Invoicing and Tax regulation in Germany

Germany initiated the modernization of its transaction processes in 2020 by implementing mandatory B2G e-invoicing for transactions with the federal government. Digitalization has been successful and is scheduled to expand in 2025 demanding all German taxpayers to be able to receive e-invoices and later issue as well. Despite this phased approach, many businesses have opted to transition earlier, realizing significant benefits in terms of cost savings, time efficiency, and reduced manual errors, which are particularly prevalent in tax reporting. Given the standard VAT rate in Germany at 19% and corporate tax rate at 15.825%, minimizing errors is crucial to avoid increased liabilities and penalties.

 

To ensure you're meeting the requirements while optimizing your financial strategy, explore our comprehensive guide on (e-)invoicing, tax regulations, and digital reporting in Germany.

 

Invoicing Regulations in Germany

Invoicing regulations in Germany are managed by the Federal Ministry of Finance (Bundesministerium der Finanzen) under the guidance of the German Value Added Tax Act (Umsatzsteuergesetz, UStG). Invoices are required for all transactions involving the sale of goods or services, applicable to both B2B and B2C dealings. Customers must receive invoices upon the delivery of goods or completion of services. For transactions where the customer is another business, invoices must be issued by the 10th day of the month following the delivery or service. Moreover, VAT-registered businesses must issue VAT invoices for all taxable sales, complying with German tax laws and regulations.

At a minimum, the invoice needs to include:

Date of Issue;

Unique Invoice Number;

Supplier Information: Name, address and tax identification number;

Customer Information: Name, address and VAT, if the buyers is VAT-registered;

Description of Goods or Services,

Quantities and Unit Prices: The quantity and price per unit, excluding VAT;

Total amount and Tax Details: VAT applied, If different VAT rates are applicable, the amount of VAT should be shown separately for each rate; VAT amount payable, total amount excluding VAT, total amount including VAT;

For intra-community supplies or exports: include references such as "Intra-community supply" or "Exempt from VAT";

For small businesses: a note should be included stating that no VAT is charged.

 

B2G Invoice Specifications

For B2G transactions you have to issue e-invoices.

 

B2C Invoicing

For most B2C transactions you can issue simplified invoices, which require less information compared to full invoices.

 

Simplified Invoices

In Germany, you can issue simplified invoices for transactions where the total invoice amount does not exceed €250.

Simplified invoices include:

Date of issuance,

Supplier information: name and address,

Description of the goods or services,

Total amount payable and the VAT amount.

 

Invoices Archiving

In Germany, you must archive e-invoices for a minimum period of 10 years. The archiving period starts from the end of the year in which the invoice was issued. Archiving abroad is allowed under specific conditions.

 

 

E-invoicing Regulations

Electronic invoicing, or e-invoicing, is the digital exchange of invoice information between a supplier and a buyer. Creating electronic invoices involves a streamlined process that includes the use of specialized software for generating invoices, selecting the appropriate electronic invoice formats, and choosing a transmission method such as the Peppol web service or email. This process not only facilitates the efficient submission and validation of invoices but also ensures that recipients are promptly notified, significantly enhancing the invoicing workflow for businesses.

In 2019, Germany implemented mandatory B2G e-invoicing. Starting in January 2025, all companies will be required to have the capability to receive e-invoices. By January 2027, companies with an annual turnover exceeding €800,000 will be mandated to issue e-invoices. By January 2028, this requirement will extend to all companies, irrespective of their turnover.

While B2C, B2B e-invoicing remain optional for now, numerous companies have proactively embraced e-invoicing. The benefits of e-invoicing include improved efficiency, faster payments, and compliance with tax authority regulations, making it superior to traditional paper invoicing.

German e-invoicing regulations align with Directive 2014/55/EU, which mandates public entities to be equipped to receive and process e-invoices that adhere to the European standard EN-16931. Furthermore, Germany participates in the PEPPOL network, enhancing standardized cross-border e-invoicing within the EU through the use of electronic invoices and electronic invoicing. To support these requirements, the German government utilizes ZRE (Zentrale Rechnungseingangsplattform des Bundes), an invoice submission portal designed for the receipt and processing of e-invoices in dealings with public sector entities, including federal contracting authorities.

 

E-invoicing Process

Suppliers in Germany must register on the Zentrale Rechnungseingangsplattform des Bundes (ZRE) online portal. This platform allows them to manage activities related to electronic invoicing, particularly when dealing with federal institutions.

The process is outlined below:

Completing a transaction and entering invoice data: German suppliers are required to accurately enter invoice data and submit electronic invoices within a specified timeframe, typically immediately after a transaction is completed;

Upon submission: The ZRE reviews the electronic invoice. This review process includes validating the transaction details and ensuring compliance with the required standards and formats;

After validation: The supplier receives a confirmation that the invoice has been accepted, often including a unique identification number assigned to the invoice for tracking purposes;

The customer receives this confirmation: which includes the unique identification number and details confirming that the invoice has been successfully submitted and is under processing;

Customers or other interested parties can verify the transaction: through the ZRE web application, which provides options to view the status of the invoice and access detailed information about the invoicing process.

 

Governmental Body Responsible for E-invoicing

The responsibility for e-invoicing, particularly when it involves the public sector, primarily falls under the jurisdiction of the Federal Ministry of the Interior, Building and Community (Bundesministerium des Innern, für Bau und Heimat, or BMI). This includes overseeing the submission of e-invoices to the indirect federal administration and cooperating federal states through platforms like OZG-RE, ensuring a structured format, transmission methods, validation process, and recipient notifications are standardized across the board.

For operational aspects, particularly the technical implementation and maintenance of the e-invoicing platform, the responsibility lies with the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt).

 

E-invoicing Formats

Germany aligns its e-invoicing formats with the European standard EN 16931. The system for e-invoicing in Germany is managed through the ZRE and Online Access Act (OZG).

E-invoicing formats commonly used in Germany:

XRechnung	A national standard that adheres to EN 16931, specifically designed for electronic invoicing within Germany.
PEPPOL BIS Billing 3.0	An internationally recognized standard, providing a unified XML-based specification for electronic billing across Europe.
Factur-X / ZUGFeRD	A hybrid e-invoicing format that combines PDF/A-3 and XML data, ensuring compatibility with both human-readable and machine-processing requirements.

 

E-invoices Validating

Ensure that your e-invoices adhere to both European standard EN 16931 and specific German requirements. Further validation of e-invoices is not mandatory, but you can use a qualified digital certificate. If you use it, then it must be verified to confirm that the invoice remains unaltered and originates from a trusted source.

 

E-invoice Archiving

You must archive E-invoices for a minimum period of 10 years, with archiving abroad being allowed under certain conditions.

 

 

Tax Regulations

The standard VAT rate in Germany is 19%. This applies to most goods and services. A reduced VAT rate of 7% applies to goods and services, such as food, books, and newspapers. Certain items and services, like exports, are exempt from VAT.

 

Corporate Tax

The standard corporate tax rate in Germany is 15%, with an additional solidarity surcharge of 5.5% on corporate income tax. This results in an effective corporate tax rate of 15.825%.

 

Trade Rax

Companies also need to consider the trade tax (Gewerbesteuer), which varies depending on the municipality. It consists of a multiplier applied to a base rate of 3.5%. Each municipality sets its own multiplier, which typically ranges from 200% to 900%, resulting in an effective trade tax rate of approximately 7% to 17.5%.

Small businesses may benefit from a tax-free allowance on trade income, which is set at €24,500.

 

VAT on Digital Products

In Germany, the VAT rate applied to digital products, such as downloadable software, or online services, is generally subject to the standard VAT rate of 15%.

 

 

VAT Payments and Returns

In Germany, businesses are required to file a VAT Return with the German Tax Authority (Finanzamt) to declare the VAT they have collected and the VAT they have credited for business purchases. The VAT Return should detail:

VAT collected on sales,

VAT credits for VAT paid on business purchases.

The net VAT amount, which is the difference between the VAT collected on sales and the VAT credits on purchases, is indicated on the VAT Return and must be paid to the German Tax Authority. If the VAT credits exceed the VAT collected, the business can claim a refund.

The reporting frequencies are:

Monthly: Reports must be submitted by the 10th day of the month following the reporting period. Mandatory for businesses with a turnover exceeding €1,000,000 in the previous year.

Quarterly: Reports must be submitted by the 10th day of the month following the reporting period. Mandatory for businesses with a turnover of less than €1,000,000.

 

The German Tax Authority strongly encourages electronic filing of VAT Returns and Payments through its online platform (Elster).

 

VAT Registration Threshold

VAT registration threshold for domestically established businesses is €22,000.

For EU-based businesses engaged in distance selling of goods or services to the German consumers, the threshold is €100,000.

Non-EU businesses selling into Germany have no VAT registration threshold; they are required to register for VAT immediately upon beginning sales of goods or services to German consumers.

 

 

E-invoice Requirements

E-invoices in Germany are demanding components such as:

Supplier Information: Name, address and VAT identification number;

Customer Information: Name, address and VAT, if the buyers is VAT-registered;

Date of Issue;

Unique Invoice Number;

Description of Goods or Services;

Quantities and Unit Prices: The quantity and price per unit;

Total amount and Tax Details: VAT applied, If different VAT rates are applicable, the amount of VAT should be shown separately for each rate; VAT amount payable, total amount excluding VAT, total amount including VAT;

Payment terms and details.

For the invoice issuer, it's important to note that from 2027, businesses with a maximum turnover of €800,000 in the previous year are required to send electronic invoices, while those exceeding this limit may opt for the EDI procedure.

 

Utilizing invoicing software can significantly benefit businesses in creating, sending, and managing e-invoices in compliance with German regulations. These tools not only help in generating professional invoices but also in streamlining the invoicing process, improving cash flow, and ensuring that payments are received on time.

See how Space Invoices can help.

 

B2C E-invoice Specifications

For most B2C transactions you can issue simplified e-invoices, which require less information compared to full invoices.

 

Simplified E-invoice Requirements

In Germany, you can issue simplified e-invoices for transactions where the total invoice amount does not exceed €250.

Simplified invoices include:

Seller's name and address;

Date of issuance;

Description of goods or services;

VAT amount and rate applied;

Gross total amount.

 

 

Digital Reporting R

Businesses registered for VAT in Germany are required to submit a VAT Return electronically via the Federal Central Tax Office's (Bundeszentralamt für Steuern, BZSt) online service. This can be done directly, through business software that integrates this functionality, or through a tax agent.

Additionally, businesses are encouraged to maintain electronic records of all transactions to meet the standards set by the German tax authorities. These records are vital for audit purposes and must be retained for a minimum of ten years.

 

SAF-T

SAF-T is not yet mandatory in Germany.

 

Data Breaches

If a data breach occurs, you must notify the German Federal Commissioner for Data Protection and Freedom of Information (Bundesbeauftragter für den Datenschutz und die Informationsfreiheit, BfDI) within 72 hours of becoming aware of the incident. If the breach poses a significant risk to individuals' rights and freedoms, affected individuals must also be notified without undue delay.

 

 

Penalties

Late issuance of invoices and non-compliance with the rules on the storage of invoices may result in penalties, which may not exceed €5,000 for each offence.

 

Tax Penalties

For VAT paid late penalty interest is charged at a rate of 1% per month of the tax liability.

For late VAT return a fine of up to 10% of the assessed tax amount may be imposed, with a maximum of €25,000.

There is also a 0.5% Interest per month.

 

Data Breaching Penalties

Failure to comply with the GDPR’s data breach notification requirements can result in significant fines up to €10 million, or 2% of the worldwide annual revenue of the prior financial year, whichever is higher.

 

 

Streamline Global Invoicing and Digital Reporting with Space Invoices

One way to comply with (e-)invoicing, tax and reporting requirements in Germany is to use a provider like Space Invoices.

You will be able to:

Utilize a single API for current and future worldwide compliance, including in Germany

Support and upsell your clients globally, including in Germany

Become the one-stop shop for current and future clients

Streamline processes to save time and reduce costs, while also eliminating manual errors

Rest assured all documents are properly archived and reported to the relevant authorities

Achieve rapid integration, typically completed in less than a week.

 

Having questions about how to achieve compliance in Germany?

We are here to assist.

 

 

This guide is provided by Space Invoices and does not constitute professional tax advice or opinions tailored to the specifics of any particular business or situation. Space Invoices does not accept responsibility for the accuracy or applicability of the content within this guide. Tax regulations, e-invoicing requirements, and digital reporting standards are subject to frequent changes and complex interpretations that require validation by qualified tax professionals. It is the user's responsibility to evaluate the relevance and accuracy of the information provided and to consult appropriate professionals. Space Invoices does not offer professional tax opinions or advice through this publication.

Looking to automate real-time reporting and tax compliance for Germany? Let's talk