E-Invoicing possible from 1 January 2025: Implementation of E-Invoicing – the interdisciplinary approach

published on 8 May 2024 | reading time approx. 7 minutes

E-Invoicing is an interdisciplinary topic, which requires a uniform, interdisciplinary, highly tailor-made implementation strategy for the entire incoming and outgoing invoice process. There are only a few months left until 1 January 2025 – optionally already – to implement E-Invoicing for Germany and to think about suitable strategies. It should be borne in mind that future handling is not only dependent on the taxable person itself, but also on the invoicing process/ IT specifications and its position in a supply and service chain, i.e. there is also a dependency on customer wishes and the approach of its suppliers/ service providers.

Implementation of E-Invoicing – the interdisciplinary approach »
Need for action in Germany and the EU »
Implementation strategies – a bunch of reflections and ideas »
Update Germany: E-Invoicing possible from 1 January 2025 or possibly unavoidable in invoice receipt »
Timetable and transitional arrangements for E-Invoicing in Germany »
E-Invoicing and some single queries »

Implementation of E-Invoicing – the interdisciplinary approach

The topic E-Invoicing qualifies as an interdisciplinary issue for us, which requires a standardised, but interdisciplinary implementation strategy in our view. We have put together our team members concerning this topic and offer our respective consulting approach profiting from the experience of various teams: e.g. specialists of our VAT/tax advisory services as well as experts from our business line process consulting and IT consulting for E-Invoicing projects. We also recommend a work force consisting of similar disciplines to be implemented on side of our clients.

In our opinion, understanding and approaching the topic purely as a VAT topic or purely as an IT topic is too narrow. In any case, we recommend taking a comprehensive approach by performing a readiness check in the company in a first step and identifying any to-dos for the company to establish the conditions for the implementation of E-Invoicing in the future in a second step.

Nevertheless, an individual and tailor-made implementation strategy for each taxpayer and client is crucial for us, as there are industry or size-related differences in the company's internal priorities and circumstances, such as the incoming and outgoing invoice process, the existing IT system and ERP structure, the teams affected by the invoices and the previous handling of electronic invoicing etc.

In our Rödl & Partner E-Invoicing task force, a wide range of disciplines work hand in hand on the subject “E-Invoicing": VAT specialists who are available to advise on the respective (planned and in some cases already implemented) regulations in Germany and other EU Member States or third countries. We advise together with IT colleagues, colleagues from the Digital Tax Transformation team and our Rödl Consulting service line consisting of IT consultants with specialisations in the various ERP systems, such as SAP® or Microsoft Dynamics®; moreover, audit colleagues and process consultants are also involved, who keep an eye on the bookkeeping requirements, process documentation, archiving and reproducibility of XML data records, etc.

Need for action in Germany and the EU

There are only a few months left to implement E-Invoicing in Germany and develop suitable strategies. It should be kept in mind that the future handling of the topic E-Invoicing is depending on the taxpayer itself, but also on its position in a supply and service chain. The whole invoicing process / specifications are also depending on customer wishes and the approach of respective suppliers and service providers.

In addition to Germany, many other EU countries are in the process of introducing a local E-Invoicing system: Romania has already introduced a systems since 1 January 2024, Poland probably now from 2025 on, Belgium from January 2026, Spain with corresponding drafts available from 2023, France from September 2026. According to the EU Commission's current plan, all EU Member States will have to gradually introduce a reporting system for EU cross-border supplies of goods and services in the EU by 2028 or 2030 / 2032. It is therefore not only necessary to have a look on national VAT and IT requirements, but also to carry out a certain monitoring and coordination of foreign countries. By the way it has to be mentioned that a local E-Invoicing system has already been successfully implemented in Italy for years.

Implementation strategies – a bunch of reflections and ideas

Depending on the current status of the implementation of processes for electronic invoices and invoice transmissions as well as other circumstances in the company, the time and resources necessary for the implementation of E-Invoicing, e.g. simply to process E-Invoices internally and communicate with debtors and creditors, can be very different. The process could also be very time consuming.

Keeping in mind the legal changes regarding E-Invoicing, we believe it is important to act quickly in order to implement the necessary technical requirements for processing outgoing invoices and, in particular, incoming invoices in the company from January 2025 onwards.

It is crucial to review the IT infrastructure and internal processes and ensure that E-Invoices can be processed in XML format in accordance with the EU standard EN 16931 (with the corresponding syntaxes) and that incoming E-Invoices can therefore be received from 1 January 2025 on. In particular, input VAT deduction from incoming E-Invoices should not be jeopardised in the short term.

The obligation to issue E-Invoices on the outgoing side will apply from 1 January 2028. Until then, invoices can also be transmitted and issued in accordance with existing law via paper invoices or, with the customer's consent, via other formats (e.g. PDF), as it was previously done. Further exceptions also apply from 2027 on for EDI invoices with customer consent and companies with a previous year's turnover of up to 800,000 Euros. Nevertheless, individual customers or customer groups may request E-Invoices from taxpayers at an earlier date, meaning that it is also advisable to react quickly on the outgoing side.

At the same time, the E-Invoicing can be seen as “Digital Driver” and used as an opportunity to (re-)think ahead digitally and to (re)use internal company processes for VAT purposes in terms of data management with options for simulation and the design of index XML. This will lead in the end to subsequent resource savings in the internal process chain. The topic of implementing an E-Invoice is not a stand-alone issue but linked per se to the entire invoicing process (incoming and outgoing) and the associated payment process for these transactions and supplies, which in turn are linked to orders and further accounting, data evaluation and analysis, among other things.

Implementation is therefore recommended in an interdisciplinary, quickly processed, forward-looking and future-oriented manner with an international perspective.

The following topics need to be addressed, for which we will provide you with customised support, e.g.:

country evaluations on VAT, procedural and technical requirements by means of training courses and workshops on country-specific impact analyses;
E-Invoicing readiness checks across the entire system and process landscape;
support and advice in checking and selecting software and software providers, setting up processes, optimizing incoming and outgoing invoices if necessary, in connection with orders and accounting as well as liquidity controlling;
support on procedural documentation and control procedures;
a “certification” of the entries in the system of the respective country requirements for an E-Invoice and / or a Digital Reporting Requirement by our audit colleagues.

An overview of the areas and topics to be considered:

Update Germany: E-Invoicing possible from 1 January 2025 or possibly unavoidable in invoice receipt

On 22 March 2024, the German Parliament approved the so-called Wachstumschancengesetz (aka “Growth Opportunities Act”) in the latest draft from November 2023. With the exception of changes to the transitional periods for outgoing invoices, no further adjustments have been made to the draft from November 2023.

The key facts for you and your implementation projects:

New definition of an invoice, in this case an E-Invoice, based on the ViDA proposal of EU Commission using the EN 16931 standard (Directive 2014/55/EU of 16 April 2014)
Deletion of the priority of paper invoices in Section 14 para. 1 sent. 7 German VAT Act
Combining paper invoices and electronic invoices that do not fulfil the requirements of the new E-Invoice under a new term "other invoice"
Restructuring of the obligation to issue invoices in Section 14 para. 2 German VAT Act in order to be able to describe B2B invoices in future
Restriction of E-Invoicing to domestic B2B transactions, i.e. supplies taxable in Germany between two taxable persons resident in Germany
Determination of residency in Germany, e.g. in the case of seat, registered office, place of management or VAT permanent establishment in Germany; not yet in the case of registration for VAT purposes of foreign entrepreneurs in Germany
Exceptions for so-called low-value invoices up to 250 Euros (gross invoice amount) and tickets / invoices for passenger transport services-Transfer of the statements on the authenticity of the origin of the invoice, the integrity of the content and its legibility; we assume that this also refers to the corresponding passages in the VAT application decree of the German Federal Tax Authority (UStAE) under Section 14.4. These basic guidelines should be followed when implementing the electronic invoice in the electronic XML format, which also provide information on how an internal control procedure should be set up

Timetable and transitional arrangements for E-Invoicing in Germany

Beforehand one letter dated 2 October 2023 of the German Federal Tax Authority (ref. III C 2 - S 7287-a/23/10001:007) was circulated and it was already pointed out that the receipt of such an invoice in XML format must potentially be possible from 1 January 2025 onwards:

"If the invoice issuer decides to use an electronic invoice, the invoice recipient must therefore also accept it."

There are currently no plans for a standardised electronic reporting or clearing system in Germany, such as in Italy, France, Romania or Poland; however, the government / tax authorities are still considering a so-called clearing system, where each invoice is routed via a platform with access by the tax authorities before “forwarding” them to the customer. According to the tax authorities, this will also be necessary in Germany at the latest when the EU requirements for reporting EU cross-border supplies will be implemented.

E-Invoicing and some single queries

There have been no changes to the requirements or to any “sanctions” currently regulated in the German VAT Act for incorrect invoicing and timely invoicing. The E-Invoice must therefore be issued within six months after the supply of goods or other services being performed.

According to the definition, E-Invoices must always be issued between two taxable persons resident in Germany and the supply has to be taxable in Germany. With the exception of some VAT exempt supplies (i.e. supplies which are VAT exempt in accordance with Section 4 No. 8-29 German VAT Act), it is not decisive whether the transaction is VAT exempt or not and who bears the VAT liability in the case of taxable supplies.

In particular, the invoicing obligation also includes, in addition to regular supplies to be invoiced with German VAT, VAT exempt intra-community supplies between two German resident taxable persons and supplies for which the VAT liability is transferred to the recipient of the supply in accordance with Section 13b German VAT Act (so-called reverse charge).