Ensuring E-Invoice Compliance for Cross-Border Trade in Germany

The German president signed the Growth Opportunity Act into law on 27 March 2024. This business tax reform bill introduces mandatory e-invoicing for domestic business-to-business (B2B) transactions.

Germany's mandatory B2B e-invoicing will be implemented in three phases, starting 1 January 2025 and ending 1 January 2028. German public bodies have received electronic invoices since 18 April 2020 in compliance with European Directive 2014/55/EU.

The progress of B2G e-invoicing adoption in Germany depends on every federal state (Bundesland) issuing its own regulations for formats, entry points, and communication systems. The only mandatory requirement is that these processes be accessible through PEPPOL.

As Germany moves on to a more advanced system for B2B transactions, it aligns with (EN 16931), which enhances compliance. This also facilitates cross-border transactions as the XRechnung format can integrate with the PEPPOL network, making international transactions seamless, especially within the EU.

In this post, we’ll discuss how implementing the Growth Opportunity Act will impact B2B invoicing in Germany. We’ll cover the implementation timeline, invoicing process, requirements, and its effect on cross-border transactions and offer tips on how to prepare.

Is electronic invoicing mandatory in Germany?

B2G electronic invoicing has been mandatory in Germany since 18 April 2020. This requirement applies to all public institutions and is being implemented for state and municipal authorities.

B2B e-invoicing in Germany will be mandatory for all B2B transactions by 1 January 2028. Implementing e-invoicing will begin on 1 January 2025, allowing businesses ample time to adopt compliant invoice-generation solutions.

Timeline for mandatory electronic invoicing in Germany

The implementation of compulsory B2B electronic invoicing will be introduced in three phases.

Phase one: 1 January 2025

In the first phase, all businesses should be able to receive and process invoices in the standard CEN 16931 format. However, business owners can optionally issue paper invoices, PDFs, or any other electronic format without the recipient’s consent.

Phase two: 1 January 2027

The second phase will mandate companies with an annual turnover exceeding EUR 800,000 to issue electronic invoices. Paper invoices and other electronic formats will still be permitted for small and mid-sized organizations with a yearly turnover of less than EUR 800,000, but only with the recipient's consent.

Phase three: 1 January 2028

By 1 January 2028, all business owners in Germany must be able to generate, issue, receive, and process electronic invoices that comply with the country’s rules and regulations.

Mandatory requirements for electronic invoicing in Germany

The electronic invoicing mandates to be implemented in Germany will mainly cover B2B transactions with exceptions for intra-community transactions, simplified invoices, invoices under EUR 250 (small amounts), and tickets for transportation services.

Here are the requirements for e-invoicing compliance in Germany:

Format

The national formats for electronic invoicing in Germany are XRechnung and ZUGFeRD 2.0/2.1.

XRechnung: It is a pure data record that specifies a set of structured data to be included in an e-invoice. This includes the invoice recipient, issuer, amount, and tax information.
ZUGFeRD: ZUGFeRD is a hybrid format that combines a human-readable document and a data record in PDF format. It is based on the international UN/CEFACT standard Cross Industry Invoice (CII) and the ISO standard PDF/A-3. You may also issue electronic invoices in Germany in XML or EDIFACT format, provided your document is compatible with the EN16931 format.

Issuance requirements

All suppliers of government authorities must be able to generate and issue electronic invoices.

The last phase of implementing the new e-invoicing mandates will make it compulsory for all businesses to have systems that can generate and issue compliant e-invoices.

Receiving requirements

All government institutions must be able to receive and process electronic invoices. The buyer’s consent is required for B2B transactions.

However, the new e-invoicing mandate will require business all business owners to be able to receive and process e-invoices by 1 January 2025.

Archiving

The minimum archiving period for electronic invoices in Germany is 10 years.

The process flow of e-invoicing in Germany

Here, we’ll discuss each step of the electronic invoice process in Germany:

Step 1: Registration with a reliable PEPPOL Access Point Provider

There are multiple ways to issue invoices in Germany, but the most effective and transparent is through PEPPOL. Businesses should register with a reliable PEPPOL Access Point provider like Storecove to issue compliant invoices.

This platform allows you to generate and send invoices that adhere to German regulations. It also helps you ensure your invoice is in the correct format and includes all mandatory data fields.

Step 2: Issuing the invoice

Your PEPPOL Access Point provider facilitates sending the invoice through their portal, or you can integrate your ERP system with their API. Enter the invoice recipient’s PEPPOL ID accurately to ensure the invoice gets to them, and attach any additional documents required.

The German Federal Council provides other means of sending invoices, including email or uploading to a portal. Since there’s no centralized platform, businesses solely manage the electronic invoicing process.

Step 3: Validation and recipient confirmation

Your access point provider checks the invoice to verify compliance, including data structure, format, and mandatory fields, before delivering it to the recipient’s access point. The recipient’s system generates and issues a receipt to the sender’s Access Point for confirmation.

The buyer then verifies the details, processes the invoice, and makes payment. After the transaction, both parties must archive the e-invoice for at least 10 years.

What is the impact of e-invoicing in Germany on cross-border transactions within the EU?

Germany’s upcoming mandate for B2B transactions enhances alignment with EN 16931, which improves compliance with EU requirements. The European Union is pushing for enhanced tax compliance and greater consistency.

Germany began its compliance journey by introducing XRechnung, a format that aligns with EN 16931. The XRechnung can be integrated with the PEPPOL network, making transacting with other EU members easier.

Businesses not using PEPPOL can also conduct cross-border transactions within the EU if the e-invoices generated comply with EN 16931.

EU requirements and cross-border e-invoicing standards in Germany

The digitization of invoicing among EU member states means businesses must adopt e-invoicing solutions that adhere to strict tax controls. Germany’s cross-border e-invoicing standards are based on EN 16931, whose requirements include the following:

Compatibility: Invoices must be compatible with international electronic standards and the provisions of Directive 2006/112/EC on VAT in the digital age.
Information exchange: The data must be expressed in a format both parties can understand and access.
Formats: The accepted formats are EDIFACT, Factur-X, German ZUGFerd, and XRechnung.
Compliance: The sender and recipient must comply with German regulations to accept and process invoices that adhere to EN16931.

Challenges for cross-border transactions outside the EU

German businesses transacting with companies outside the EU may face various unique challenges due to the country’s e-invoicing legislation.

The new German e-invoicing regulations require invoices from transacting parties to comply with the country’s format, structure, and other requirements. This may be challenging for businesses with poor digital infrastructure, making compliant transactions impossible.

However, if the foreign company uses PEPPOL, the transaction is seamless.

What is the penalty for noncompliance with the e-invoicing mandate in Germany?

Submitting invoices late or failing to comply with German e-invoicing rules results in fines ranging from EUR 200 to EUR 5000. Due to delays, invoice recipients can also be denied input tax deductions.

Benefits of e-invoicing for businesses in Germany

Here are the main benefits businesses in Germany will gain from the upcoming invoicing mandate:

Improving traceability and security

Electronic invoicing enhances traceability by providing a clear audit trail for all transactions. This level of transparency helps businesses quickly identify discrepancies and resolve issues, which is particularly beneficial in preventing VAT fraud.

The structured electronic format required by the new regulations ensures that invoices contain all necessary data fields, making it easier for businesses to verify information and maintain compliance.

Increasing business efficiency

Implementing e-invoicing can significantly streamline business processes. Traditional paper invoicing often leads to delays and inefficiencies, as documents are manually processed and routed between departments.

In contrast, electronic data interchange (EDI) allows for the automatic exchange of invoice information, reducing the time spent on administrative tasks. This increased efficiency can free up valuable resources, allowing businesses to focus on growth and customer service.

Receiving payments faster

Automating invoice generation and submission reduces the time between invoice issuance and payment processing. This speed improves cash flow and enhances relationships with clients.

Cost savings

Organizations can reduce their overall operational expenses by minimizing paper usage and postage costs.

The improved efficiency and faster payment cycles mean businesses can lower the costs associated with late payments and overdue invoices, contributing to a healthier bottom line.

How can businesses prepare for e-invoice compliance for cross-border trade in Germany?

To navigate the upcoming changes effectively, German businesses should take the following steps to ensure compliance for cross-border trade:

Assess your business’s readiness for e-invoicing

Start by examining your current invoicing processes to understand where adjustments are needed to meet Germany's new e-invoicing requirements. This may involve auditing your invoicing workflows to pinpoint any gaps in technology or data processing capabilities that could hinder compliance.

Pay special attention to cross-border invoicing capabilities, which must align with EN 16931 and PEPPOL standards for seamless EU transactions.

Integrate scalable e-invoicing solutions

Choosing a scalable e-invoicing solution ensures your business can adapt to evolving requirements without repeatedly overhauling systems. Look for software that can handle different invoice formats (such as XRechnung and ZUGFeRD) and support future expansions.

A robust e-invoicing system can integrate with your ERP software or other financial management tools, simplifying the invoicing workflow and automating data entry, validation, and submission steps.

Stay updated on e-invoicing rules and regulations

Regulations around e-invoicing are dynamic, especially with Germany’s phased implementation schedule. Keeping informed of any updates will ensure your business remains compliant.

You may also want to designate a team member or partner with compliance specialists to monitor regulatory updates and implement necessary changes in real time.

Partner with reliable e-invoicing service providers

Working with a trusted e-invoicing service provider like Storecove can simplify compliance. Storecove offers solutions to meet German and EU e-invoicing standards, making cross-border invoicing smoother and more efficient.

Our expertise in electronic data interchange and VAT compliance ensures your invoices meet all structured electronic format requirements and are transmitted securely through PEPPOL or other necessary channels.

Takeaway: Achieving compliance and efficiency for Germany’s e-invoicing mandates

As Germany transitions to mandatory e-invoicing for B2B transactions, businesses must adapt to meet new compliance standards and maintain a competitive edge. This shift is an opportunity to improve invoicing efficiency and accuracy within the EU.

Investing in scalable e-invoicing solutions can help your business handle Germany’s structured electronic format requirements, including XRechnung and ZUGFeRD.

Staying up-to-date on evolving e-invoicing regulations is essential. As the phased rollout progresses, new compliance details will emerge. Businesses that monitor these changes closely will avoid potential penalties and strengthen their invoicing practices.

Partnering with a reliable e-invoicing provider like Storecove can simplify the transition. We can help your business implement efficient, compliant e-invoicing solutions that support growth and streamline cross-border trade.

Contact Storecove today to schedule an appointment with one of our e-invoicing experts!

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