Author: Lukas Landstorfer, tax advisor
#Sales tax # Limited liability company #Tax law #Entrepreneurs #E-invoicing #Digitization
Mandatory e-billing from 2025: What companies need to know now
With the launch of mandatory e-invoicing on January 1, 2025, Germany is taking a major step toward digitizing its accounting system. Entrepreneurs, finance departments, and decision-makers must prepare for the fact that paper-based or simple PDF invoices will no longer suffice in the long term. This guide clearly explains what is changing, what transition periods apply, and what requirements companies will have to meet in the future.
The Federal Ministry of Finance addressed the topic of e-invoicing in a letter dated October 15, 2024 (link).
Why is the legislator introducing e-billing?
The aim is to modernize and simplify the German economy and financial administration:
- Invoice data will no longer need to be entered manually in the future.
- Errors caused by duplicate entries are reduced.
- Accounting processes can be automated and accelerated.
- Companies benefit from time and cost savings.
But also: The use of e-invoicing will make invoicing more transparent for the tax authorities and prevent tax evasion.
What will be considered an e-invoice from January 1, 2025—and what will not?
From 2025 onwards, a distinction must be made between two types of invoices.
- e-invoices
- Other invoices (e.g., in paper form, PDF, or as an email)
Until the end of 2024, any invoice sent electronically, such as a PDF attached to an email, is considered an "e-invoice." However, starting in 2025, this will no longer be sufficient.
From then on, an e-bill will only be valid if you:
- is issued in a structured electronic format (XML file), (example)
- is transmitted electronically,
- enables automated processing.
Since e-bills are essentially just data records with fixed logic, they are not readily readable by the human eye.
This requires visualization applications or a hybrid file format such as ZUGFeRD version 2.0.1 or higher.
When using hybrid file formats, the structured electronic data record is decisive for input tax deduction. It depends entirely on the XML file and that the invoice details in accordance with Section 14 (4) of the German Value Added Tax Act (UStG) are correct and must be included.
However, if the embedded PDF in ZUGFeRD format contains, for example, an excessive sales tax amount, the tax statement is incorrect and the entrepreneur still owes the additional amount, even though the XML data record is correct.
Important: Since 2025, domestic entrepreneurs have been required to be able to receive e-invoices. In practice, receipt by email is sufficient, but other transmission methods such as electronic interfaces or downloads via internet portals are also permitted.
Who is required to issue e-invoices?
Every entrepreneur in Germany who provides VAT-liable transactions or tax-exempt services in accordance with Section 4 No. 1 to 7 of the German VAT Act (UStG) to entrepreneurs or legal entities under public law based in Germany (B2B) is obliged to issue e-invoices.
Foreign companies that are registered for sales tax purposes in Germany but do not maintain a permanent establishment are not subject to the e-invoicing requirement.
It is not necessary to issue e-invoices to private individuals, entrepreneurs and their private sphere, associations for the non-business sector, or service recipients residing abroad.
Examples
mandatory e-billing
- Domestic B2B sales (other services or deliveries)
- tax-free intra-Community supplies
- Cash purchases from businesses over EUR 250*
No e-invoicing obligation
- tax-free export delivery to a third country
- Invoices to end consumers (B2C)
- tax-free rental of real estate
- Small invoices up to EUR 250 gross
- Small business owners (but the obligation to receive invoices remains)
*Applies only if the invoicing party cannot or does not wish to make use of the transitional rules.
What information must an e-bill contain?
In order for an e-invoice to be valid and allow input tax deduction, it must contain the mandatory VAT information specified in Section 14(4) and Section 14a of the German VAT Act (UStG).
Mandatory sales tax information:
- Name and address of the performing entrepreneur
- Name and address of the recipient of the service
- Tax number or VAT identification number of the supplying entrepreneur
- date of issue
- invoice number
- Quantity and type (commercial designation) of the delivered items or the scope and type of other services
- applicable tax rate
- Net amount of individual benefits
- Tax amount (total sales tax payable)
If the e-invoice is sent by email, additional information such as time sheets may also be sent as a PDF file (Section 14 (1) sentence 3 in conjunction with Section 31 (1) UStDV).
Providing supplementary information via a link is not permitted, as accessing the information in a browser does not constitute an invoice or e-invoice.
What needs to be considered with regard to input tax deduction?
If a regular invoice was issued even though an e-invoice was required, input tax deduction is not possible. According to the BMF letter (margin number 57), a retroactive correction is possible if an e-invoice is created that refers to the regular invoice.
Until the end of 2027, issuing invoices in the wrong format will not cause any harm if the invoice recipient can assume that the invoice issuer is claiming the transitional provisions (margin number 59).
What transitional arrangements are in place?
Many people are wondering when the regulations for e-billing will have to be implemented. The obligation to use e-billing will be introduced gradually.
It should be noted that, in the case of a VAT group, the total turnover of the group must not exceed the threshold of EUR 800,000 in order to be allowed to continue using other invoices until 2027.
How long must e-invoices be retained?
Since e-invoices are accounting documents, they must be retained for eight years (Section 147 (3) of the German Fiscal Code (AO)).
As a rule, the period begins at the end of the year in which the annual financial statements were prepared (Section 147 (4) AO):
For example, if the 2025 annual financial statements are prepared on February 25, 2026, the retention period begins on December 31, 2026. The documents must then be retained until December 31, 2034.
What does e-billing mean for businesses?
✔ Investment in suitable software
Invoicing programs must be able to output standards (e.g., XRechnung).
✔ Customize processes
- Digital review and approval
- Interfaces to accounting & ERP
- secure archiving
✔ Employee training
Finance departments require expertise in handling structured invoice formats.
The introduction of e-billing should be seen as an opportunity to rethink the entire process of incoming and outgoing invoices.
Intelligent processes result in immediately noticeable time savings through the automation of accounting. This means that the desire for up-to-date, meaningful figures is not just a wish, but also a reality.
This makes business decisions easier to make.
Conclusion
Mandatory e-billing is coming, but with a sufficient transition period. Companies should use the coming months to:
- To test software solutions,
- adapt internal processes,
- Training employees,
- and suppliers at an early stage.
Those who act in a timely manner benefit from more efficient processes, fewer errors, and modern digital financial management.
The transitional arrangements give some entrepreneurs a little time to implement the changes. However, it is still worth reviewing existing processes and options now in order to ensure that your business is not only efficient but also legally compliant.
Please feel free to contact us if you need assistance with implementation.