices issued before January 1, 2027 as other invoices (e.g. in paper form or as a PDF) (e.g. in the case of a rental agreement), there is no obligation to also issue an e-invoice as long as the invoice details do not change.

• Final or residual invoice for previously issued advance and down payment invoices : In a final invoice with which a contractor settles the entire service performed, the fees or partial fees received before the service was performed, as well as the tax amounts due on them, must be deducted if invoices with a separate tax statement have been issued for these fees or partial fees. A residual invoice can also be issued instead of a final invoice. Currently, the requirements for a final invoice cannot yet be presented in the structured part of an e-invoice. In these cases, it is therefore advisable to issue a residual invoice instead. However, in view of the technical restrictions that still exist, the tax authorities will not object if a final invoice issued as an e-invoice up to December 31, 2027, contains an attachment as an unstructured file in the e-invoice.

• Invoice correction : The invoice issuer can correct the issued e-invoice. The general requirements regarding the form and content of an invoice apply to an invoice correction. Therefore, the correction of an e-invoice must also be made in the prescribed form (using the appropriate invoice type). For transactions carried out before January 1, 2025, there is no obligation to use an e-invoice. The same applies to the period in which the transitional arrangements can be used – e.g., for smaller companies. Therefore, an invoice correction for such transactions can also be made without using an e-invoice.