Germany: VAT in the Digital Age (ViDA) and E-Invoicing Requirements

Here you will find an overview of our services and solutions for e-invoicing.

E-invoicing obligation: Origin

The e-invoicing obligation in Germany results from an amendment to Section 14 of the Value Added Tax Act (UStG). Germany has thus made use of an exemption to make e-invoicing mandatory for certain national transactions before it is introduced by the EU directive "VAT in the Digital Age" (ViDA) for all transactions that have previously been listed in the recapitulative statement (ZM).

What is an e-invoice according to the amended Section 14 UStG?

An e-invoice is only something that

• is issued, transmitted and received in a structured electronic format,
• enables electronic processing and
• complies with the European standard for electronic invoicing and the list of corresponding syntaxes in accordance with Directive 2014/55/EU (and thus the EN 16931 standard), e.g. XRechnung and ZUGFeRD.

All mandatory invoice details must be included in the structured part of the invoice, including those for the clear identification of the supply. Additions in an appendix are permitted.

The issuer and recipient may agree on any electronic format, as long as it is ensured that the complete invoice data can be extracted and converted into a standard format or is interoperable with it.

E-invoicing: Who is obliged to use it and from when?

E-invoicing has been mandatory since 1 January 2025 for supplies with a place of supply in Germany that are either not VAT exempt or VAT exempt under Section 4 No. 1–7 UStG (these are the VAT exemptions with input VAT credit) from businesses based in Germany to other businesses based in Germany for business purposes.

In all other cases, e-invoicing is not mandatory from 2025 onwards and can only be agreed upon individually with the consent of the recipient. Businesses must therefore check the place of supply of the relevant transaction, any VAT exemptions, and the residence and VAT status of the recipient.

Transitional rules for mandatory e-invoicing

• For transactions between 1 January 2025 and 31 December 2026, an "other invoice" may be issued instead of an e-invoice until 31 December 2026 – on paper or, with the recipient's consent, in another electronic format.
• Businesses whose total turnover in the previous calendar year did not exceed € 800,000 in accordance with Section 19 (2) of the UStG (the regulation for small businesses) can apply this simplification rule until 31 December 2027 – for transactions between 1 January and 31 December 2027.
• For supplies between 1 January 2026 and 31 December 2027, subject to the recipient's consent, an "other invoice" may also be issued instead of an e-invoice until 31 December 2027 if it is transmitted via electronic data interchange (EDI).
• Even during the transition periods, the recipient cannot refuse to receive e-invoices and must be technically capable of doing so, provided that e-invoicing is mandatory and therefore does not require their consent. They are not entitled to an alternative invoice.

Permissible formats and transmission methods

Permissible formats are:

• the XML-based XRechnung, which is already in use in exchanges with public authorities. A PDF view can be attached,
• the hybrid ZUGFeRD invoice, which was developed jointly by institutions in Germany and France, and
• Factur-X from France, Peppol-BIS Billing and other European formats that comply with Directive 2014/55/EU.

In the event of discrepancies between the structured part and any image part, the structured part takes precedence; there are no restrictions with regard to transmission channels.

During the transition period until 31 December 2027, EDI invoices remain permissible even if the aforementioned data extraction is not possible or there is no interoperability – provided that the recipient agrees. After the transition period ends on 31 December 2027, EDI will be permitted as the agreed format if the invoice data can be extracted or if interoperability is ensured.

Error types and significance of validation tools

In the event of a format error, the invoice does not meet the requirements for an e-invoice because the file does not comply with the permitted syntax or technical specifications or does not allow correct and complete extraction. It can therefore only be considered an “other” invoice in another electronic format. Format errors can be detected by validation tools.

Business rules are technical regulations for checking the logical dependencies of the information contained. Business rule errors can consist of missing or contradictory information. Example: The VAT amount does not match the VAT rate. Business rule errors can be detected by validation tools.

If mandatory invoice details are missing or incorrect, this constitutes a content error. In this case, there is no right to deduct input VAT. Content errors are only detected by validation tools if they also constitute a format or business rule error.

The use of a validation tool does not release the business from the obligation to check for content errors (in the case of content errors: no input VAT deduction). However, if the business complies with the due diligence obligations of a prudent businessman, they can rely on the technical result of the validation (i.e. with regard to format and business rule errors) of a suitable tool. The validation report should be kept as proof. Input VAT should be deductible then. Although the use of a validation tool is not a legal obligation, businesses should make use of it due to the explicit reference of the Federal Ministry of Finance.

The problem is that a large number of tool providers are currently entering the market. It can be difficult for businesses to assess whether the tool offered filters out all critical errors.

Impacts for e-invoice issuers

The introduction of e-invoicing means, among other things, that tax departments must implement suitable software, train their employees and adapt their processes in order to issue and receive electronic invoices. Companies that have already used EDI in the past are now tasked with converting the process to XML logic. In mass data processing, all conceivable supplies should be classified in terms of their VAT treatment and the corresponding invoice requirements and precisely converted to the new logic.

Impacts for e-invoice recipients

For invoice recipients, the structured format of e-invoices has the advantage that the quality and completeness of the formal invoice details are increased with regard to input VAT deduction eligibility. In mass processing, it is not the image but the structured part of an e-invoice that is read. This is significantly less prone to errors than paper invoices using optical character recognition (OCR). Invoice recipients cannot refuse to accept e-invoices if they are mandatory for the issuer and may therefore have to upgrade their technology even if they are not required to issue e-invoices themselves (e.g. providers of certain VAT-exempt services).

If an “other” invoice is issued even though e-invoicing was mandatory, the other invoice does not generally entitle the recipient to deduct input VAT (however, there are exceptions). Correction by subsequently issuing an e-invoice has retroactive effect.

Contractual conflict resolution: legal certainty from the outset

In addition to the technical challenges, we also keep an eye on the potential for legal conflicts. From our consulting practice, we are familiar with the typical points of contention when it comes to issuing and transmitting e-invoices. We address these preventively through tailor-made contractual provisions – for example, in supply of goods, service, work, distribution or framework agreements.

With appropriate conflict resolution clauses, we ensure clear guidelines for dealing with incorrect e-invoices and the chosen transmission method. In the event of a dispute, we support our clients both in enforcing their right to proper invoicing and in exercising their rights of retention.

Our solutions minimise uncertainties in dealing with interoperable invoice formats and promote uniform processes in exchanges with business partners.

Do you have any questions on this topic? Then please feel free to contact our experts.