Germany’s E-Invoicing in 2025: Key Changes and Business Preparation
Discover how Germany’s e-invoicing for B2B transactions impacts businesses, with insights on compliance, benefits, and readiness steps.
Germany´s New E-Invoicing Standards: What Businesses need to know for 2025
Starting January 1, 2025, Germany will usher in a new era of digital financial transactions with the next relevant steps into the implementation of e- invoicing for all B2B transactions. This significant shift aims to enhance efficiency, compliance, and transparency in business operations. Here’s a comprehensive guide to help businesses navigate these upcoming changes.
Understanding the new E-invoicing Format
The new e-invoicing standards mandate the use of structured e-invoices that can be processed automatically and digitally. The primary formats include XRechnung and ZUGFeRD from version 2.0.1. These formats are designed to comply with the European standard EN 16931, ensuring uniformity and compatibility across different systems.
• XRechnung: A structured XML-based format widely used in Germany. It is specifically designed for automated processing and is mandatory for public sector transactions.
• ZUGFeRD: A hybrid format that combines a PDF with embedded XML data, allowing both human-readable and machine-readable versions. This format is particularly useful for businesses that need to provide a visual representation of the invoice while ensuring it can be processed digitally.
• International Formats: Formats like Italy’s FatturaPA and France’s Factur-X are also acceptable as long as they meet the EN 16931 standard. These formats facilitate cross-border transactions within the EU by ensuring compatibility and compliance with European regulations.
How to Use E-Invoicing Formats
1. To use these e-invoicing formats, businesses need to:
2. Generate the Invoice: Use accounting or ERP software that supports the required e-invoicing formats.
3. Embed Data: Ensure that all necessary data fields are correctly filled out and embedded in the XML structure.
4. Send the Invoice: Transmit the e-invoice via secure electronic channels, such as email or dedicated e-invoicing platforms.
Receive and Process: Ensure your systems are capable of receiving and automatically processing incoming e-invoices.
Key Changes to NOte
• Mandatory E-Invoicing: Starting January 1, 2025, all businesses in Germany must be prepared to receive and process e-invoices for B2B transactions, though issuing e-invoices remains optional until January 1, 2027. From 2027, businesses with annual sales exceeding 800,000 Euros must issue e-invoices, with full e-invoicing requirements for all B2B transactions taking effect January 1, 2028. This phased approach represents a shift from the current, optional e-invoicing system.
• No Consent Required: Unlike the current practice, businesses will no longer need the recipient’s active consent to issue e-invoices.
• Exemptions: Certain transactions, such as invoices for small amounts and tickets, are exempt from the e-invoicing obligation.
Types of E-Invoices
In addition to XRechnung and ZUGFeRD, other international formats like Italy’s FatturaPA and France’s Factur-X are acceptable, provided they meet the EN 16931 standard.
Transition Periods for Mandatory E-Invoicing in Germany January 1, 2025 - December 31, 2026: During this phase, businesses must ensure that they are technically and organizationally equipped to receive and process e-invoices. While paper and PDF invoices are still allowed, businesses should be ready to issue e-invoices and confirm that recipients can process them before sending.
January 1, 2027 - December 31, 2027: The requirement to receive e-invoices remains, but businesses with sales under 800,000 Euros from the previous year may continue to issue paper or PDF invoices. Other businesses, however, must issue e-invoices.
From January 1, 2028: All businesses must issue e-invoices for B2B transactions, with no exceptions for sales size.
Impact on Businesses
The transition to mandatory e-invoicing will require businesses to upgrade their accounting and ERP systems to generate, send, and receive compliant e-invoices. This shift will also bring about increased scrutiny and the need for diligent record-keeping to avoid discrepancies and potential tax liabilities.
Benefits of E-Invoicing
The move towards e-invoicing is expected to bring several benefits, including enhanced tax compliance, reduced tax fraud, and streamlined financial operations. Businesses can look forward to reduced processing times and increased efficiency in their financial transactions.
Preparing for the Transition
To ensure a smooth transition, businesses should start preparing now by upgrading their systems and familiarizing themselves with the new e-invoicing formats and standards. Here are some steps to help with the transition:
• Assess Current Systems: Evaluate your current invoicing and accounting systems to determine their compatibility with the new e-invoicing formats.
• Upgrade Software: Invest in accounting or ERP software that supports XRechnung, ZUGFeRD, and other compliant formats.
• Train Staff: Provide training for your finance and accounting teams to ensure they understand how to generate, send, and process e-invoices.
• Engage with IT Professionals: Work with IT experts to integrate e-invoicing capabilities into your existing systems and ensure secure data transmission.
• Test the System: Conduct trial runs to identify and resolve any issues before the mandatory implementation date.
Transitioning from Current Invoicing to E-Invoicing
Transitioning from traditional invoicing methods to e-invoicing involves several key steps:
• Digitalization of Records: Convert existing paper and PDF invoices into digital formats.
• System Integration: Ensure your invoicing system is integrated with your accounting and ERP systems for seamless data flow.
• Compliance Check: Regularly review your e-invoicing processes to ensure compliance with the new standards.
• Customer Communication: Inform your business partners and customers about the transition to e-invoicing and provide guidance on how they can receive and process e-invoices.
• International E-Invoicing Compatibility: For businesses engaged in cross-border transactions, it’s helpful to ensure compatibility with international formats that meet the European standard (e.g., Italy’s FatturaPA, France’s Factur-X). While Germany’s requirements focus on domestic B2B transactions, supporting EU-compliant formats can facilitate smoother international exchanges.
Germany’s move towards mandatory e-invoicing marks a pivotal step in the digitalization of financial transactions. By embracing these changes, businesses can not only comply with the new regulations but also reap the benefits of a more efficient and transparent financial system.
Conclusion
In summary, Germany’s shift to mandatory e-invoicing by 2025 marks a critical advancement in the ambitious yet non-harmonized digitalization of B2B transactions, a decision some view as rushed upon without thorough discussion with all involved stakeholders in advancing digital projects. Businesses that proactively adapt to these new requirements by upgrading systems, aligning with the XRechnung and ZUGFeRD formats, and ensuring smooth integration with their financial workflows will not only meet regulatory obligations but also unlock significant operational benefits. Enhanced efficiency, improved accuracy, and greater tax transparency are just a few of the advantages of this transition. By preparing early, businesses position themselves to navigate the regulatory landscape with confidence, while embracing a more streamlined and secure financial future.
Our remarks
At Kalms Operations, we understand the challenges businesses face in adapting to evolving regulatory landscapes, including Germany’s move toward mandatory e-invoicing. To support our clients, we already offer e-invoicing services within the framework of our Kalms Operations solutions upon request. Whether it’s ensuring compliance with standards like XRechnung and ZUGFeRD or facilitating seamless integration into existing workflows, our services are tailored to meet individual needs. By providing a reliable and efficient e-invoicing solution, we aim to make this transition as smooth as possible for businesses navigating these significant changes.
Disclaimer:
This article is intended for general informational purposes only and does not provide specific financial, tax, or legal advice. Regulations may change, and businesses should consult their tax advisor or CPA for tailored guidance – they’re happy to help! Kalms Consulting GmbH assumes no liability for any errors, omissions, or reliance on the information provided in this content.
Sources:
Ernst & Young: https://www.ey.com/en_gl/technical/tax-alerts/germany-finalizes-e-invoicing-administrative-guidance
KMLZ Rechtsanwaltsgesellschaft GmbH: https://www.kmlz.de/en/VAT/Newsletter_10_2024
Feder Ministry of the Interior and Community: https://en.e-rechnung-bund.de
Cover image credit:
Portion sourced from: Jakub Żerdzicki - Unsplash (free license). Original image available here. The image utilized in this article was sourced from unsplash.com in accordance with the license terms of use.
The image utilized in this article was sourced from unsplash.com in accordance with the license terms of use.