The adoption of the EU Directive 2014/55/EU of 16 April 2014 (the 'E-Invoicing Directive') made the use of electronic invoicing during public procurement mandatory. An 'electronic invoice' means an invoice that has been issued, transmitted, and received in a structured electronic format, which allows for its automated processing.
The 'core elements of an electronic invoice' are essential information components that an electronic invoice must contain to enable cross-border interoperability, including the necessary information to ensure legal compliance. The core elements of an electronic invoice are, among other things:
- process and invoice identifiers;
- the invoice period;
- seller information;
- buyer information;
- payee information;
- seller's tax representative information;
- contract reference;
- delivery details;
- payment instructions;
- allowance or charge information;
- invoice line item information;
- invoice totals;
- VAT breakdown.
Member States have implemented the 'E-Invoicing Directive' into their national law.
Germany: e-invoicing and public procurement (B2G)
Public bodies are the federal, regional, and municipal administrations and energy companies, schools, and hospitals. Starting 27 November 2020, all public contractors that issue invoices to the federal administration must submit an electronic invoice.
No deadlines are yet set for issuing e-invoices by contractors to state governments, and local authorities. Every state defines its own rules.
The federal government's E-Invoice Regulation specifies that a supplier issues an e-invoice in "XRechnung," a format developed by the German Coordination Office for IT Standards (KoSIT). XRechnung is an XML-based invoice format. The existing XRechnung standard only allows two XML formats, either UBL or UNCEFACT/CII, to transmit electronic invoices. It is also possible to use other data formats such as Zentraler User Guide des Forums elektronische Rechnung Deutschland (ZUGFeRD).
The ZUGFeRD is a hybrid electronic invoice format. ZUGFeRD has two components: a PDF file and an embedded XML file. ZUGFeRD is based on the international UN/CEFACT standard Cross Industry Invoice (CII) and the ISO standard PDF/A-3, and It is compliant with the European standard EN 16931. That standard regulates the requirements for electronic invoices for B2G. The latest version ZUGFeRD 2.1 complies with EU Directive 2014/55/EU and the German E-Invoice Regulation.
Severe penalties are levied for non-compliance starting November 27, 2020.
The standard SAP solution
SAP developed the SAP Document Compliance solution with an integrated SAP eDocument cockpit) for customers who have to meet global legal requirements, including electronic invoicing or fiscal regulations. The SAP solution can create and send an XRechnung XML file to public contractors in Germany. The SAP solution extracts the invoice data.
It is subsequently converted into the required XML format and sent as an XML file to the recipient (public contractor). That could take place via PEPPOL (Pan-European Public Procurement Online).
What do we offer?
KG can support you in implementing the SAP Document Compliance solution and guarantee that your SAP ECC or SAP S/4HANA system will comply with the German B2G E-Invoicing Regulation provisions. The implementation support will result in that you meet all German XRechnung requirements.
As an alternative, we are in our R&D phase to develop an SAP add-on with a local SAP partner. That can be done efficiently and effectively due to our e-invoice experience and SAP add-ons launched, such as India, Spain, and Hungary.
What is an SAP add-on?
An SAP add-on enhances standard SAP itself.
Add-on components are extra functionalities that do not come with the main SAP product. Different organizations have different requirements. SAP has recognized that and facilitated that additional functionality can be added and that such functionality as a component can be integrated with Standard SAP.
An add-on is permitted by SAP – the code 'ABAP' is written and transported where SAP allows it. That means these add-on components sit above the core and access the same dictionary objects or repository objects and perform the required functionality. It contains custom authorization objects according to SAP standards.
SAP add-on solutions are, therefore, without an external interface or external software and can be implemented with minor or no SAP impact in any other area. An SAP add-on does not change the programming code of SAP. As a result, SAP upgrades do not lead to any problems, and maintenance is straightforward. Additional functionality is added to Standard SAP.
Written by Richard Cornelisse
Richard advises multinational businesses in improving the efficiency and effectiveness of their Indirect Tax Function and Tax Control Framework.
He started his career as a manager at Arthur Andersen and then became a partner in EY where I led the indirect tax performance team for Netherlands and Belgium. Currently, he is a senior managing director of KEY Group.
Richard has over 20 years’ experience advising clients on international VAT issues. He is specialized in the tax aspects of financial transformations, shared service center migration, and post-merger integration work. Richard is also somewhat of a mentor, giving back to the profession. If you are interested in conversation and discussion, please feel free to contact him.