As a first measure for the introduction of transaction-based reporting, the Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) is considering the mandatory introduction of electronic invoices for B2B domestic sales. It could even start as soon as January 1, 2025!
Update
On June 23, the European Commission granted Germany permission to deviate from parts of the VAT Directive, thus introducing mandatory electronic invoices for the B2B sector. The authorisation is valid from 1 January 2025 to 31 December 2027, making 1 January 2025 a possible starting point. This is also outlined in the new Growth Opportunities Act (Wachstumschancengesetz), which has already been approved by the Federal Cabinet.
The regulation proposed by Germany aligns with the requirements of the "VAT in the Digital Age" (ViDA) package, especially Articles 218 and 232 of the Directive. The exemption will remain in effect until 31 December 2027, or until the point at which Member States are obligated to enact new national regulations based on a directive amending the value-added tax rules for the digital age. This exemption authorisation allows Germany to commence earlier than the rest of the EU!
What is "VAT in the Digital Age"?
"VAT in the Digital Age" is the new directive from the European Commission that mandates intra-community electronic invoicing (explicitly NOT in PDF format) and mandatory digital reporting of business-to-business invoices by 2028 for all European member states.
The directive announced by the European Commission in December 2022 aims to recoup billions of euros in value-added tax lost each year due to fraudulent invoices and abusive VAT claims.
This obligation for intra-community electronic invoicing and digital B2B reporting obliges the Member States to create and implement a system that allows electronic invoicing and electronic reporting. The introduction of these systems will prompt many Member States like Germany to take the logical next step and make all domestic B2B transactions mandatory electronic, with the aim of collecting domestic value-added tax amounts and further digitalising the economy.
Read more about VAT in the Digital Age (ViDA) in our blog (currently only available in English).
Germany's response in detail
In recent weeks, the BMF (Federal Ministry of Finance) has sent a draft proposal for discussion to selected German associations and requested feedback on the planned legal changes.
The proposal, which has already been approved by the Federal Cabinet, envisages the mandatory introduction of electronic invoicing for domestic B2B transactions from January 1, 2025, with a gradual implementation. Various approaches are provided for in the so-called Growth Opportunities Act:
- The priority of paper invoices is eliminated, and the recipient's consent for receiving EN16931-compliant e-invoices is no longer required.
- Starting from January 1, 2025, the receipt of e-invoices in accordance with EN16931 will be mandatory for all recipients in the B2B sector.
- From January 1, 2025, to December 31, 2025, other digital or paper invoices are also allowed if the recipient agrees.
- Exceptions for invoices under 250 euros according to § 33 UStDV (VAT implementation order) and tickets according to § 34 UStDV.
This means that both paper and PDF invoices, and later even EDI invoices, will no longer be permitted!
As mentioned earlier, the current ViDA proposal enforces transaction-based reporting for intra-community B2B transactions and abolishes the recapitulative reporting from 1 January 2028. Germany aims to establish a unified electronic system for transaction-based reporting, minimising the effort for both national and cross-border B2B transactions. The ongoing discussions at the EU level are taken into account in shaping the national reporting system, and the resulting technical requirements are incorporated into the deliberations.
It's important to note that Germany is moving towards what is called a DCTCE model (Decentralised CTC Exchange). The DCTCE model is a joint effort by the world's major players in electronic invoicing aimed at achieving 100% interoperability and full automation of business processes. This new model allows for the automation of business processes without tax authorities having to forego the value-added tax information they require.
For more information (in English) on the DCTCE model, click here.
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