Virginie Taborowski
Content Specialist
Last updated on
2.10.24
Best Practice
E-invoice and its obligation: What companies need to know now
8
min
Table of contents
- What is an e-invoice?
- Digital invoices: What are the benefits?
- E-billing is becoming mandatory: What you need to know and consider
- What information is mandatory in an e-invoice?
- When will e-billing become mandatory?
- What e-billing formats are there?
- Switching to e-billing: 5 tips for your company
- Conclusion: Prepare your company for the e-invoicing requirement now
The introduction of electronic invoices (e-invoice) is becoming increasingly mandatory in Germany and the EU. What began as a measure to increase efficiency has now become a decisive step towards combating tax evasion and securing tax revenue. Companies are faced with the challenge of preparing in good time for the mandatory use of electronic invoices.
In this blog post, we give you an overview of the current legal requirements, the benefits of e-billing and practical tips for making the switch in your company.
What is an e-invoice?
According to the E-billing regulation (eRechV), an e-invoice consists of a structured, machine-readable data set with all billing information. The data set ensures that e-invoices can be transmitted, received and processed electronically.
In contrast to paper invoices or image files in PDF format, the data is structured and can be processed automatically and without media breaks. An illustrated invoice therefore does not meet the requirements for an e-invoice. E-invoices must comply with the European invoicing standard EN16931 fulfill.
Digital invoices: What are the benefits?
Invoices are essential in general business transactions. They document tax and civil claims and ensure that companies are paid for their services or goods. When companies digitize these processes, they save resources and also establish more efficient workflows.
More specifically, e-billing has the following advantages:
- E-invoices are resource-saving and ecological: No use of paper, printer toner, etc.
- Invoices are processed without media disruption, which prevents incorrect information.
- Processing times are reduced by automated processes.
- Cash receipts can be guaranteed more quickly, which increases liquidity.
- Paper and printer costs and consumption are minimized.
- There are no postage costs.
- There is greater transparency, which makes cross-departmental, internal audits easier.
E-billing is becoming mandatory: What you need to know and consider
Since November 27, 2018, public authorities have been required to receive and process electronic invoices. Initially, only the highest federal authorities were affected. Since 2020, the federal administration, federal states and municipalities have also been affected. Companies that work for public institutions must therefore already rely on e-billing.
For cross-border B2B transactions, there should also be an obligation to use e-invoices in the future. This is based on a recent proposal to revise the value added tax (VAT in the Digital Age - ViDA). The VAT Gap Report 2022 shows that EU member states lost 93 billion euros in VAT revenue in 2020. The losses are primarily due to tax fraud. E-invoices combined with a reporting system restrict tax evasion and thus secure important tax revenue.
With the Growth Opportunities Act The government has also created a basis for the mandatory domestic use of e-invoices. From January 1, 2025, all German B2B companies will therefore be required to receive and process electronic invoices.
You must consider the following aspects when using e-billing:
Consent to electronic transmission
In order to meet the legal requirements, the recipient of an e-invoice must expressly consent to electronic transmission. This consent should be documented and archived for legally compliant processing.
Authenticity of the e-invoice
The invoice issuer is responsible for ensuring that the e-invoice is clear and secure. This includes authentication measures to ensure that the invoice actually comes from the specified sender and has not been manipulated.
Ensuring the integrity of the content
An e-invoice must be transmitted and stored in an unalterable and tamper-proof manner. All required information must not be changed retrospectively to ensure the integrity of the invoice content. It is important that the invoice can only be read and processed by electronic means to avoid misuse.
Archiving and storage requirements for e-invoices
Both paper and electronic invoices must be archived for at least ten years in accordance with legal requirements. During this time, they must be kept in their original format and in a condition that ensures legibility and original condition. A simple backup to the hard drive is not enough. Instead, a special software archiving system should be used that meets legal requirements and enables reportable processes.
What information is mandatory in an e-invoice?
An invoice is important under tax and civil law. Mandatory information is therefore important for both biller and invoice recipient. This is the only way to comply with the provisions of the Sales Tax Act and the invoice serves as proper proof of input tax deduction. The biller must ensure that all important content is on the invoice. Otherwise, on the customer's side, this may result in the tax office not accepting the invoice for sales tax purposes.
In accordance Section 14 Paragraph 4 in conjunction with Section 14a Paragraph 5 UStG An invoice must contain the following information:
- full name and address of the performing contractor and the service recipient,
- the tax number or the sales tax identification number issued to the performing entrepreneur,
- the date of issue,
- a sequential invoice number
- the quantity and type of the goods delivered or the scope and type of other service,
- the time of delivery
- the fee for delivery or other services broken down by tax rates
- the applicable tax rate and the amount of tax attributable to the remuneration
In addition, sees Section 5 of the eRECHV further information before:
- Route identification number (for the public sector) or a buyer reference (such as order number, customer number, or project number)
- Due date of the invoice amount
- Payment terms
- Payee's bank details
- Billing person's email address
When will e-billing become mandatory?
From January 1, 2025, all German B2B companies will be required to use e-invoices in accordance with the Growth Opportunities Act. However, there is a transition period for implementation. This is designed for the years 2025 to 2027. From 2028, all new requirements must be fully implemented.
important: However, please note that as of January 1, 2025, all domestic companies must be able to receive and archive electronic invoices. For more information, read on the website of the Federal Ministry of the Interior and Home.
What e-billing formats are there?
As a general standard for compliance with EU-compliant e-invoices, the XRechnung format has become established in Germany. XRechnung follows the binding national standards of the Core Invoice Usage Specification (CIUS), which ensure that invoice data can be transmitted in a structured and machine-readable manner.
An XRechnung is designed to enable efficient and error-free processing in electronic systems, resulting in faster business processes and lower administrative costs.
XRechnung and ZUGFeRD are two important formats for electronic invoices, both of which comply with European standard EN16931. An XInvoice is sent in CII (Cross-Industry Invoice) or UBL (Universal Business Language) formats.
ZUGFeRD is a PDF document that contains a CII file. These formats ensure that electronic invoices meet the required standards and can be transmitted correctly.
According to legal regulations, all other invoice formats, including traditional paper invoices and digitally created PDF invoices, are classified as “other invoices.”
Companies and public institutions must ensure that, from the specified deadline, they issue and receive all electronic invoices in one of the specified standardized formats in order to comply with legal requirements.
Switching to e-billing: 5 tips for your company
A targeted transition to e-invoices requires not only technological adjustments, but also a holistic strategy for integrating and training all parties involved.
We have summarized five important tips for implementing e-billing:
- Implement powerful invoice management software that can automatically read and process e-invoices. This not only optimizes your work processes, but also minimizes errors and increases efficiency. Tips for the right software to write invoices digitally, read elsewhere.
- Digitize your paper invoices to ease the transition to e-invoicing and reduce paper costs.
- Involve your employees, suppliers and customers in the process at an early stage and train them intensively in the correct handling of e-invoices. This ensures that everyone involved understands the new processes and can use them effectively.
- Make sure that all e-invoices are archived in an audit-proof manner. The process is required by law and ensures that you keep track of your financial data over the long term.
- Provide regular training and training on e-billing. This not only helps to increase understanding and compliance within your organization, but also makes it possible to identify and fix potential stumbling blocks during the transition at an early stage.
Conclusion: Prepare your company for the e-invoicing requirement now
The introduction of e-billing is not only a legal obligation, but also offers companies the opportunity to make their processes more efficient and reduce costs. By using standardized formats such as XRechnung or ZUGFeRD Workflows can be optimized and liquidity benefits can be achieved through faster incoming payments. Careful implementation of legal requirements and training for employees are crucial for a successful transition to digital invoicing.
