accounting – Michaela Merz

The Growth Opportunities Act of 27 March 2024 introduced a binding standard for electronic invoices (known as the E-Rechnung, or e-invoice) from 2025, which applies to all supplies of goods and services performed between taxable persons (B2B) established in Germany. Staggered transition periods will apply for issuing e-invoices, but accepting such invoices in the prescribed format will be mandatory from 1 January 2025. Now the Federal Ministry of Finance (Bundesfinanzministerium, or BMF) has published a final decree on this matter.

Issuing invoices

The decree explains that although the law requiring taxable persons established in Germany to issue e-invoices (including credit notes) will go into effect on 1 January 2025, the government has granted comprehensive transitional provisions. In practice, the obligation to issue e-invoices has generally been postponed to 1 January 2027. Small and medium-sized businesses whose total annual turnover does not exceed €800,000 have been granted a further postponement, to 1 January 2028. Electronic invoices submitted via Electronic Data Interchange (EDI) that are not in line with the e-invoice format may also continue to be used until 31 December 2027.

Being established in Germany is the deciding factor as to whether e-invoicing is mandatory, regardless of whether VAT is actually shown on the invoice. For instance, e-invoicing would be required for an intra-Community supply of goods carried out by a German taxable person to a foreign fixed establishment of another taxable person established in Germany. The decree explicitly confirms that, in this respect, holding a taxable lease of a property in Germany will also give rise to the assumption that the taxable person doing so is deemed to be established in Germany.

Some exceptions will apply to this obligation. For example, e-invoicing is not required if goods or services are supplied by or to a foreign taxable person not established in Germany, or to a private individual. Similarly, e-invoicing is also not required for simplified low-value invoices, for travel tickets which qualify as invoices, or in cases where no invoice is required at all – e.g. for out-of-scope transactions and for VAT-exempt supplies where no right to deduction applies. In all these cases, existing invoice formats may continue to be used – i.e. paper invoices, or, if the recipient gives consent, electronic invoices that do not comply with the e-invoice standard (e.g. PDF, email). Even where no obligation to issue e-invoices is in place, an e-invoice may be issued if the recipient gives their express or implied consent.

The decree states that no exception currently applies to taxable persons subject to the small business scheme, and that they would also be obliged to issue e-invoices after the expiry of the transition periods. It should, however, be noted that the current draft of the Annual Tax Act 2024 (which has not yet been adopted) provides for an exception for simplified small business invoices, which are to be introduced as part of an extensive recast of the small business scheme. In cases where e-invoicing would theoretically only be mandatory for part of the invoice – for example, an invoice issued for multiple supplies but where e-invoicing is only required for some of them – the entire invoice must be issued as an e-invoice. Similarly, supplies which are partly for taxable purposes and partly for out-of-business purposes must be e-invoiced in full.

Input e-invoices

The exemptions granted for the transition period only apply to issuing e-invoices: taxable persons established in Germany will still be required to accept e-invoices from other taxable persons established in Germany from 1 January 2025, regardless of whether input VAT is deductible. Providing an email address will be deemed a sufficient means of accepting e-invoices, though other electronic means of transmission may also be agreed. If a recipient refuses to accept an e-invoice, or is unable to accept an e-invoice for technical reasons, the invoice issuer will be considered to have complied with their VAT obligations if they have issued an e-invoice and demonstrably attempted to submit it.

Permissible formats

E-invoices must be issued in a standardised, machine-readable format that complies with European standard EN 16931, and must be transmitted and received electronically. The parties must be able to ensure the authenticity of the invoice’s origin, the integrity of its content and its legibility. Although e-invoices are only required to be machine-readable, a supplementary human-readable document may also be submitted. However, the decree also states that any discrepancies in the human-readable document may give rise to a VAT liability under Article 203 of the Main VAT Directive due to VAT being incorrectly shown on the invoice.

The BMF allows the XRechnung standard for e-invoices in Germany. The ZUGFeRD format, version 2.0.1 or later, will also be permitted (with the exception of the MINIMUM and BASIC-WL profiles) – this is a hybrid format that contains both a human-readable and a machine-readable part, with the latter being relevant for VAT purposes. Permissible formats are not restricted to those from Germany, and other formats that meet the requirements may be used: the decree gives the French Factur-X standard and Peppol-BIS billing as examples, but – in contrast to a draft of the decree published back in June 2024 – does not explicitly mention the Italian FatturaPA standard.

In terms of the requirements from an accounting standpoint, the structured part of the e-invoice must contain all of the mandatory VAT information required for a proper invoice. However, additional information may be included in an attachment to the e-invoice (e.g. a breakdown of timesheets in a PDF file) or, it would seem, in an extension. Additional exceptions have been granted for written agreements that constitute invoices. A link, however, does not meet the requirements of an e-invoice; the BMF apparently does not consider any linked documents to be part of the invoice.

If the parties to the invoice agree to do so, other formats may also be used if they can be correctly and completely extracted to a format which complies with, or is interoperable with, the EN 16931 series of standards. In this context, “interoperable” means that the necessary information from a VAT standpoint can be obtained from the invoice in its original format and processed without any information being lost. Established electronic invoice formats (the decree mentions electronic data interchange protocols such as EDIFACT) may therefore remain in use even beyond the deadline of 31 December 2027, provided that the e-invoice formatting requirements are met.

Input VAT deduction and correcting invoices

Once the transition periods have expired, only an e-invoice will be sufficient to obtain an input VAT deduction in cases where e-invoicing is mandatory. An input VAT deduction will not become completely impossible if invoices of other formats are submitted instead, but will be conditional on the tax authorities (which will be applying a strict standard) having all the information they need to check the material requirements for input VAT deduction. However, an invoice that has not been issued in the prescribed format (e.g. a paper invoice instead of an e-invoice) may also be corrected by an e-invoice that makes clear and specific reference to the original invoice, and thus shows that it is a correction. Such a correction will be retroactively effective to the date of issue of the first invoice, subject to the usual conditions.

For other corrections, the corrected e-invoice must be submitted in the form prescribed for e-invoices. Sending the missing or corrected information in another format is not sufficient. Corrections of this nature will also be retroactively effective, subject to the usual conditions.

Miscellaneous

There are special provisions for invoices on continuous supplies, for written agreements that constitute invoices, and to final invoices preceded by instalment invoices. Other provisions concern the retention of e-invoices and invoicing to entities under public law. Regarding the latter, it should be noted that e-invoicing for supplies to these entities has already been mandatory for several years, which the decree mentions only in passing.

The decree also makes clear that the new e-invoicing rules will be transitional in nature. When the planned EU-wide reporting system is introduced, other channels for transmitting invoices, in the shape of e-invoicing platforms, are expected to be prescribed – alongside the fact that e-invoicing will then no longer be restricted to companies established in Germany.

Source

BMF decree dated 15 October 2024 (in German language only)

https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Umsatzsteuer/2024-10-15-einfuehrung-e-rechnung.html

On 5 of November 2024 the European Council has adopted the VAT in the Digital Age (‘VIDA’) package. This means that significant changes will be made to the EU VAT system starting from 2027.

In short, VIDA applies to all businesses that sell goods and/ or services in the EU, irrespective of whether they are established in an EU Member State or not. The three main pillars of VIDA are:

Introduction of Digital Reporting Requirements – modernize the process of invoicing and move to mandatory e-invoicing on intra-EU business to business transactions

Electronic invoicing will become the default system for issuing invoices and eventually holding a valid e-invoice will become a material VAT recovery requirement. However, Member States will be allowed to authorise other invoices for domestic supplies.
Invoices that have been issued, transmitted and received in electronic format that allow for automatic electronic processing will be considered to be electronic invoices and they should in principle comply with the European Standard (EN16931) and its list of syntaxes (other formats are allowed as long as these data formats ensure interoperability with the European Standard). Member States will not be allowed to request any additional data, to avoid unnecessary administrative burden. Summary invoices will be allowed (however, Member States may exclude this possibility in certain fraud sensitive sectors).
The electronic invoices for cross-border transactions must be issued no later than 10 days following the chargeable event.
The current recapitulative statements (EC sales listings) will be replaced with DRR for cross-border supplies of goods and services. The reporting of the invoice data by the supplier needs to happen in real time (i.e. at the time the invoice is issued or should have been issued). However, in situations of self-billing or reporting by the buyer, the buyer needs to transmit the information no later than five days after the invoice is issued or should have been issued.
Although real-time reporting of domestic transactions is not required under the EU VAT Directive, should a Member State opt to implement such a system, it will need to align with the digital reporting requirements for cross-border supplies. Member States can decide that holding an electronic invoice issued in compliance with the required standard becomes a substantive condition to be entitled to deduct or reclaim the VAT due or paid.
Member States will not be allowed to impose any additional general transaction-based reporting requirements, but may keep national measures to prepare/submit VAT returns for audit purposes, e.g., SAF-T requirements and reporting obligations which are not general such as cash registers.

The requirements above will apply as from 1 July 2030 with specific rules for Member States with domestic digital real time transaction-based reporting obligations already in place or announced on 1 January 2024 (who will have to converge their national systems into the ‘EU model’ by 1 January 2035).

2. Introduce a deemed supplier rule for platforms that facilitate short-term accommodation rentals and passenger transport services by road

3. Reduce the need for multiple VAT registrations through expansion of the One-Stop Shop, the introduction of a specific scheme for the transfer of own goods and a mandatory application of the reverse charge mechanism.

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