Everything about e-bills

Everything you need to know about e-invoicing: When does which obligation apply? How do I receive, send and process e-invoices? Formats and requirements.

What are e-invoices?

An electronic invoice or e-invoice is a digital document that represents invoice data in machine-readable form and in a standardized format and can therefore be processed electronically by the recipient.

A paper or PDF invoice is not an e-invoice from the point of view of the legislator. The differences are explained in the following overview:

Paper invoice
The traditional paper invoice does not allow electronic processing, as the invoice would first have to be digitized via scan or photo. In order to be able to process the data further, the data contained on the invoice must be read out separately and entered into an accounting system.

PDF invoice
Although the PDF invoice is issued in a digital format, its main purpose is to present the invoice as “paper-like” as possible, i.e. as it would look in the form of a printed invoice. The PDF format is therefore suitable for human processing, where invoice information is read out manually. Additional text recognition (OCR software) is required for further electronic processing.

E-bill
The e-invoice is issued in accordance with a standard specified by the EU (EN-16931). This standard defines a structured data set based on the XML format. Invoices are thus represented as machine-readable code. This code can be created, sent and processed without media discontinuity. There are two e-invoice formats, ZUGFeRD and XRechnungen. The formats will be explained later.

The origin of the e-bill is the Growth Opportunities Act of the Federal Government In Article 23, it defines an e-invoice as follows:

“An electronic invoice is an invoice that is issued, transmitted and received in a structured electronic format and enables electronic processing. Another invoice is an invoice that is transmitted in another electronic format or on paper.”

Any invoice that does not meet the standard for e-invoices is summarized by the legislator under the term “other invoice”.

Obligation to e-bill

Purpose and background of the duty

As part of the ViDA initiative (short for VAT in the Digital Age), the European Commission is planning to introduce an electronic VAT reporting system. The new reporting system will be based on data from e-invoices. As things currently stand, e-invoices are to be transmitted to the tax authorities within a few days of the service being provided from 2028. The aim is near-real-time reporting in order to combat VAT fraud more effectively.

In order to meet these significantly shorter deadlines compared to the previous recapitulative statement (ZM), a standardized electronic data format is essential. To this end, the EU member states should provide a technical procedure for transmission.

Scope of the obligation

From 01.01.2025, companies in Germany will be obliged to receive and process electronic invoices for domestic sales in the business-to-business (B2B) sector. The obligation therefore applies if …

both the supplier and the recipient are established in Germany and
the turnover takes place in business transactions (B2B).

Domiciled in Germany means that both parties have their registered office, their management, a permanent establishment relevant to the turnover or their domicile or habitual residence in Germany.

B2B means that both parties are companies. The obligation also applies if the recipient of the service is another legal entity such as an association or foundation. In contrast, the receipt and processing of e-invoices for end consumers (B2C) is not mandatory. For contracting authorities (B2G), an obligation to issue e-invoices has already largely applied since 2020 (see federal government information on e-invoicing).

Small-value invoices (up to 250 euros) and tickets are not affected by the obligation. They may still be issued in paper form or as a PDF.

Transition periods

From 01.01.2025, companies will be obliged to issue e-invoices in addition to receiving e-invoices. Due to the high implementation costs, various transitional regulations have been created to simplify the changeover for companies. However, the basis is always the consent of the recipient!

Until the end of 2026 Other invoices (PDF, paper, etc.) are permitted with the consent of the recipient.

Until the end of 2027 Other invoices are permitted with the consent of the recipient if the previous year’s turnover of the invoicing party
was less than EUR 800,000.

From 2028 E-invoices must be issued in accordance with EN 16931

With the recipient’s consent, other invoices (paper, PDF, etc.) may be sent until the end of 2026. If the invoice issuer’s previous year’s turnover was less than EUR 800,000, other invoices are even permitted until the end of 2027 with the recipient’s consent. From 2028, the obligation will then apply to all domestic B2B sales.

Requirements for an e-bill

Standard EN 16931

The EN 16931 standard is based on Directive 2014/55/EU of the European Parliament and aims to create a standardized electronic invoice format that is accepted by all contracting authorities in the EU. EN 16931 was published in 2017.

The standard regulates two main components in particular:

The core model of the e-invoice (Core Invoice Model): It describes the information that every electronic invoice must contain.
The syntactic bindings (syntax bindings): They describe how the core model can be represented in different electronic formats.

In addition to compliance with EN 16931, e-invoices must meet the same requirements that apply to paper invoices. These are outlined below.

General requirements for an e-invoice

Companies must ensure the following principles when issuing invoices. These also apply in particular to electronic invoices:

Authenticity of origin: The identity of the invoice issuer must be ensured.
Integrity of the content: The invoice details required under the Value Added Tax Act have not been changed.
Legibility: The invoice must be legible to the human eye. E-invoices may have to be converted for this purpose.
Invoices must also contain the following information (in accordance with Section 14 (4) UstG):

the full name and address of the supplier and the recipient of the service,
the tax number issued to the supplier by the tax office or the VAT identification number issued to him by the Federal Central Tax Office,
the date of issue,
a consecutive number with one or more series of numbers that is assigned once by the invoice issuer to identify the invoice (invoice number),
the quantity and type (customary trade name) of the goods supplied or the scope and type of the other service,
the date of the delivery or other service; in the cases of paragraph 5 sentence 1, the date of receipt of the consideration or part of the consideration, provided that the date of receipt is fixed and does not coincide with the date of issue of the invoice,
the consideration for the delivery or other service, broken down according to tax rates and individual tax exemptions (Section 10), as well as any reduction in the consideration agreed in advance, unless it has already been taken into account in the consideration,
the applicable tax rate and the amount of tax due on the consideration or, in the case of a tax exemption, an indication that a tax exemption applies to the delivery or other service,
in the cases of Section 14b (1) sentence 5, a reference to the recipient’s obligation to retain the goods and services and
in cases where the invoice is issued by the recipient of the service or by a third party commissioned by him in accordance with paragraph 2 sentence 2, the indication “credit note”.

Retention obligations for e-invoices

Like paper invoices, e-invoices must be stored for 8 years from 01.01.2025. The period begins at the end of the calendar year in which the invoice was issued. The requirements listed above with regard to authenticity, integrity of content and legibility continue to apply for the entire period.

Important: Invoices must be archived in the same format in which they were sent. Electronic invoices may therefore not be filed exclusively in paper form, but must be saved and stored as an original XML file. In order to ensure legibility, software must also be available with which the original invoice can be read. Storage locations on the hard drive or in a mail folder are already not always recognized by the tax authorities.

Formats of an e-bill

As EN 16931 only specifies a data structure, but no specific technical implementation, various standards have been established that comply with the standard but differ in technical terms. In German-speaking countries, the two most common are the XRechnung and ZUGFeRD formats.

XInvoice

XRechnung is a data model based on XML that is used in particular in exchanges with public clients in Germany. It was developed by the Coordination Office for IT Standards (KoSIT) and is intended to be generally available and kept permanently up to date. In Germany, XRechnung is the binding standard for all invoicing in public procurement.

ZUGFeRD

ZUGFeRD stands for “Zentraler User Guide des Forums elektronische Rechnung Deutschland”. The format was developed together with associations, ministries and companies and is available free of charge. In contrast to XRechnung, ZUGFeRD is a hybrid format. This means that in addition to the XML file, a PDF file can also be sent, which displays the invoice in a conventionally readable format. However, it should be noted that the structured part of the invoice (i.e. the XML file) should be the leading part. With version 2.1.1, ZUGFeRD has integrated the requirements of XRechnung in a separate profile so that these are also accepted by public clients.

Opportunities and challenges

The standardized format for e-invoices also has a number of advantages for companies:

Less error-prone: e-invoices can be read automatically. This avoids potential sources of error when entering data manually.
Time-saving: Fully electronic transmission and processing saves time when digitizing or reading out invoices.
Cost-saving: In addition to labor costs, there are no expenses for paper and postage.
Process improvement: Receiving and sending invoices electronically makes it easier to record and evaluate financial data centrally.

In addition to the opportunities that e-invoice formats bring, companies also face a number of questions and challenges during the changeover:

Research: How do e-invoices affect my business processes? When is my company obliged to receive and send e-invoices? What is the best way to implement this obligation technically? What needs to be considered in terms of data protection?
Implementation: How do I introduce a system that can receive and send electronic invoices? How do upstream and downstream processes need to be adapted?
Training: What are the guidelines for dealing with e-invoices? How can employees be prepared as well as possible for the changeover and familiarized with the new processes?

Software solutions for e-invoices

Moving away from Word and Excel for invoices

Until now, many smaller companies have been writing invoices using Office software such as Word or Excel. With the introduction of mandatory e-invoicing, these companies now need to rethink. On the one hand, Office tools are not automatically able to create or process documents based on the European invoice standard. On the other hand, companies are denying themselves the process advantages that can be exploited by the uniform data standards.

The new legal requirements promote systems that work purely digitally and in the cloud. They meet the legal requirements and also enable the new e-invoices to be processed efficiently and without data discontinuity.

Invoice software versus complete solution

The first obvious step is to look for new software specifically for invoice management. This satisfies the new requirements, but also leaves some potential untapped, as other processes are linked to invoicing: For example, the recording of order or project times, the processing of tickets or controlling based on income and expenditure.

E-invoicing is therefore also an opportunity for companies to digitize business processes related to incoming and outgoing invoices. This is a further step towards the paperless office and offers companies a range of benefits:

All-in-one concept: all business-relevant data is stored in one place, all processes take place online and on the basis of this data. No more isolated solutions, data disruptions or transmission errors.
Simple and efficient processes: All important business processes take place on a common platform on which the entire team works. No more chain emails or paper printouts are necessary.
Make business success measurable: All relevant data for your analyses is available in one place and can be incorporated into your business evaluations.

Dr. Martin Moosbrugger

hilft Unternehmen bei der Digitalisierung Ihrer Geschäftsprozesse

05. August 2024