Germany’s mandatory e-invoicing system will be implemented in phases, with Phase One beginning January 1, 2025. During this initial phase, businesses conducting domestic business-to-business (B2B) transactions must be able to receive structured electronic invoices that comply with the EU e-invoicing standard EN 16931. While this requirement may seem straightforward, there are important nuances to consider. Germany’s approach to e-invoicing differs substantially from existing mandates in other EU member states, such as Romania and Italy, as well as from planned implementations in neighboring countries like France and Poland (scheduled for 2026).
Several lesser-known aspects of the German e-invoicing mandate are often misunderstood by businesses, including:
- A structured electronic invoice compliant with EN 16931 may still fail to meet the requirements of German VAT law.
- Small businesses exempt from VAT are also subject to the e-invoicing mandate, despite their tax exempt status.
- An email address is sufficient to fulfill the obligation to receive structured e-invoices. No specialized software is required for this purpose.
- Even if you have agreed with your supplier to use XML invoices, you may still receive a PDF document in your inbox instead.
These nuances highlight the importance of understanding the specific requirements of the German e-invoicing mandate and preparing accordingly to ensure compliance. This article provides an in-depth analysis of Germany’s e-invoicing regulations.
Scope of Germany’s e-invoicing mandate
The e-invoicing mandate in Germany applies to invoices for taxable supplies of goods and services made by a business established in Germany to another business also established in Germany. The mandate does not extend to transactions involving exempt supplies (financial services, healthcare, education, social services), invoices for amounts below €250, or tickets.
An electronic invoice is also required for shipments of goods outside the EU or to another EU Member State, provided the recipient is a business established in Germany. The obligation to issue e-invoices applies even to businesses that benefit from the small business exemption (Kleinunternehmerregelung). These businesses, while exempt from collecting VAT and filing monthly or quarterly VAT returns, are still required to comply with the e-invoicing mandate for relevant transactions.
Businesses established outside of Germany are subject to the e-invoicing mandate if they have a fixed establishment in Germany that participates in the transaction. A fixed establishment is defined as a fixed place of business, other than the main place of business, that has the human and technical resources necessary to provide or receive goods or services on a permanent basis. Examples of a fixed establishment include a warehouse used for storing and distributing goods, supported by local personnel, or a branch office that performs operational functions and is equipped with employees and resources to provide services locally.
E-invoice formats
In 2025 and 2026, businesses in Germany will be permitted to issue invoices in one of three formats:
- Paper format.
- Structured electronic format that complies with or is interoperable with the EN 16931 standard.
- Alternative electronic formats, which primarily include graphic formats such as JPG, PDF, or TIFF, as well as structured data formats that do not meet the EU e-invoicing standard or are not interoperable with it. However, the use of these alternative formats is subject to the recipient’s consent.
The recipient’s consent for using alternative formats does not require a specific form and can even be granted retroactively. Consent is considered valid if the parties involved implicitly approve the invoicing method by consistently using it in practice. For example, paying an invoice issued in an alternative electronic format is considered implied consent to the use of that format.
The Finance Ministry underscores that the choice of format is a civil matter and must be agreed upon by the contracting parties. Simply agreeing that an invoice must be EN 16931 compliant is not sufficient, as structured electronic invoices compatible with the EN 16931 standard can exist in various formats. The most widely used invoice formats in Germany that are compatible with the EN 16931 standard include ZUGFeRD and XRechnung. However, the scope of EN 16931-compatible electronic invoices under the German e-invoicing mandate is not limited to formats used in Germany. It also allows for the use of foreign e-invoicing formats, such as the French Factur-X and Peppol-BIS Billing.
XRechnung is an XML-only invoice format developed by the German Coordination Office for IT Standards. It was specifically designed for transactions involving German public authorities and government agencies. XRechnung invoices must use one of two XML syntaxes: Universal Business Language (UBL) or UN/CEFACT Cross Industry Invoice (CII). If parties opt to use XRechnung, they should specify which XML syntax will apply.
ZUGFeRD is a hybrid invoicing format that combines a PDF/A-3 document (human-readable format) with an embedded XML file (machine-readable format). Developed by the German Forum for Electronic Invoicing, ZUGFeRD allows businesses to send invoices that are both visually readable and easily processed by software systems. That’s why even if you agree to use XML invoices with a supplier who selects ZUGFeRD, you may still receive a PDF document in your inbox. ZUGFeRD is specifically designed to use the CII syntax. Its dual structure is especially advantageous for businesses transitioning from paper-based invoicing to fully digital processes, supporting both automated invoice processing and easy manual verification.
It is important to note that being compatible with the EN 16931 standard does not guarantee compliance with German VAT laws. Under EN 16931, the only mandatory address element for both the seller and the buyer is the country code, while the city and postal code are optional. However, this approach does not align with German VAT regulations, which require a more detailed specification of the address.
E-invoice transmission
Germany does not mandate a specific method for transmitting e-invoices, allowing contracting parties to choose the method that best suits their needs. Acceptable transmission methods include email, electronic interfaces, shared drives and download portals.
The Finance Ministry has explicitly clarified that the requirement to receive electronic invoices can be met by providing an email inbox; it does not need to be a dedicated inbox solely for receiving e-invoices. While an email inbox may initially seem like a simple solution for fulfilling the e-invoicing requirement, this approach will quickly face limitations. Emails are vulnerable to phishing, spam, and other security risks.
Currently, Germany does not require invoice data to be reported directly to the tax authorities. However, such a reporting obligation is expected to be introduced in the future. The German Finance Ministry’s circular states that the technically possible and legally permissible transmission channels will be redefined within the framework of the future reporting system. This suggests that, with the introduction of a reporting system for national invoices, the current flexibility regarding transmission methods for domestic invoices will be restricted.
Outlook
A proper nationwide transition to electronic invoicing will begin in 2027, with companies having an annual turnover exceeding €800,000 in the previous year required to issue electronic invoices. Starting in 2028, all businesses in Germany will be obligated to issue electronic invoices. This timeline may provide an advantage to companies that have not yet adapted their processes to meet e-invoicing requirements. Given that the European Committee for Standardization plans to release a new version of the EN 16931 standard in the first half of 2025, focusing on invoicing in the B2B sector, it may be advisable for companies to wait for this update before beginning the implementation of e-invoicing systems.
The opinions expressed in this article are those of the author and do not necessarily reflect the views of any organizations with which the author is affiliated.
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