Reading time approx. 6 minutes
The best thing first: On March 22, 2024, the way was cleared for the Growth Opportunities Act (WCG) and thus also for mandatory e-invoicing. After a long struggle between government and opposition parties over the feasibility and the actual amount of relief, the Federal Council gave the green light for implementation. This decision means that a significant innovation will come into force in 2025: receiving electronic invoices will be mandatory for domestic German business transactions in the B2B segment. Although the focus is initially on the pure Reception lies, this fundamentally also implies the necessity of shipping such invoices (a corresponding obligation for companies with an annual turnover of over 800,000 euros will take effect from 2027). It seems unrealistic that companies would simply switch to receiving such invoices without sending them themselves. Although the shipping obligation will only take effect from 2027, it opens up the opportunity for companies to use the advantages of digital invoicing more efficiently than before. This leads to cost savings, especially given rising postage costs and paper prices. Invoice transmission is also accelerated, to name just a few of the benefits. It should be noted that companies according to the European standard EN 16931 and the Directive 2014/55/EU must use standard-compliant formats such as XRechnung or ZUGFeRD.
Alarm, alarm… or not?
As practical as this all sounds for companies of all sizes and industries, the anticipated changeover burden is causing concern in many companies. Why? Well, ultimately there is a risk of complex changes to the invoice. In addition, various associations complain about the enormous financial costs that such a reorientation means, especially for small businesses. But what does an e-invoice actually mean? Can it be equated with the PDF invoices that are currently often sent by email? No! An e-invoice is more similar to a structured Excel file: it can be read directly by machine. This means that error-prone text recognition using OCR in incoming invoices is a thing of the past. A PDF invoice may be digital, but it does not meet the specific requirements of an e-invoice with structured data.
Why just this simple data structure? The primary reason for the introduction of the e-invoicing requirement is the EU requirement that in the future tax reporting to the tax authorities should be done electronically – almost in real time – directly from the invoice. The medium-term goal is to close the VAT gap. Germany is addressing this issue in two phases, with electronic invoice exchange being the first step. The second step is planned for 2028. The German approach aims to reduce complexity or at least extend it over time, which has been positively received by business, associations, financial authorities and service providers.
Companies that still create invoices using Word, Excel or similar programs should quickly seize the opportunity and arm themselves digitally. One thing is clear: the mandatory switch to e-invoices in the B2B segment confronts numerous companies with technical and financial challenges. It is often unclear which steps are necessary for the changeover and in what order. This text article also provides practical guidelines for the successful transition from paper and PDF invoices to e-invoices. Reach your destination safely in just five stages.
Stage 1: Build expertise
Every company subject to tax in Germany that supplies or buys from companies based in Germany must familiarize themselves with the local regulations and the upcoming e-invoicing requirement. From 2025, the requirement for consent to receive real e-invoices will no longer apply. It is therefore essential to be technically capable of not only receiving e-invoices, but ideally also being able to process them. This not only affects accounting, but also IT managers who have to create and manage the technical requirements for receiving and processing e-invoices. This includes both the required hardware and infrastructure as well as the corresponding software solutions. At the management level, this means acquiring knowledge and releasing the necessary budgets.
As with many changes, there are transition periods when introducing e-invoicing. The first deadline ends in 2026, at least for companies with a turnover of over 800,000 euros (in 2026). Until then, paper invoices and digital invoices are still equally permissible, even if they do not meet the specific requirements of the aforementioned EN 16931 standard. Even simple PDFs are still allowed during this period. The second transition period for the “EDI” procedure (short for Electronic Data Interchange – i.e. electronic exchange of business documents) ends for companies in 2027.
Caution: It should be noted that sending digital formats that do not conform to EN 16931 requires the consent of the recipient from January 1, 2025.
Fig. Matrix of the transition periods for B2B invoice dispatch within Germany
The passed law stipulates that digital invoice formats that contain the necessary structured data fields and are interoperable in accordance with EU standards will also be accepted beyond 2028. In this case, the consent of each invoice recipient is also required.
Stage 2: Conduct an inventory
It is important to record and analyze the current customer or supplier structure with regard to invoice exchange in order to determine the need for action for each format.
With an eye on the future and international invoicing, it is advisable to simultaneously check which countries invoices should be sent to – both currently and in the coming years. In B2B, the obligation to use e-invoices is mostly related to national transactions. Although everyone in the EU must adhere to the European standard EN 16931, there are national variations regarding formats and transmission channels.
A list for analyzing the actual invoice volume can be helpful here.
Fig. Table for analyzing the actual invoice volume in shipping
Stage 3: Integration into the system landscape
IT managers face numerous challenges when implementing legal and technical requirements. First, it must be clarified which systems and interfaces are relevant for sending and receiving invoices. It is important to choose a solution that supports the transition to the new requirements, taking into account usability, integration into existing systems, security features and compliance.
We recommend: Check your own system landscape (ERP, DMS, archive, etc.) for its performance in terms of creating and receiving EN 16931-compliant invoices.
Stage 4: Checking the invoice contents
Invoices are essential documents for business customers and suppliers. They must therefore meet strict content guidelines and contain all mandatory fields according to Section 14 of the Sales Tax Act. Compliance with the EU standard EN 16931 is intended to ensure that invoices are complete and error-free in order to avoid delays in payment or problems with input tax deduction. E-invoices that do not pass EN 16931 validation on the part of the recipient will usually be rejected immediately.
Stage 5: Develop communication strategy
Early coordination with customers and suppliers about the new invoice exchange is essential. Those involved in the process – internal employees or external employees from your IT partners – also contribute to smooth implementation in your own company. The introduction of e-invoicing offers the opportunity to optimize operational processes through digitalization or even automation.
Overall, this guide offers a practice-oriented approach to successfully mastering the transition to e-invoicing and fully exploiting the associated benefits.