E-Invoicing: Achieving Operational Efficiency While Fulfilling on the EN 16931 Mandate

In March of earlier this year, the Federal Council approved the Growth Opportunities Act, which triggered the path for mandatory e-invoicing in Germany.

Now that the e-invoicing obligation for the B2G (Business-to-Government) sector has primarily been implemented in Germany, the e-invoicing obligation for domestic invoices in the B2B sector will start gradually from 1st January 2025 to the end of 2027. The introduction of a reporting system in Germany to combat VAT fraud is planned to begin in 2028.

In principle, businesses can issue an invoice if they provide a delivery or other service. If this service is provided to another company and the transaction is not tax-exempt by § 4 No. 8 – 29 UStG, they must issue an invoice. Businesses have six months to issue the invoice (from when the service is provided). These introductory provisions remain unchanged by the Growth Opportunities Act. However, the obligation to issue invoices electronically by § 14 para. 2 sentence 2 no. 1 UStG-E is new.

The obligation to issue an electronic invoice applies exclusively to business relationships between companies (B2B). In addition, the supplier and the recipient must be residents in Germany (or territories pursuant to § 1 para. 3 UStG).

To be considered a resident in Germany, either a registered office, a management, or a permanent establishment (involved in the corresponding turnover) in Germany is required. If there is no registered office, domicile, or habitual residence in Germany pursuant to § 14 para. 2 sentence 3, UStG-E is also sufficient. Therefore, VAT registration in Germany without residence does not constitute an obligation to issue electronic invoices.

Starting 1st January 2025, receiving e-invoices by EN 16931 will be mandatory for all German B2B transactions. The following formats are acceptable:

• ZUGFeRD: Hybrid format – human-readable PDF/A-3 with embedded XML file in the Cross-Industry Invoice (CII) syntax
• XRechnung: XML file in the Cross-Industry Invoice (CII) syntax
• XInvoice: XML file in the Universal Business Language (UBL) syntax
• Traditional EDI – those formats interoperable with EN16931 and compatible with the European standard.

The Transition Timeline and Requirements

The path to fully adopting e-invoicing is marked by a series of transitional phases, particularly relevant for businesses operating within the EU and Germany. Understanding this timeline and the associated requirements is vital for seamless adaptation. Requirements include:

• January 1, 2025, through 2026: The continued use of paper invoices for B2B transactions is acceptable, alongside electronic invoices that might need to meet new standards, provided the recipient’s consent is obtained.
• In 2027, Paper billing remains an option. E-invoices that do not conform to the latest formats are still permissible under specific conditions, such as the issuing business not exceeding a turnover threshold of €800,000 in the previous year. The alternative for larger companies is adhering to the EDI procedure, assuming the electronic data can integrate with or align with the European standard.

This year marks a pivotal shift—e-invoicing compliance with the European standard becomes mandatory, rendering old EDI procedures that fail to extract required information incompatible. The introduction of ViDA proposals and the coalition agreement’s reporting system signifies a concentrated effort to minimize the economic compliance burden, focusing on national and cross-border B2B sales.

Germany’s planned reporting system aims to reconcile national requirements and the EU’s ViDA stipulations by mandating the reporting of intra-community B2B transactions starting 1st January 2028. This dual approach minimizes redundancy and alleviates the administrative burden on businesses, highlighting the importance of preparedness for these upcoming regulatory shifts.

The Core Components And Benefits of E-Invoicing

To navigate the world of e-invoicing, understanding its core components is crucial. These include:

• Schema: This is the blueprint for e-invoices, typically prescribed by tax authorities. It outlines the specific structure an e-invoice must adhere to, ensuring consistency and compliance.
• Semantic: Refers to the set of transaction data that an e-invoice must contain. It’s essential to ensure that all necessary information is communicated clearly.
• Syntax and the CIUS: While syntax relates to the invoice data structure rules, CIUS (Core Invoice Usage Specification) details additional requirements specific to particular domains or industries.

The adoption of e-invoicing presents a wealth of benefits, crucial for businesses in the digital era:

• Efficiency and Accuracy: The digital nature of e-invoicing significantly reduces manual data entry errors, ensuring accurate transactions.
• Cost Reduction: Moving away from paper-based processes reduces printing and storage costs.
• Regulatory Compliance: With regulations tightening, adopting e-invoicing ensures businesses stay ahead of legal requirements and avoid penalties.
• Enhanced Security: Digital invoices can be encrypted, ensuring data integrity and confidentiality.
• Eco-Friendly: Reducing paper usage contributes to environmental sustainability efforts.

Saison Technology’s Data Integration Solution for E-Invoicing

Like many government mandates, the e-invoicing mandate from the Growth Opportunities Act has caused additional strain on many IT teams across Europe. While many companies have already made significant digital transformations in finance, the extra burden of e-invoicing is currently challenging many companies. Determining what data is required and understanding how it will be transformed into the ERP or accounting workflow can be challenging. And setting up integrations to move the data automatically is another challenge altogether.

Consequently, Saison Technology offers a fully managed data integration service that enables companies to progress on e-invoicing even if they don’t have adequate staff or financial resources to address the January 2025 deadline. For a flat monthly fee, we will design, deploy, and manage your data integration needs on a single modern platform with complete enterprise security.

The key benefits of HULFT Managed Integration Service include:

• Total customer control and visibility. Even though HMIS is outsourced, we provide complete visibility via the Global Administrator Console that business and IT professionals use. 
• A foundation to reduce complexity and spur innovation. Saison Technology provides a path to solve e-invoicing integration needs today, and we provide the infrastructure that integrates seamlessly with other enterprise systems. Our framework makes future projects more doable and more efficient no matter what data source and how old it is. 
• Simple and predictable billing. We provide complete transparency with mutually agreed-upon monthly prices and initial setup fees. 
• GDPR, CCPA, and SOC 2 compliant. Our data models enable organizations to confidently expand deployments globally, knowing that machine data and customer information are protected in any country.

Final Thoughts

The transition to e-invoicing is not merely a regulatory obligation but a strategic move toward operational excellence. As deadlines approach, businesses are encouraged to reassess their invoicing processes, explore compatible e-invoicing solutions, and engage in professional consultations to ensure a smooth transition. Embracing e-invoicing is embracing efficiency, accuracy, and sustainability—hallmarks of future-proof businesses ready to navigate the complexities of the digital age.