B2B e-invoicing obligation: What does this mean for you?

On April 17, 2023, the Federal Ministry of Finance presented a draft law to enable the introduction of e-invoicing in the business-to-business sector. Just under a year later, on February 23, 2024, the Bundestag approved the compromise of the Mediation Committee on the Growth Opportunities Act. This also covers e-invoicing. However, the process wasn’t over yet. In March 2024, the Bundesrat still had to give its approval. Under the resolution, e-invoicing was to be introduced gradually from 2025. There will also be transitional rules. After all, switching to e-invoicing is no simple task. Here you’ll find out which invoice formats exist, when they are valid, and how to prepare for the changeover.

The variety of invoice formats

Electronic invoice formats were treated the same as paper invoices for VAT purposes back in 2011. Since November 27, 2020, there has been an obligation for invoices to be issued and sent to public clients of the federal government in electronic format. According to the Growth Opportunities Act, this obligation is now also to be introduced for B2B transactions in Germany.

A distinction can currently be made between the following invoices:

From January 1, 2025, a distinction will be made between two types of invoices: electronic invoices (e-invoices) and other invoices. According to the new definition in the VAT Act, an e-invoice would be an invoice that is created, transmitted, and received in a structured electronic format and enables electronic processing. The structured electronic format must comply with the European standards for e-invoicing and the list of corresponding syntaxes in accordance with Directive 2014/55/EU (and therefore also CEN standard EN 16931).

Electronic invoices with XRechnung and ZUGFeRD

In Germany, when we talk about e-invoices, the terms XRechnung and ZUGFeRD often come up. But what do they actually mean?

Electronic invoices with XRechnung

The XRechnung is a technical format for electronic invoices in text-based data format (XML). The structure that the XRechnung (and therefore the e-invoice) must have is determined by the European standard for electronic invoicing EN-16931. Each country defines its own Core Invoice Usage Specifications (CIUS) in order to be able to implement EN-16931 with the country-specific requirements. XRechnung therefore represents the national implementation of EN-16931 for Germany and is already being used to transmit invoices to public clients at the federal level and for most federal states and local authorities.

Electronic invoice with ZUGFeRD

The ZUGFeRD format is a combination of PDF and XML file. Here, invoices are sent as PDFs and contain the XML data record for extracting the invoice data. This makes the format suitable for both visual inspection and the automated transfer of data to IT systems.

Lifespan of the different invoice formats

The aim of the Federal Ministry of Finance is to create a uniform electronic invoicing standard that will gradually replace the existing invoice formats.

Paper invoices, PDF invoices, and EDI are not directly out of the question, and e-invoicing is not immediately mandatory. Nevertheless, there are a few details to consider.

Until the end of 2026 

It is permitted to continue using paper invoices for business transactions made in 2025 and 2026. Electronic invoices that do not comply with the new format may also be used during this period. However, the consent of the invoice recipient is still required, as was previously the case.

Until the end of 2027

It is permitted to continue using paper invoices for business transactions made in 2027. Electronic invoices that do not comply with the new format are also permitted. As in 2025 and 2026, the consent of the invoice recipient is also required for this. However, there is an additional requirement: the invoice issuer may have only a maximum turnover of €800,000 in the previous year.

Entrepreneurs with a previous year’s turnover (for 2026) exceeding this limit still have the option of issuing invoices transmitted via electronic data interchange (EDI procedure). This regulation applies also to sales made in 2026 or 2027, even if the required information is not converted into a format that complies with or is compatible with the European standard.

From 2028

By 2028, the federal government wants to ensure that all companies are able to receive, process, and create invoices in accordance with the EN-16931 standard. In addition, the federal government is aiming to introduce a standardized reporting system to support companies in fulfilling their VAT obligations. This step is part of the VAT in the Digital Age (ViDA) of the EU Commission and contributes to the creation of a uniform digital single market in Europe.

Important: The EDI procedure can still be used. The prerequisite for this is that the information relevant for VAT can be extracted correctly and completely from the invoice format used. The result should therefore comply with or be compatible with CEN standard EN 16931.

Are there any other exceptions?

Invoices for small amounts up to €250, tickets, and invoices sent to consumers are exempt from the regulation.

This is necessary for a changeover

There are three important things to bear in mind when switching to electronic invoicing:

1. Software: For the digitalization of accounting, it is important that the right software is implemented for your company first.
2. Training of employees: It is advisable to train the responsible employees from the accounting department accordingly.
3. Consultation with the tax consultant: Many companies let their tax consultant take over a large part of the bookkeeping. When switching to electronic invoicing, it is advisable to sit down with your tax advisor and clarify how they should be involved in this area.