The German tax authorities published a proposal in April 2023 that would introduce mandatory e-invoicing requirements for German-established companies engaging in B2B supplies as from 1 January 2025.
An e-invoice is an invoice that is issued, transmitted and received in a structured electronic format that allows for electronic processing. The current proposal in Germany takes the new EU e-invoicing rules into account (for prior coverage, see the article in the January 2023 issue of Indirect Tax News). These rules will allow member states to introduce e-invoicing requirements as from 1 January 2024 provided the requirements are in line with the relevant EU standard (i.e., EN 16931).
Covered taxpayers and how the system would operate
Under the proposal, taxable persons established in Germany would be required to issue e-invoices for B2B supplies of goods and services in Germany and that are subject to VAT in Germany. Still under discussion is whether fixed establishments of foreign established taxable persons would have to issue e-invoices for supplies that are taxable in Germany; this presumably would be the case under a strict interpretation of the proposal.
Hard copies or PDF versions of invoices would be able to be prepared in addition to e-invoices.
Based on the current proposal, a platform operator (whether public or private) would have to validate an e-invoice before issuing it to a B2B customer and provide specific information on the transaction to the German tax authorities. However, before an e-invoice could be sent, the data in the ERP system would have to be converted into an e-invoice based on the EU e-invoicing standard. This could necessitate upgrades or add-ons to ERP systems or separate mechanisms to convert the data into an e-invoice.
Status of discussion and next steps
There are open questions about the implementation of e-invoicing, and at the time the Ministry of Finance presented the proposal, it requested feedback from relevant associations and industry by May 2023, in particular, on whether:
- The proposed timeline (introduction of e-invoicing as from 1 January 2025) is feasible for affected entrepreneurs or whether the e-invoicing requirement should be phased in, especially for small and medium-sized enterprises; and
- Exceptions are necessary, especially with respect to small-value invoices or travel tickets.
The government will review the feedback submitted and intends to publish a legislative proposal to amend the German VAT law sometime this summer.
Entrepreneurs should review the current (and any future) proposal to determine whether they will be affected by the rules, whether their ERP systems and/or other internal processes (such as procurement and sales, finance and accounting, etc.) will require modification or updating to comply with the e-invoicing requirements.
BDO in Germany