Introduction of mandatory e-billing

From 2025, the tax authorities want companies to take the first step towards complete recording of all sales by the tax office and only use electronic invoices for B2B sales.

Part of the Growth Opportunities Act is the introduction of the obligation for companies to issue an electronic invoice (e-invoice) for deliveries and services to other companies from 2025. Only an invoice in a structured electronic format that can be processed automatically is considered an e-invoice. In contrast, paper invoices and other electronic invoices, such as pure PDF documents, count as other invoices that do not meet the new requirements. An exception to this obligation only applies to small-value invoices up to 250 euros, travel tickets and the majority of VAT-exempt transactions.

The introduction of this obligation is the first step for the tax authorities towards imposing a further obligation on companies in just a few years' time, namely to transmit all e-invoiced sales to the tax office individually and promptly. The government hopes that this will lead to even better control of companies and a reduction in cases of VAT fraud, especially as some other EU countries already have such a system in place.

However, the time has not yet come and companies already have enough work to do to implement the first step in time. Although there are transitional regulations, contrary to the wishes of the Federal Council, these only apply to the obligation to issue an e-invoice. Specifically, during a transitional period until the end of 2026, other invoices can also be issued instead of an electronic invoice with the consent of the recipient. For companies whose total turnover in the previous year did not exceed 800,000 euros, this transitional period even applies until the end of 2027. In addition, all companies can agree the format used among themselves under certain conditions, which means that the EDI process in particular can be used until at least the end of 2027.

However, from 2025, all companies must be able to receive an e-invoice and process and archive it in accordance with the statutory regulations, as invoice recipients will no longer be entitled to request a "traditional" invoice from their supplier during the transition period. However, only very few companies will be able to switch completely to e-invoicing from 2025, as the obligation only applies to domestic B2B sales. If a company also sells abroad or to private customers, customers will often not be able to process the German format for the e-invoice and will therefore expect a "traditional" invoice.

This problem can be largely eliminated by using hybrid formats, e.g. a PDF file with embedded invoice data in a structured format. Customers who are unable to process the structured data still have it in the familiar PDF view. After all, the e-invoice also has some advantages:

• Compared to the classic paper invoice, the e-invoice eliminates the labor and material costs for printing and sending the invoice.

• When an invoice is received, there is no need to physically file the invoice or scan a paper invoice to replace it.

• By dispensing with physical invoices, invoice processing can be decentralized and location-independent.

• However, the biggest advantage of e-invoicing is that all invoice data is available in a structured format that can be processed electronically. This means that many details can be transferred to the accounting department fully automatically - provided the appropriate software is available. This not only significantly reduces the workload, but also avoids numerous input errors that occur when entering data manually.

To ensure the smoothest possible start to the age of e-billing, you should begin preparations as early as possible. Having the right software and hardware is not enough, as business processes also need to be adapted and employees trained in the new procedures. You should also keep an eye on incoming invoice control and data security, because the more invoices are sent by e-mail in future, the more fraudsters will try to obtain unjustified payments or access to the company's IT infrastructure using fake invoice attachments and fictitious e-mails. In addition, the introduction of e-invoicing threatens to create various other hurdles and stumbling blocks of a tax nature. Here are a few examples:

• The obligation to receive and process e-invoices applies to all entrepreneurs, even those who only carry out tax-free transactions, e.g. doctors or operators of photovoltaic systems. This also affects small VAT entrepreneurs, flat-rate farmers or landlords of commercially used properties.

• Even if this should not actually be the case, in hybrid formats (PDF file with embedded structured invoice data) the information in the PDF presentation and in the structured part may differ. However, only the information in the structured part is binding for tax purposes. Anyone who relies on the PDF representation when checking an incoming invoice may be in for a nasty surprise during a tax audit, e.g. if mandatory information is missing in the structured part.

• Standing invoices already issued on paper or in a non-structured electronic format will continue to be valid for the time being. However, they will lose their validity at the end of the transition period at the latest and must be reissued as e-invoices by then.

The Federal Ministry of Finance has already published a draft administrative instruction on e-invoicing, which will be finalized in the coming months. You will find out more about the detailed regulations contained therein and other questions relating to e-invoicing in the next issues.