Germany Gears Up for E-Invoicing with a Phased Approach (2024)

By Ioana Ploesteanu, Product Marketing Manager, Tradeshift

e-Invoicing in Germany: a Phased Approach to Digital Transformation

E-invoicing in Germany is following suit with other European countries, including Romania, Poland, and France by transforming its business landscape with the upcoming adoption of an e-invoicing mandate. This move towards digitalization aims to streamline processes, enhance tax efficiency, and foster innovation within the B2B sector.

Let’s delve into the details of the German e-invoicing mandate, exploring its context, key dates, and implications for businesses.

Paving the Way for Digital Invoicing

Prior to the B2B e-invoicing mandate, Germany had already adopted e-invoicing for B2G transactions (businesses to government) starting in April 2020. This initiative, aligned with the European Directive 2014/55/EU, paved the way for a broader shift towards digital invoicing.

So far, the B2B sector has remained largely reliant on paper-based invoices. While some businesses have adopted electronic invoicing (e-invoicing) for internal efficiency, it has yet to be universally mandated. This traditional system often led to manual data entry, delays in processing, and increased risk of errors. Recognizing the potential benefits of e-invoicing, the German government introduced the mandate as part of the “Growth Opportunities Law” (Wachstumschancengesetz) in March 2024.

The new German B2B e-invoicing mandate will offer a more streamlined and automated approach, fostering faster processing times, reduced costs, and improved transparency for both businesses and tax authorities.

Key Dates and Requirements for Germany B2B e-Invoicing Mandate

The German government is implementing the e-invoicing mandate in a phased approach, allowing businesses time to adapt and prepare their systems. Here’s a breakdown of the key dates and phases:

• January 1, 2025: All German businesses, regardless of size, must be equipped to receive e-invoices in a structured electronic format compliant with the European standard EN 16931. While issuing paper invoices remains technically possible, it requires the recipient’s consent. This period serves as a transition phase, encouraging businesses to embrace e-invoicing while allowing for some flexibility.
• January 1, 2025 – December 31, 2026: A coexistence of paper and electronic invoices is permitted during this period. Businesses can still issue paper invoices with recipient consent. However, this window encourages businesses to adopt e-invoicing solutions and streamline their processes in preparation for the mandatory issuance phase.
• January 1, 2027: This is a critical date for businesses with an annual turnover exceeding €800,000. These businesses will be legally obligated to issue e-invoices in a structured electronic format. This ensures a larger segment of the B2B landscape adopts e-invoicing, fostering greater efficiency and data exchange within the business ecosystem.
• January 1, 2028: This marks the final stage of the mandate. All German businesses, irrespective of their turnover, will be required to issue e-invoices. This ensures complete standardization and streamlines B2B transactions across the board.

What to Expect from the New Tax Model?

The German B2B e-invoicing mandate doesn’t simply dictate the format of invoices. It signifies a broader shift towards a digital tax model with several key implications:

• Structured Data: The mandate emphasizes structured electronic invoices, which go beyond simple PDFs. These invoices contain machine-readable data that can be automatically processed by accounting software, eliminating manual data entry and streamlining processes.
• Standardized Format: The EN 16931 standard ensures data consistency across invoices. This allows for seamless electronic exchange between businesses and facilitates interoperability with different accounting systems. XRechnung is the format that will be used for e-invoices in Germany. This format is a purely electronic invoice with no paper counterpart. It’s specifically designed for e-invoicing in Germany and adheres to specific technical specifications that comply with the EN 16931 standard.
• Focus on Efficiency: E-invoicing promises faster processing times, reduced administrative costs, and improved accuracy. Businesses can expect quicker invoice settlements and enhanced cash flow management.
• Tax Simplification: The German government anticipates that e-invoicing will simplify tax administration and compliance. Real-time data accessibility could potentially enable more efficient tax audits and potentially lead to a reduction in tax errors.
• Enhanced Transparency: Electronic invoices provide a clear audit trail, allowing tax authorities to efficiently monitor transactions and combat tax evasion.
• Improved Cash Flow: Faster processing of invoices translates to quicker access to payments for suppliers, improving cash flow management.
• Reduced Costs: Digitizing invoices eliminates the need for paper-based processes, saving on printing, storage, and postage costs. Additionally, streamlined data processing reduces human error and the associated costs for corrections.

Preparing for the E-Invoicing Mandate for Both Buyers and Sellers

As the deadlines approach, businesses operating in Germany, regardless if they are buyers or sellers, should take proactive measures to ensure compliance and:

• Receive compliant invoices: As a buyer, implementing an e-invoicing solution that ensures early compliance with the mandate is crucial. Businesses investing in e-invoicing and AP Automation solutions, like Tradeshift Pay, for which complying with regulations is “business-as-usual”, gain a significant advantage. By investing in Tradeshift Pay, businesses ensure compliance with Germany’s e-invoicing mandate from day one. They can receive compliant invoices from their suppliers through various channels like email, system integration, or the supplier portal, all while gaining improved operational efficiency, better data visibility, and enhanced collaboration with trading partners.
• Send compliant invoices: Depending on what invoice management systems you are currently using, you might need to update your internal processes for e-invoice creating and sending. As a seller, you’ll have to create invoices in the XRechnung required format and clear them through the government system before sending the invoices to your buyers via their dedicated channels. With best-in-class solutions, like Tradeshift Pay, you don’t have to worry about clearing the invoices before sending them to your buyers. Our platform manages the clearance flow for you, fosters collaboration between you and your buyers, and offers you an easy way to onboard from the first invoice you send, and to communicate and enrich documents for a faster transaction process.
• Communication between Trading Partners: While businesses should maintain their own compliance updates, fostering open communication with trading partners strengthens relationships and streamlines the process. Sharing information on upcoming regulatory changes demonstrates collaboration and allows for a united front in meeting government requirements. Business networks specializing in compliance can be invaluable partners, optimizing accounts payable (AP) and receivable (AR) efficiency.

The German e-invoicing mandate presents a unique opportunity for businesses to embrace digitalization and unlock a range of benefits. By understanding the phased approach, familiarizing themselves with the new tax model, and taking proactive steps towards compliance, businesses can navigate this transition smoothly and reap the rewards of a streamlined and efficient B2B invoicing system. Sometimes it is not easy to do all of this alone, but that’s why we are here to help. Ask us how to become compliant.