Obligatory e-invoicing starting in 2025

What companies need to know now

The electronic invoice or e-invoice is already firmly established in the federal administration. From 1 January 2025, it will also become obligatory for all companies. What does this mean for companies? Why is the e-invoicing obligation being introduced? Who is affected, what deadlines apply and what steps need to be taken? In this blog post, we answer these questions and highlight the most important facts about the e-invoicing law.

What does this mean for companies in concrete terms?

The introduction of mandatory e-invoicing means that companies will no longer be allowed to use paper invoices as standard from 1 January 2025. Instead, invoices must be created and sent in a structured electronic format. This applies to invoices to both public sector clients and other companies (B2B sector). The aim is to reduce the administrative burden, increase efficiency and minimise sources of error.

Companies must adapt their accounting and ERP systems in order to create, send and receive e-invoices. It is also important to ensure that e-invoices contain all legally required mandatory information and are transmitted in an authorised format.

Why is e-invoicing obligatory?

The e-invoicing obligation is being introduced for several reasons:

  • Increased efficiency and cost reduction: electronic invoices simplify and speed up administrative processes, which leads to a significant reduction in costs.
  • Error reduction: Automated processing of electronic invoices reduces the risk of errors that can occur when entering invoice data manually.
  • Transparency and traceability: E-invoices enable better traceability of financial transactions and increase transparency in invoice exchange.
  • Environmental protection: Switching to electronic invoices reduces paper consumption and thus contributes to environmental protection.
  • Combating VAT fraud: The German government wants to combat VAT fraud and close the VAT gap of around 23 billion euros in Germany.

Important facts about the e-invoicing law

The e-invoicing obligation, formally known as the “Act on the Promotion of Electronic Administration”, was introduced to digitise and standardise the exchange of invoices. Here are some important facts:

  • Structured format: e-invoices must be issued, transmitted and received in a structured electronic format. This enables automatic and electronic processing.
  • Mandatory information: An e-invoice must contain certain mandatory details, including the name and address of the invoice issuer and recipient, tax number or VAT identification number of the invoice issuer, invoice date and number, quantity and type of products or services supplied, as well as the net amount, tax amount and gross amount.
  • Permissible formats: In Germany, the ZUGFeRD (Central User Guide of the German Electronic Invoice Forum) and the XRechnung format are widely used. Both formats are standardised and meet the requirements of EU Directive 2014/55/EU.

Who is affected and are there any exceptions?

The e-invoicing obligation affects all companies that issue invoices to other companies (B2B) or public clients. This includes large companies as well as small and medium-sized enterprises (SMEs). International companies that do business in Germany and accept public contracts must also comply with this regulation.

However, there are also exceptions to the obligation to issue e-invoices, such as for small-value invoices of less than 250 euros and travel tickets. Some exceptions also apply to invoices that are issued as part of a direct order. At this point, it is important to find out about the specific exemptions in your federal state or industry.

Important transition periods at a glance

Different transition periods apply to different company sizes and sectors. Here is a brief overview:

  • From 27 November 2020: Mandatory for all federal authorities and their suppliers.
  • From 18 April 2021: Obligation for invoices to contracting authorities at state and municipal level
  • From 1 January 2025: Priority for paper invoices will no longer apply and every company will be able to issue e-invoices. However, paper invoices may continue to be sent until 31 December 2026. Other electronic formats (such as PDF) may only be sent with the recipient’s consent.
  • From 1 January 2027: Companies with a previous year’s turnover of more than 800,000 euros in the B2B sector must send e-invoices. Companies with a previous year’s turnover of less than 800,000 euros may still use other invoice formats (paper, PDF, etc.) until 31 December 2027.
  • From 1 January 2028: All companies in the B2B sector are obliged to send e-invoices. The EDI (Electronic Data Interchange) procedure can also be used beyond 2028, provided that a reporting data record can be correctly and completely extracted from the EDI invoice from 1 January 2028 in accordance with the VAT Act.

New developments due to the Growth Opportunities Act

The Growth Opportunities Act will introduce mandatory e-invoicing for domestic B2B sales (sales between companies) from 1 January 2025. This measure was approved by the Federal Council on 23 March 2024. In addition, the Federal Ministry of Finance (BMF) is planning to introduce an electronic reporting system for domestic B2B transactions at a later date, which will follow EU guidelines and enable standardised reporting for both domestic and cross-border B2B transactions. It is being discussed whether invoices should be exchanged via a state e-invoicing platform or private platforms, which will pass on all tax-relevant data to the tax authorities in future. This is intended to further combat VAT fraud.

What steps do companies need to take?

Companies should take the following steps to prepare for the e-invoicing obligation:

  • Adapt systems: Review and, if necessary, adapt accounting and ERP systems to be able to create, send and receive e-invoices.
  • Train employees: Employees in the relevant departments (e.g. accounting, IT) should be trained in the handling of e-invoices.
  • Fulfil legal requirements: Ensure that all e-invoices contain the legally required mandatory information and are transmitted in an authorised format.
  • Communication with business partners: Inform business partners about the switch to e-invoices and, if necessary, obtain consent for other electronic formats (such as PDF).

Conclusion ​

The e-invoicing obligation is an important step towards digitalisation and increased efficiency in the corporate world. Although the changeover requires a certain initial investment, the long-term benefits clearly outweigh the costs. Companies that switch to e-invoices at an early stage and fulfil the legal requirements will benefit from the many advantages and increase their competitiveness in the long term. With the new regulation from 2025, the switch to e-invoices will also become mandatory for B2B sales, which will not only reduce the administrative burden, but also help to combat VAT fraud and close the VAT gap in Germany.

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Obligatory e-invoicing starting in 2025

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