Invoicing and Tax regulation in Germany

Navigating German evolving e-invoicing and tax regulations can be challenging. This guide provides an overview of the latest requirements to help you stay compliant and avoid potential penalties.

In the guide, we will cover:

Regulations Timeline

German E-invoicing Requirements (2024 Update)

Tax Regulations

Digital Reporting

Penalties

Achieving Global Invoicing and Tax Compliance with Space Invoices

 

Regulations Timeline

A quick overview of all current and upcoming regulations that Germany mandates regarding e-invoicing and digital reporting. For more details, check out the sections below.

Regulations in Effect:

Mandatory e-invoicing for all B2G transactions,

Voluntary e-invoicing for B2B and B2C transactions.

Upcoming Changes to German E-invoicing:

1st January 2025: Mandatory capabilities of receiving and processing e-invoices in Germany;

January 2027: Companies with an annual turnover of more than €800,000 must issue e-invoices in Germany;

January 2028: All companies have to issue e-invoices in Germany.

 

German E-invoicing Requirements (2024 Update)

In Germany, current regulations mandate e-invoicing for all B2G transactions. While B2B e-invoicing is voluntary for now, companies will be required to integrate capabilities for receiving and processing e-invoices starting in January 2025. By January 2027, the regulation will expand to mandate that companies with an annual turnover exceeding €800,000 issue e-invoices, and by January 2028, all companies will be required to do so. B2C e-invoicing remains optional.

To support this transition, Germany has implemented:

The PEPPOL network

Directive 2014/55/EU

A centralized platform known as ZRE (Zentrale Rechnungseingangsplattform des Bundes).

Governmental Body Responsible for E-invoicing

The Federal Ministry of the Interior, Building and Community (BMI) is responsible for e-invoicing regulations in Germany, particularly when it involves the public sector.

Click here to visit their official website.

For the technical implementation and maintenance of the e-invoicing platform, the responsibility lies with the Federal Central Tax Office (BZSt).

Click here to visit their official website.

E-invoicing Formats

In Germany, e-invoices are typically exchanged using the XML format, usually in either XRechnung or PEPPOL BIS Billing 3.0. Businesses connect to ZRE and Online Access Act (OZG); facilitating the exchange of electronic invoices between B2G and supports the Belgian government’s commitment to streamlined digital invoicing.

E-invoice Requirements

Invoices must be issued at the time of the supply and for taxable customers, they have to be issued by the 10th of the month following the supply. They can be issued in either electronic or paper form and must include the following components:

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.

Certain transactions may require additional information:

B2C Transactions:

Simplified Invoices Include:

E-invoice Archiving

E-invoices must be archived for a minimum of ten years.

 

Tax Regulations

Value Added Tax (VAT)

The standard VAT rate in Germany is 19% and applies to most transactions.

However, Germany also enforces reduced VAT rates:

14% rate: Applies to certain agricultural products;

7% rate: Applies to qualifying medicines, medical goods, and specific services.

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%.

VAT on Digital Services in Germany

Digital services in Germany are generally subject to a 15% VAT. However, foreign companies selling digital services to German consumers have some extra regulations:

They are required to register for VAT in Germany or opt for the EU's One-Stop Shop (OSS) schem, if their annual turnover from these services exceeds €10,000.

B2C Transactions: The VAT must be collected at the time of sale, it must be charged on the customer's location.

Digital services that are subject to VAT include e-books, software downloads, music, movies, games, and other electronically supplied services.

 

Digital Reporting

Ukraine has already introduced several digital reporting requirements, with more to come:

B2G e-invoicing is required for all companies;

B2B e-invoicing will be mandatory in 2025-2028;

B2C e-invoicing is voluntary;

Tax returns must be submitted electronically.

VAT Registration and Thresholds

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

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

Non-EU businesses selling into Germany have are required to register for VAT immediately upon beginning sales of goods or services to German consumers.

VAT Returns and Payments

The reporting frequencies are as follows:

Monthly Reports: are mandatory, for businesses with a turnover exceeding €1,000,000 in the previous year and must be submitted by the 10th day of the month.

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

 

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.

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.

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.

 

Achieving Global Invoicing and Tax Compliance with Space Invoices

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

You will be able to:

Use one API for current and future global tax and invoicing compliance, including Germany

Save time and money with integration that takes less than a week

Support and upsell your clients worldwide, including Germany

Ensure all documents are archived and successfully reported to responsible institutions

Become a one-stop shop for current and future clients

Streamline processes and eliminate manual errors, saving time and money

Do you have questions about achieving compliance in Germany?

We are ready to help.

 

The information in this guide is strictly informative, as regulations and timelines change frequently. While we make every effort to monitor updates and maintain the accuracy of our content, we recommend consulting with a tax professional or e-invoicing specialist for the most reliable and personalized advice. This guide was last updated on November 8, 2024.

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