Independently of the European Commission's legislative proposal "VAT in the Digital Age (ViDA)", which also contains fundamental changes in the area of invoicing, Germany had already applied for the introduction of mandatory electronic invoicing as a special measure under Art. 395 of the VAT Directive in 2022. By decision of 25 July 2023, the Council of the European Union approved this approach. The validity of the special measure is limited to the period from 1 January 2025 to 31 December 2027 at the latest. However, in anticipation of the granting of this approval, the draft of the Growth Opportunities Act already contained corresponding adjustments with regard to invoicing, which are supposed to be applied in Germany from 1 January 2025. The core elements of the planned changes to invoicing in accordance with Section 14 German VAT Act are the definition of the term "e-invoice" based on the ViDA bill, i.e. an invoice that must always comply with the requirements of CEN standard EN 16931 (Directive 2014/55/EU of 16 April 2014). For certain situations, the draft Act provides for the mandatory use of electronic invoices. This applies to domestically taxable B2B transactions - with the exception of certain VAT-exempt transactions, if the supplier and recipient of the service are domiciled in Germany.
In this regard, the leading business associations had already expressed concerns at a very early stage that the introduction of mandatory e-invoicing on 1 January 2025 would not be feasible in this short period of time given the wide range of legal, technical, normative and administrative requirements for the economy as a whole. There are also considerable concerns regarding the practicality of e-invoicing in accordance with the current requirements of the EN 16931 standard. Invoicing in the B2G sector already takes place on the basis of the data structure defined in this standard. However, much of the information relevant to the B2B sector, such as information on invoices for instalments or the mapping of discounts, is not currently provided as a separate, structured data element. Without further specifications and adjustments to the requirements for the invoice data record, this information would have to be entered via free text fields, which ultimately prevents automated further processing.
In the meantime, the tax authorities have issued an official letter dated 2 October 2023 to the associations on the planned changes to the issuing of invoices in accordance with Section 14 German VAT Act. They are clearly endeavouring to provide companies with information on the planned changes and their implementation in a timely manner.
With regard to the question of which currently existing invoice formats generally comply with the new standard of a structured electronic invoice, the tax authorities are of the opinion that invoices in both the XStandard and the ZUGFeRD format from version 2.0.1 meet the planned requirements. It therefore appears possible to fall back on already established invoice formats.
The letter also provides further details on the future handling of hybrid invoice formats, e.g. in accordance with the ZUGFeRD format. From the introduction of the mandatory electronic invoice on 1 January 2025, the structured part will be decisive for a hybrid format, contrary to Sec. 14.4 para. 3 sentence 4 German VAT Application Decree. In the event of a deviation, the data from the structured part will take precedence over the data from the image file. However, this does not change the fundamental permissibility of a hybrid format.
Finally, the tax authorities expressly point out that, according to the draft of the Growth Opportunities Act, the acceptance of an electronic invoice will be mandatory for all domestic entrepreneurs from 1 January 2025. The transitional regulations provided for in the draft bill only concern the issuing of an invoice in other formats. If the invoice issuer decides to use an electronic invoice, the invoice recipient must also accept it.
The German parliament accepted the Growth Opportunities Act in November 2023. In contrast to the previous version of the draft, it should now also be possible to issue an electronic invoice in a format other than the EN 16931 format. This format should continue to form the basic case for the syntax and semantics of an electronic invoice and thus enable companies to adapt to a standardised format. However, the parties involved in the exchange of services should also be able to agree on a different format. The prerequisite is that this format enables the correct and complete extraction of the required information from the electronic invoice into a format that corresponds to the EN 16931 standard or is interoperable with it. According to the explanatory memorandum, this is intended to ensure that invoices issued via EDI procedures in particular, whose format does not fulfil the requirements of CEN standard EN 16931, are also to be regarded as electronic invoices.
Contrary to criticism from the business community, the legislator intends to stick to the previously planned entry into force of the legislative amendment on 1 January 2025. However, the associated simplification regulations have recently been extended once again: Accordingly, entrepreneurs should generally still be able to switch to invoice forms other than electronic invoices until 31 December 2026 (Section 27 (39) no. 1 UStG-E). The simplification rule for traders whose total turnover in the previous calendar year did not exceed €800,000 in accordance with Section 19 (3) UStG will be extended to 31 December 2027 (Section 27 (39) no. 2 UStG-E).
Contrary to these necessary clarifications, the crux of these changes does not actually lie in their implementation, but rather in their predictability. This is because the Bundesrat (another constitutional body in the legislative procedure) has not approved the Growth Opportunities Act passed by the German parliament in 2023. This may not have been due to the intended changes to the VAT Act, or at least not exclusively. The bill was referred to the Mediation Committee. However, no mediation results were achieved in 2023 with regard to the relevant VAT regulations. Ultimately, it is therefore still necessary to wait for the conclusion of the legislative process in this regard.
