Invoicing and Tax regulation in Germany
Invoicing Regulation in Germany
Invoicing in Germany is strictly regulated. According to the German Value Added Tax Act (UStG), all business transactions, either b2b, b2c or b2g, must include invoices. These invoices must include specific data, such as the name and address of the issuing business and the customer,the quantity and type of item delivered or the extent and nature of the service provided, the date of issuance, and the tax amount. There are severe penalties for non-compliance, making it mandatory for businesses to adhere to these regulations.
Real-Time Reporting / Fiscalization in Germany
Beginning in 2020, all electronic point of sale (POS) systems in Germany are required to have a certified technical security system (TSS) including a cryptographic module, a security module and a digital interface for real-time transaction recording, thus enabling real-time reporting. This is known as fiscalization. It applies to all businesses, including b2b, b2c and b2g, and has been compulsory since 2022.
E-Invoicing in Germany
E-Invoicing is mandatory for b2g transactions in Germany as of November 27, 2020 following the EU directive 2014/55/EU. This means that all invoices to public institutions must be issued and received in an electronic format. For b2b and b2c transactions, e-invoicing is not required, but it is widely adopted due to its convenience and efficiency.
VAT/GST/Tax Compliance in Germany
Value Added Tax (VAT) is an important aspect of tax compliance in Germany. The standard VAT rate is 19%, with a reduced rate of 7% for some goods and services. Businesses are required to charge this tax for all b2b and b2c transactions. There is an exception for small businesses which have turnover under 22,500 euros in the previous year and are projected to have a turnover under 50,000 euros in the current year, they are not required to collect VAT. Tax compliance is mandatory and non-compliance is subject to penalties. For b2g transactions, reverse charge mechanism is applied where the recipient of the goods or services is liable to pay VAT not the supplier.