Electronic invoice to become mandatory from 2025: everything you need to know

After a draft of the letter had already been published in June, to which various associations had expressed helpful criticism, the final version is now available. We have summarized for you all relevant aspects on Art. 14 UStG (German VAT Act), which makes the electronic invoice mandatory for transactions between domestic companies from 2025: 

1.    Applicability
2.    Definition of e-invoice and specification of admissible formats
3.    Scope, transfer and correction of e-invoices as well as selected special issues
4.    Requirements for input VAT deduction
5.    Documentation obligations
6.    Transitional provisions
7.    Background and objectives

1. Applicability
The obligation to issue an e-invoice applies to sales between business which are both domiciled in Germany. A business is deemed domiciled in Germany if one of the following places is located in Germany: 

• Registered office or, in the absence of a registered office, the place of residence or place of habitual abode,
• Place of management, 
• Place of a permanent establishment for VAT purposes (fixed establishment) that is involved in the respective sales. 

Companies with a registered office outside of Germany are exempt from the obligation to issue electronic invoices for domestic sales. This shall explicitly also include businesses of foreign rental companies (although these are deemed to be domiciled in Germany for purposes of Art. 13b in the tax authorities’ opinion).

VAT registration in Germany alone, without the existence of one of the above-mentioned requirements, does not establish residency and the obligation to issue electronic invoices.

The e-invoice obligation also applies to credits, transactions subject to reverse-charge (Art. 13b UStG), small businesses, farmers and foresters, travel services and sales using the margin scheme. Compared to the draft, the final BMF letter clarifies that the obligation also covers transactions which are tax-exempt pursuant to Art. 4 No. 1-7 UStG, if these are provided between two business domiciled in Germany. The obligation does not apply to invoices for small amounts and tickets, but a note has been added stating that voluntary e-invoicing is of course also possible in these cases with the recipient’s consent.

2. Definition of e-invoice and specification of admissible formats
An e-invoice is an invoice that is issued, transmitted and received in a structured electronic format and enables electronic processing. A structured electronic format generally requires conformity with the European standard CEN 16931, but can also be agreed between the parties. In the latter case, so-called “interoperability” with the standard is required.

The BMF letter further specifies the admissibility of certain formats. According to the BMF, the national formats “XRechnung” and “ZUGFeRD” meet the standard. In contrast to the draft letter, the final BMF letter excludes certain sub-profiles of the ZUGFeRD standard (MINIMUM and BASIC-WL), as these do not comply with the standard. The French format “Factur-X”, which is basically equivalent to the “ZUGFeRD” format, has also made it onto the tax authorities’ exemplary list, as has the format “Peppol-BIS Billing”. However, the Italian format “FatturaPA”, which was still mentioned in the draft, is no longer mentioned as it does not conform to CEN standard 16931. From 2028, invoices issued according to the EDI (Electronic Data Interchange) procedure will only be permitted if they are interoperable with the CEN standard. According to the BMF letter, interoperability requires possible further processing of the information required under VAT law without loss of information, as would also be the case when extracting from an e-invoice in accordance with CEN 16931. The wording in the final letter is much more open than in the draft letter, which referred to conversion into a standard-compliant “target format”. Nonetheless, current EDI procedures must be put to the test regarding their admissibility after 2027.

3. Scope, transmission and correction of e-invoices as well as selected special issues
The tax authorities emphasize that all invoice data required under German VAT law must generally be contained in the e-invoice’s structured part. An exception only applies to the service description, which may refer to supplementing attachments to the e-invoice. The annex must be actually attached to the e-invoice (e.g., as PDF). According to the BMF, a link is not sufficient. 
The tax authorities have proposed the following forms of transmission: 

• E-mail (ideally with an electronic signature) – The BMF letter now clarifies that no separate e-mail inbox exclusively for e-invoices is required.
• Provision via electronic interface – E-invoice platforms such as PEPPOL are probably the most future-proof transmission channel as, according to the BMF, they will be important in the later introduction of an electronic (near-real-time) reporting system.
• Shared access to a central storage location within the group – This point was newly included in the final version of the BMF letter.
• Download via an Internet portal
• The physical transfer of a data carrier (e.g., USB stick) with invoice data, which was still explicitly excluded in the BMF draft letter, is now no longer explicitly excluded as a means of transfer. It could therefore be permitted in exceptional cases.

The BMF letter also contains explanations on the treatment of continuing obligations, final or remaining invoices and invoice corrections.

In case of continuing obligations (such as rental contracts), e-invoices must only be issued for new contracts or amendments to existing contracts (e.g., rent increase). For an unchanged continuation of contracts concluded before December 31, 2027, there is no need to take action, as was still provided for in the draft letter. 

The notes on final and remaining invoices have been newly added and provide for simplifications when presenting partial payments already made on a final invoice.

Invoice corrections follow the original invoice’s format. The letter now clarifies that the correction of transactions carried out before January 1, 2025 or during the transitional regulations does not have to be made via e-invoice. 

4. Requirements for input VAT deduction
To allow a proper deduction of input VAT, the electronic invoice must meet the requirements of Art. 14 and Art. 14a UStG. 
In particular:

• The invoice must contain all legally required information, such as name and address of the supplier, tax number, invoice number, date of performance, and tax amount. This information must be generally included in the invoice’s structured part. 
• Authenticity and integrity must be ensured. This can be achieved through electronic signatures, EDI procedures or reliable internal control procedures. 

If a business has wrongly not issued an e-invoice, although there was an obligation to do so, the issued other invoice does not entitle the customer to deduct input tax. The invoice recipient is subject to the protection of legitimate expectations for their input tax deduction if they could assume that the invoice issuer was allowed to apply a transitional arrangement. However, according to the tax authorities, the recipient must consider the previous year’s sales, the invoice issuer’s known size, as well as knowledge of related company structures. It therefore remains necessary to add additional controls to the invoice receipt process, particularly during the sales-dependent transitional period.

5. Documentation obligations
Proper documentation is crucial. Companies must ensure that their e-invoices are retained in a tamper-proof manner. The following requirements must be observed: 

• Long-term retention: e-invoices must be stored in an electronic format for at least 10 years.
• Traceability and auditability: The invoice must be legible in its original form at all times, and it must be ensured that all processes from the time of receipt to archiving are fully traceable.
• Integrity of the data: It must be guaranteed that the invoice data cannot be changed during the retention period. Suitable IT systems must be used for this purpose.

6. Transitional provisions
There is no transitional period for the receipt of e-invoices. Such receipt must be ensured by the invoice recipient from January 1, 2025.
For paper invoices and other non-structured invoices in electronic form (e.g., PDF), the previous rules apply until December 31, 2026. During such period, paper invoices can always be issued, PDF invoices require, as before, the recipient’s (possibly implied) consent. For businesses with annual sales of no more than EUR 800,000, such deadline is extended until December 31, 2027. 

A special transitional period also applies to EDI invoices compliant or interoperable with CEN standard 16931. Theses continue to be admissible until December 31, 2027. At the end of this period, the requirement for interoperability must be critically examined.

7. Background and objectives
The mandatory e-invoice is introduced as part of the combat against tax fraud and the promotion of efficient tax processes. The digital processing is intended to minimize errors and optimize administrative processes both for companies and the tax authorities. 
For further details, the entire document is available here.