Germany is Taking Significant Steps Towards Mandatory E-Invoicing, a Development with Major Implications for German Businesses

The Path to Mandatory E-Invoicing

Germany has recently formally submitted a request to the European Commission for permission to introduce mandatory e-invoicing for transactions between businesses. This initiative aligns with expectations and follows the guidelines of the European Union, specifically the ViDA directive (VAT in the Digital Age), which aims to modernise the VAT system and combat fraud. The German invoice standard is xRechnung, which has been aligned with the European Standard.

Why is Germany Pursuing Mandatory E-Invoicing?

Germany is pursuing mandatory e-invoicing to improve efficiency and transparency in business transactions, combat fraud, and comply with European directives. This step supports digital transformation and promotes faster payment processes.

What is the ViDA Directive?

The ViDA directive (VAT in the Digital Age) is a European Union plan to improve VAT rules in the digital age. The goal is to make business transactions easier for companies, discourage inefficiencies in manually processing PDFs, make it harder to circumvent VAT rules, and ensure better VAT collection through the use of digital technologies. A key part of ViDA is encouraging businesses to use electronic invoices, resulting in faster and more secure payments. This initiative supports the EU's digital single market, making it easier for businesses to operate across borders in different countries, thereby strengthening and connecting Europe economically.

What is the European E-Invoicing Standard EN-16931?

The European e-invoicing standard EN-16931 is a set of rules created by the European Union to ensure that e-invoices are created and used uniformly across Europe. The ultimate goal is to make it easier for businesses to send and receive invoices, regardless of the EU country they are in. The idea is that if everyone uses the same type of digital invoice, the processing of invoices and payments will be faster, and there will be fewer errors in these processes.

Key Dates and Transition Periods

As of January 1, 2025, all German businesses (B2B) are required to be able to receive e-invoices that comply with the European e-invoicing standard (EN 16931), the XRechnung. This represents a change from the current situation, where "buyer consent" (the requirement that buyers must explicitly agree to receive e-invoices instead of paper invoices or invoices in PDF format) is no longer necessary. PDF invoices are not considered e-invoices. Exceptions apply to invoices under €250 and for tickets, while invoicing to consumers (B2C) falls outside the scope.

There is a two-year transition period from January 1, 2025, to December 31, 2026, during which paper invoices and e-invoices that do not meet the new requirements (e.g., PDFs) can still be exchanged, provided that trading partners agree. eConnect can also convert an e-invoice into a PDF, but it is better to take advantage of the benefits of e-invoicing.

From January 1 to December 31, 2027, this transition period will only apply to invoicing companies with an annual turnover of less than €800,000.

The Role of Peppol and the Future of E-Invoicing in Germany

Germany has also made significant progress in e-invoicing infrastructure. The country has established a shared e-invoicing portal (E-Rechnungs-Portal) at the federal level, with some states also using this portal, while others have developed their own systems. These developments are in line with Peppol standards, which promote interoperability between different systems and countries.

The German Formats XRechnung and ZUGFeRD 2.1 Compared to EN-16931

The German government has adopted XRechnung and ZUGFeRD 2.1 as standard formats for e-invoicing, both of which comply with the European e-invoicing standard EN-16931 and specific German requirements. The XRechnung is an XML file that may include a PDF, while ZUGFeRD is a PDF that contains an XML. The XRechnung versions that are allowed on Peppol in 2024 are: XRechnung-UBL-3.0.1 and XRechnung-UBL-3.0.1-CreditNote.

The advantage of ZUGFeRD is that it is identical to the French Factur-X, promoting trade between the two countries.

The choice of standard formats that comply with the European e-invoicing standard EN-16931 ensures compatibility with European norms and facilitates cross-border trade within the EU, despite Germany not explicitly mandating the use of the Peppol network. This demonstrates Germany's commitment to efficient and secure digital transactions, both nationally and within the European market.

Conclusion

With the upcoming changes in German legislation regarding e-invoicing, it is clear that e-invoicing in Germany is no longer a voluntary matter.

Although the mandate initially targets companies registered in Germany, it is important for all international companies doing business with German partners to be aware of these developments in order to benefit from streamlined and efficient digital transactions.

What we wrote in our recent blog about the mandatory e-invoicing in Belgium now also applies to German customers: From 2025 onwards, due to the mandatory e-invoicing, Dutch entrepreneurs can assume that German customers will also be able to receive e-invoices. It is advisable to start doing so as soon as possible. As your Peppol Service Provider, we can help you with this. We already transform your SI2.0 or BISv3 e-invoices today into the German XRechnung-UBL-3.0 format, or vice versa. If your customer (recipient) can only receive XRechnung-UBL-2.3 and XRechnung-UBL-2.3-CreditNote, we will still deliver those for you.

If a German customer registers with eConnect, we will register this customer on Peppol with the XRechnung-UBL-3.0 (Invoice+Creditnote).

Do you need more information? then plan an introduction.