The Path to Mandatory E-Invoicing

The national e-invoicing requirement for business-to-business transactions is a prerequisite for the introduction of the tax reporting system, analogous to the European plans for intra-Community supplies of goods and services under the ViDA Directive (VAT in the Digital Age). As of January 1, 2025, a general requirement to receive e-invoices applies to all businesses. The requirement for businesses with prior-year revenue of 800,000 euros to issue e-invoices takes effect on January 1, 2027. The general requirement for all businesses to issue e-invoices takes effect on January 1, 2028, with the exception of micro-enterprises.

Problem: Validation – Invoice Verification

There is a requirement to verify e-invoices. According to the second BMF circular on the introduction of e-invoicing, validation errors only result in VAT-related consequences if they pertain to the e-invoice format (CEN Standard 16391) and the mandatory VAT information. Format errors result in the invoice being classified as “other,” while content errors mean the invoice is not valid, which leads to the loss of the right to deduct input tax.

Currently, companies are confronted with different validation solutions and results on both the outgoing and incoming sides, which leads to excessive coordination efforts and legal uncertainty. It is unclear whose validation result is the authoritative one. Therefore, a uniform regulation for validation is needed. The Federal Ministry of Finance (BMF) could propose suitable validation applications to provide greater legal certainty or make a voluntary government validation tool available.

Problem: Ambiguities in Filling Out E-Invoice Fields

The e-invoice standard allows too much room for interpretation regarding the entry of mandatory VAT information, which leads to validation errors and, consequently, non-compliant invoices. To address this issue, the State Coordination Office for IT Standards (KoSIT) and the Association for Electronic Invoicing (VeR), in consultation with the business community, published a recommendation in 2025 regarding the completion of e-invoice fields with mandatory VAT information. The Federal Ministry of Finance (BMF) has also included these recommendations in its FAQ catalog.

The current validation issues show that this voluntary guidance has not led to uniform application of these requirements. This can only be achieved through legally binding guidelines, which should be published promptly by the tax authorities. IT companies need sufficient lead time to program their e-invoicing software and test it within businesses. Only then will they be able to comply with the issuance requirement in a legally compliant manner starting January 1, 2027.

Problem: Input Tax Deduction Starting January 1, 2027

Despite the requirement to issue e-invoices starting January 1, 2027, and January 1, 2028, respectively, significant problems persist regarding the use of e-invoices. In addition to the problems already described, previous simplifications for complying with the mandatory VAT reporting requirements in a structured format are no longer applicable, leading to transition issues and legal uncertainty. With the upcoming requirement to issue e-invoices, companies fear that, due to the problems described, invoice recipients will refuse to accept the invoices out of fear that they will be unable to claim input tax credits, thereby causing a halt in payments in commercial transactions.

This development must be prevented. Under European law, the German tax authorities may not make input tax deduction contingent on the existence of an electronic invoice until the European reporting system is introduced on July 1, 2030. Until that date, businesses can demonstrate compliance with the requirements for input tax deduction in other ways, such as by providing an alternative invoice. The tax authorities must clarify that, until the introduction of the EU reporting system on July 1, 2030, input tax deduction must be granted upon presentation of a valid alternative invoice, despite the issuance requirement taking effect on January 1, 2027.

Problem: Legal Uncertainty in the FAQs

The Federal Ministry of Finance (BMF) responded early to the outstanding questions regarding the implementation of e-invoicing and published answers in the online FAQ catalog. While this promotes transparency, it does not create legal certainty. It is therefore essential to incorporate certain provisions from the FAQ catalog into the Value-Added Tax Application Decree. Furthermore, the simplification rules set forth therein should apply not only to individual industries but generally.