Germany has initiated a phased mandate for B2B structured e-invoicing starting this year, first requiring businesses to be capable of receiving e-invoices.
The next significant milestone is set for 2027, when suppliers will be required to issue e-invoices for in-scope transactions. It is important to note that there will be no live transaction e-reporting in place until the implementation of EU ViDA digital reporting in July 2030.
Key Developments
June 2025: Consultation on E-Invoicing Second Draft
On June 25, 2025, the German Ministry of Finance released a second 'letter' outlining the rules and processes for the mandatory implementation of B2B e-invoicing set to take place between 2025 and 2028. This phase commenced on January 1, 2025, and the new draft incorporates insights gained during the initial six months of the mandate, clarifying definitions and usage as follows:
Validation of e-invoices must comply with the EN16931 standard.
Updates on requirements for small businesses and low-value e-invoices.
Clarifications for the construction sector regarding corrections.
Specific rules for hybrid e-invoices, indicating they are subordinate to XML formats.
Confirmation that VAT deductibility applies only to the machine-readable components of invoices.
The consultation period will remain open until mid-August, with a revised final letter to be published before the end of 2025.
Initial Requirement to Receive B2B Structured E-Invoices (January 2025)
Effective January 1, 2025, Germany’s Ministry of Finance initiated the first phase of mandatory B2B e-invoicing, which applies to businesses established in Germany as well as foreign companies with a fixed establishment in Germany.
The transition from 2025 to 2028 will culminate in all resident businesses exchanging structured e-invoices, compliant with EN16931 or similar standards, for domestic transactions. Importantly, there is currently no obligation for businesses to report to tax authorities or obtain pre-approval.
Since January 1, 2025, suppliers may choose to issue e-invoices, and customers must be prepared to accept them. According to the Ministry of Finance, the minimum requirement for receiving e-invoices is the provision of an email inbox. Alternative electronic data exchange methodologies may also be agreed upon by the involved parties.
Overview of Germany's E-Invoicing Requirements
Germany's e-invoicing requirements are being established under the 2024 Growth Opportunities Act (Wachstumschancegesetz) and further supported by a final letter issued in October, which updated a draft released in June.
E-Invoice Issuance Requirements
Sales structured e-invoices are mandatory for taxpayers established in Germany. For instance, if a German resident taxpayer sells goods domestically, within the EU, or for export, they must issue a compliant e-invoice. Foreign businesses with a German fixed establishment, such as leased warehouse space, are also subject to these requirements.
All German resident businesses must be equipped to receive e-invoices starting January 1, 2025. Non-compliant e-invoices will not be eligible for customer deduction without a further application to the tax authorities. E-invoices must be securely retained for eight years, while other accounting records must be held for ten years.
Exclusions from E-Invoicing Requirements
The following transactions are exempt from e-invoicing and may continue to utilize paper or PDF formats:
Foreign suppliers without a German establishment.
Simplified invoices (below €250).
Travel tickets.
Micro businesses (with annual sales below €100,000 in 2025), which are only required to receive e-invoices.
B2C transactions.
VAT-exempt transactions.
Acceptable E-Invoice Formats
Germany mandates that e-invoices be machine-readable, adhering to the Directive 2014/55/EU (CEN format EN 16931) standard. Acceptable formats include:
XRechnung
ZUGFeRD 2.0.1 or later hybrid formats
Other recognized formats, such as French Factur-X or Peppol BIS
EDIFACT protocol, provided it complies with EU16931
Invoice attachments, contracts, or similar documents may also be included, beyond the minimum requirements for German VAT invoices.
Approval of Mandatory German E-Invoicing
On July 25, the Council of the European Union approved the European Commission's request to introduce mandatory B2B domestic VAT e-invoicing in Germany. This approval allows Germany to implement real-time e-invoicing.
Backed by the EU Commission in June, this request authorizes Germany to derogate from the EU VAT Directive's requirement for paper-based invoices. The permission for e-invoicing will remain in effect until the end of 2027, at which point there will be a further review.
How Can KGT Support You?
KGT has created an SAP-integrated e-invoicing add-on solution for Germany, featuring outbound and inbound functionalities to meet tax reporting requirements. This add-on includes a data extractor and a cockpit for generating periodic electronic invoices in the legal format and controls before submission. When SAP DRC launched the German e-invoicing solution as part of its e-document offerings, KGT emerged as a leading consultancy firm for SAP DRC and tax services. Recognized as an SAP DRC partner for German e-invoicing services, KGT is one of SAP's recommended implementation partners for this solution. We provide comprehensive support, including installation, configuration, customization, and training, to help you maximize the long-term value of your SAP DRC investment.
KGT is an SAP partner for PE services and an SAP Build partner, and to become an SAP partner, strict due diligence requirements must be met, including having certified SAP consultants. You can find us at: https://partnerfinder.sap.com/profile/0001925409
