Businesses in Germany must prepare for the implementation of mandatory B2B e-invoicing as per the Wachstumschancengesetz law, passed by the German Federal Ministry of Finance (BMF) on March 22, 2024.
The project will begin from January 01, 2025 to January 01, 2028. It will be implemented in several phases to accommodate all kinds of businesses. In the proposal, the government does not offer a centralized e-invoicing platform.
However, businesses can use PEPPOL, which enables the exchange of electronic documents regardless of your e-invoicing software. The Wachstumschancengesetz law includes regulations like format, archiving period, and other critical information.
Electronic invoicing offers businesses multiple advantages, including better cash flow and increased efficiency, which foster growth.
German federal states were first mandated to receive e-invoices on April 18, 2020. And by January 01, 2028, all businesses will be required to issue and receive electronic invoices.
In this post, we’ll discuss e-invoicing in Germany, including implementation timeline, requirements for e-invoicing in Germany, the process of sending an e-invoice in Germany, and how businesses in Germany should prepare for e-invoicing.
Is e-invoicing mandatory in Germany?
Since April 18, 2020, all German federal contracting authorities have been required to receive e-invoices. The government has been adopting and implementing electronic invoicing procedures in recent years to curb tax evasion.
It first passed the law on B2G e-invoicing in April 2017, which was implemented in three phases until November 27, 2020.
According to the set timeline by the Wachstumschancengesetz law, e-invoicing will be mandatory for all B2B transactions by the start of 2028.
Timeline for e-invoice implementation in Germany
Understanding the timeline for implementing e-invoicing in Germany is essential for businesses to prepare adequately. Here, we outline the key milestones in this journey and what companies need to know about each phase:
April 2017: Passing of the B2G e-invoicing law
In April 2017, Germany made a significant leap towards digital transformation by passing the B2G e-invoicing law. This law mandated the use of electronic invoicing for transactions with public authorities.
It laid the groundwork for future advancements in e-invoicing across different government and private sectors. The law signaled a shift towards embracing digital technologies to improve operational efficiencies.
April 18, 2019: B2G e-invoicing mandatory for receiving at the national level
The government began implementing the law on April 18, 2019, by making it mandatory for all federal authorities to receive electronic invoices. This mandate ensured that all national-level government agencies were equipped to handle electronic invoices.
The federal government aimed to set an example for other public and private entities by adopting electronic invoicing at the national level.
April 18, 2020: B2G e-invoicing mandatory for receiving at regional and communal levels
On April 18, 2020, the mandate for receiving electronic invoices was extended to regional and communal levels of government. This step ensured that federal, state authorities, and local government entities adopted e-invoicing practices.
The goal was to create a unified and consistent approach to invoicing across all levels of government, thereby maximizing the benefits of digitalization in public administration.
The government was working to eliminate silos and foster a more cohesive and streamlined financial system by incorporating regional and communal authorities into the e-invoicing framework.
November 27, 2020: B2G e-invoicing mandatory for sending at the federal level
The final phase of B2G e-invoicing implementation began on November 27, 2020, when federal authorities were required to send electronic invoices.
This was a significant step in achieving a fully integrated digital invoicing system within the public sector. It facilitated faster transaction processing, reduced administrative costs, and improved the accuracy and reliability of financial data.
March 22, 2024: Passing of the B2B e-invoicing law (Wachstumschancengesetz)
On March 22, 2024, the German Federal Ministry of Finance (BMF) passed the Wachstumschancengesetz law, which introduced mandatory Business-to-Business (B2B) e-invoicing.
The Wachstumschancengesetz law outlines specific requirements for the format and archiving electronic invoices, ensuring that businesses adhere to standardized practices.
This law will help reduce the likelihood of tax evasion, improve the accuracy of financial reporting, and facilitate better cash flow management for businesses.
January 01, 2025: Phase 1 of B2B e-invoicing implementation
Starting January 01, 2025, taxpayers must receive structured electronic invoices. However, during this phase, businesses will have no obligation to issue structured electronic invoices.
Companies can still send paper invoices or documents in non-structured formats; the receiver's consent will not be required.
This approach provides businesses with a transition period to adjust to the new digital reporting requirements without facing immediate pressure to overhaul their invoicing systems.
December 31, 2026: Flexibility for invoices for 2026 transactions
By December 31, 2026, businesses will still have the option to issue invoices in paper form or non-structured electronic formats for transactions made in 2026, provided the recipient agrees.
This provision will offer flexibility during the transition period. It recognizes the varying capacities of businesses to adapt to new technologies and allows for a smoother transition to mandatory e-invoicing.
This flexibility applies independently of the company's turnover, meaning that all businesses, regardless of size or revenue, can take advantage of this provision.
December 31, 2027: Turnover-based mandate structured e-invoicing
From January 01, 2027, the issuance of structured electronic invoices will become mandatory for businesses with a total turnover exceeding €800,000 in the previous calendar year.
For invoices related to transactions made in 2027, companies below this turnover threshold can still issue invoices in paper or a non-structured electronic format, provided the receiving company consents.
This approach ensures that larger businesses, which typically have more resources to adapt to new systems, are the first to comply with the new requirements.
December 31, 2027: EDI formats for invoices in 2026 and 2027
Businesses will be allowed to issue invoices in Electronic Data Interchange (EDI) formats for transactions made in 2026 and 2027 by December 31, 2027, provided the receiving company agrees.
Using EDI formats ensures businesses can leverage existing technologies and systems to comply with the new requirements without facing significant disruptions.
The allowance for EDI formats applies independently of the company's turnover, meaning businesses of all sizes.
January 01, 2028: Full implementation of B2B e-invoicing
By January 01, 2028, all businesses in Germany will be required to issue and receive structured electronic invoices. This final phase marks the complete transition to e-invoicing for B2B transactions.
The full implementation of B2B e-invoicing is expected to significantly enhance the efficiency of business operations, improve cash flow management, and reduce the administrative burden associated with invoicing.
It will provide the tax authorities with better tools to monitor and manage compliance, reducing evasion and improving overall tax revenue. Businesses will benefit from faster invoice processing, reduced costs, and improved data accuracy.
Who is obligated to issue e-invoices in Germany?
In Germany, the Wachstumschancengesetz law passed in March 2024 mandates that all businesses engaged in B2B transactions issue electronic invoices by January 1, 2028.
This mandate is part of a broader initiative to enhance the efficiency of tax processes and business operations by adopting electronic invoicing.
The phased implementation approach allows businesses to adapt to the new requirements gradually. Larger companies (those with a turnover exceeding €800,000) will be the first to comply starting January 1, 2027.
The requirement has been in place for several years for B2G transactions. All federal, regional, and local public authorities in Germany were mandated to receive electronic invoices from April 18, 2020.
Federal authorities extended this e-invoicing mandate to sending electronic documents on November 27, 2020. The goal was to create a unified and efficient invoicing system across all levels of government, thereby improving transparency and reducing administrative costs.
Requirements for e-invoice in Germany
Compliance with e-invoicing regulations in Germany involves adhering to specific requirements regarding formats, digital signatures, and archiving.
Here are details of the mandatory e-invoicing requirements in Germany:
Format
The format for several businesses includes:
B2G (Business-to-Government)
- XRechnung: This is the primary format mandated for e-invoicing with government entities. XRechnung is a structured XML-based format compliant with the European standard EN 16931, designed to ensure data consistency and interoperability.
- ZUGFeRD (from version 2.0.1): This format integrates structured invoice data in XML within a PDF document. It provides a dual format, combining a human-readable PDF and a machine-readable XML, making it versatile for manual and automated processing.
B2B (Business-to-Business)
- XRechnung and ZUGFeRD (from version 2.0.1): Similar to B2G transactions, these formats are also applicable in B2B transactions, ensuring consistency and compatibility with public sector invoicing standards.
- Other formats: Other electronic formats, such as XML and EDIFACT, can be used, provided they are compatible with the EN16931 standard. This allows businesses to use existing systems and formats while complying with the new requirements.
You may also like: XRechnung: Everything You Need to Know About the German E-invoice Format.
Digital signature
Digital signatures are not a mandatory requirement for both B2G and B2B transactions. However, businesses can use digital signatures for additional security and authentication if preferred.
Archiving
Both B2G and B2B e-invoices must be archived for at least 10 years plus the year the invoice was issued. This requirement ensures that businesses maintain adequate records for compliance with tax and legal obligations.
The archived e-invoices must be stored in a way that guarantees their integrity, authenticity, and legibility throughout the entire retention period.
How to submit an e-invoice in Germany
Since the German government does not offer a centralized e-invoicing platform, businesses have several methods for sending electronic invoices. Some options include email, direct submission to the recipient's system if it supports the required formats and more.
Let’s discuss one of Germany's easiest and most effective methods of sending e-invoices: PEPPOL. PEPPOL is a standardized network that facilitates the secure and efficient exchange of e-invoices.
Here are the steps to send an electronic invoice using PEPPOL:
1. Register with a PEPPOL Access Point Provider: Businesses need to register with a reliable PEPPOL Access Point provider like Storecove, which acts as a gateway to the PEPPOL network and allows businesses to send and receive electronic documents.
2. Format the Invoice: Ensure that the invoice is in a PEPPOL-compliant format. It must include all mandatory data fields as specified by the PEPPOL BIS specifications.
3. Send the invoice: Log in to the Access Point provider’s portal or integrate your ERP system with the provider’s API to submit the invoice. Enter the recipient’s PEPPOL ID to ensure the invoice reaches the correct recipient. Attach the formatted e-invoice and any additional documents if required.
4. Transmission and validation: The Access Point provider will transmit the invoice through the PEPPOL network. The invoice undergoes validation checks to ensure it meets the PEPPOL standards, including verifying the data structure, mandatory fields, and format.
5. Recipient confirmation: Once validated, the invoice is delivered to the recipient’s Access Point. The recipient’s system receives the invoice and generates a confirmation receipt, which is sent back to the sender’s Access Point.
6. Archiving: As per German regulations, both the sender and the invoice recipient must archive the electronic document for at least 10 years plus the year of issuance. The archived invoice must be stored in a manner that ensures its integrity, authenticity, and legibility throughout the retention period.
See also: How Do I Become Ready for Peppol? (A Beginner's Guide).
How can businesses prepare to become e-invoice compliant in Germany?
Preparing for e-invoicing compliance in Germany involves several key steps to ensure a smooth transition. The following are some of the best practices businesses can follow to become e-invoicing compliant:
- Understand the requirements: The first step in preparing for e-invoice compliance in Germany is to thoroughly understand the regulations set forth by the Wachstumschancengesetz law. This includes knowing the mandatory e-invoice formats such as XRechnung, ZUGFeRD (version 2. x or higher), and PEPPOL BIS (version 3 or higher), as well as other formats compliant with the European Standard EN16931.
- Upgrade your accounting and ERP systems: Businesses must ensure their accounting and ERP systems can generate, send, and receive e-invoices in compliant formats. This might involve upgrading current systems or integrating new software solutions that support the required formats.
- Choose an e-invoicing service provider: Selecting a reputable e-invoicing service provider is crucial for managing the technical aspects of compliance. Reliable providers such as Storecove offer platforms that facilitate the exchange of e-invoices in the mandated formats. They can also help with data validation, ensuring that e-invoices meet the necessary standards before they are sent or received.
- Train your staff: Effective e-invoicing implementation requires your finance and accounting teams to be well-versed in the new processes and requirements. This involves training staff to generate compliant e-invoices and use the chosen e-invoicing software or service provider.
Read also: What are the Peppol & E-Invoicing Mandates In Germany?
Takeaway: Prepare for Germany's e-invoicing mandate to ensure compliance
As Germany transitions to mandatory B2B e-invoicing starting January 1, 2028, you must prepare by understanding the new regulations, upgrading your systems, and ensuring compliance with the required electronic invoice formats.
The phased implementation provides a gradual shift, allowing businesses to adapt to the digital reporting requirements with manageable adjustments.
Embracing e-invoicing aligns with legal mandates and unlocks growth opportunities by enhancing efficiency and streamlining electronic processing.
For a seamless transition, consider leveraging platforms like Storecove. We offer robust solutions to help businesses meet e-invoicing mandates and efficiently manage electronic invoice exchanges.
Contact Storecove today to get started!
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