Germany – Introduction of B2B Electronic Invoicing

Last March, the Federal Council approved the Growth Opportunities Act, which, driven by the Government’s goal to enhance the quality of services within the digital business environment, introduced the plan for gradually implementing e-invoicing and digital reporting in the country. 

The German government has been working continuously for some time now on the plan to mandate B2B electronic invoicing for domestic taxpayers. The push for the mandate is twofold: from one side, it has been seen as a necessity to shift from the traditional paper-based invoicing system to a more developed one. From another perspective, the common EU-wide framework for digital reporting is developed as part of the ViDA reform. 

Government officials see an additional benefit for taxable persons who will be covered by the VAT reporting requirements in the Digital Age modernization project based on the possibility of introducing both mandates within a short timeframe. 

Timeline of New Requirements

The Growth Opportunities Act sets a clear timeline for adopting electronic invoicing in Germany. The mandate will be introduced gradually, in a few successive phases, shown below accordingly: 

• January 1, 2025 – Taxable persons with a permanent establishment in Germany should be prepared to receive e-invoices if the supplier generates and submits a structured e-invoice to its counterparty 
• January 1, 2027 – Taxable persons with a turnover above EUR 800,000 should issue exclusively electronic invoices
• January 1, 2028 – All domestic taxable persons should be able to issue, receive, and store electronic invoices 

Impact on Taxable Persons

The implementation of countrywide E-invoicing reform and later digital reporting requirements undoubtedly show the government’s will to reinforce the quality of the tax monitoring tools available to the tax authorities. 

Evidence shows that the countries that have introduced electronic invoicing and digital reporting requirements have benefited exponentially from reducing the national VAT gap and struggling to identify the taxable persons operating non-compliantly. 

This is one of the main reasons global countries have adopted digital reporting channels. We shouldn’t forget the almost equally important advantage of this change: the willingness to elevate the quality of the invoicing process, making the invoicing lifecycle cheaper, more efficient, and transparent for all participants. 

Resident taxable persons in Germany should prepare for this mandate within the stipulated timeframe. Implementing the IT processes and training personnel takes time, so it’s better to start as soon as possible so that additional time is available if something doesn’t go as planned. 

Modernizing the invoicing system in Germany’s business environment represents a strong move towards digitalization, reinforcement of tax reporting channels, and VAT compliance in general. A project of this magnitude will require essential investments in both the public and private systems. Still, the benefits that will be obtained in the long term undoubtedly outweigh the initial costs. 

The taxable persons that are part of the e-invoicing reform should start with preparing to introduce the new system at the proper time and definitely shouldn’t wait until the last minute because, in the end, it’s not a simple update of the accounting system.