E-invoicing in Germany: challenges, triumphs and everything in between

Blog Compliance May 20, 2020

Like many European countries, Germany has been on the quest to implement standards for e-invoicing for nearly a decade. Trent Targa describes the journey of e-invoicing in Germany, details the requirements for sending and receiving e-invoices, and gives us the current status of initiatives in the country.

The beginning of the German e-invoicing journey

Germany’s e-invoicing journey started in the same way as it did for many other EU member states in 2010-11, with the introduction of Directive 2010/45/EU. The Directive specified that e-invoices are required to be treated in the same way as paper invoices, without additional conditions being applied.

Germany implemented changes in tax legislation to fulfill the Directive requirements, transposing them in the Tax Simplification Act of 2011 and amendments in Section 14 of the Sales Tax Law (UStG). The alterations allowed e-invoices to become legally equivalent to those in paper form.

Introduction of the e-bill ordinance

In 2014, the Council of the European Union released Directive 2014/55, refining the EU’s definition of an e-invoice. According to the new Directive, human-readable formats such as PDF, TIFF, or JPEG were no longer valid e-invoices.

The new Directive also elaborated a requirement for authorities in each EU Member State to be able to receive and process e-invoices by:

  • 18 April 2018 for central contracting authorities;
  • 18 April 2020 for sub-central, regional, and local offices and entities.

As a national implementation of this new Directive, the German government published an additional Section 4a of the eGovernment Act (EGovG) that came into force in May 2017. The Act empowered the federal government to enact special regulations on the design of e-invoices by ordinance.

The Federal Ministry of the Interior published such an ordinance called the e-bill ordinance (ERechV). The bill states that all federal authorities, such as constitutional bodies and federal ministries, must receive and process e-invoices in the Xrechnung format or other formats that comply with the European standard on e-invoicing from 27 November 2018. A year later, all other federal contracting authorities (federal tax offices, police authorities, federal universities, hospitals, etc.) had to do the same.

Finally, in October 2018, the IT Planning Council decided all authorities at both federal and state-level should always offer Peppol if an automated data submission/exchange is provided for the delivery of e-invoices.

The Xrechnung format

The development of Xrechnung has been instrumental in the implementation of e-invoicing in Germany.

KoSIT announced the Xrechnung standard for e-invoicing version 1.0 on 5 October 2017 (the latest version is 1.2.2). In accordance with Decision 2017/22 of the National IT Planning Council, the format was made public, and updated in the ERechV. ERechV further states that “The issuer of electronic invoices and invoicing senders must generally use the data exchange standard XRechnung”.

In April 2018, the IT-planning council mandated the use of the Peppol eDelivery network for e-invoice transmission and created their own Peppol Authority, KoSIT.

Xrechnung (invoice) submission directly to platforms

Despite the existence of various platforms, Germany has implemented a unified routing logic. This routing ID (Leitweg ID) allows the invoicing platform to correctly distribute the invoice to the contracting authority. The Leitweg ID is a mandatory element in the Xrechnung schema. The ID has the following structure:

ID structure for e-invoicing in Germany

Peppol in Germany

As per unofficial information obtained by Pagero from OpenPeppol from November 2018, OpenPeppol worked together with the IT Planning Council and KoSIT on the German requirements into Peppol specifications. This collaboration enabled e-invoice exchange in the format Peppol BIS 3 (DE CIUS), which along with XRechnung can be used in the Peppol infrastructure.

Peppol Service Providers (SPs) are a central part of the Peppol network and connect users (buyers or sellers) through other SPs that can receive and send e-documents and messages.SPs have easier routing and clearer terms for communication than traditional operator-controlled communication. SPs use predefined transport profiles to exchange information between transmitters and recipients of messages in the Peppol network.

As previously mentioned, the Xrechnung format is permitted via the Peppol infrastructure. The Xrechnung format is, however, German-specific. Therefore, it should be advised to choose a Peppol SP that can create, transmit, and receive this format. It is also advised to select a provider that is accredited by the German Peppol Authority and is, therefore, approved to conduct Peppol transactions in Germany.

Invoice submission via Peppol

Ordinary Peppol routing logic will be used applying the Peppol Routing ID.

The Peppol Routing ID structure:

  • DE: LID (9958: Leitweg ID)
  • DE: LWID (0204: Koordinierungsstelle für IT-Standards (KoSIT))
  • DE: VAT (9930: German VAT number)

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The Portals

To support the federal administration in accepting e-invoices, a central federal incoming invoice platform was developed.

Since 20 November 2018, the central entrance for electronic invoices, the Federal Central Invoice Receiving Platform (ZRE), has been live and obliges all companies to submit e-invoices. Invoices are to be submitted in the Xrechnung standard.

To support the federal states in accepting e-invoices, a second platform has also been made available to suppliers (the online access law-compliant invoice receipt platform, OZG-RE).

Both platforms have similar invoice entry capabilities, as well as comparable user interfaces. The OZG-RE acts as a central entrance for electronic invoices in the XRechnung standard to the indirect federal administration and is also available to the individual federal states as a platform basis.

Five main functionalities of the platforms

1. Authentication

Invoice senders can register and authenticate themselves on the portals. This functionality is provided via user accounts.

2. Invoice generation and submitting

In the portals, there are 2 options for suppliers to generate e-invoices:

  • Manually filling out an online form
  • Xrechnung invoice created in house to be attached or uploaded

3. Reception / transmission channels

Invoice senders have different delivery options:

  • An email with an XML attachment
  • De-mail with XML attachment
  • Uploading XML via an online form
  • Peppol (Xrechnung)

The only fully automated transmission channel is through Peppol. All other methods require some kind of manual intervention.

4. Validation

Invoices are checked by the portals for formal correctness of Xrechnung schema, automatically rejecting them if they are not accepted. This will significantly reduce the number of incorrect invoices submitted to the end receiver.

5. Addressing/forwarding

The centrally submitted and checked invoices are forwarded to the correct invoice receiving authority. The authorities are identified using a Leitweg ID or Peppol ID for Peppol transactions.

Timeline for Public Procurers (public contracting authorities)

The implementation deadlines for receiving e-invoices in Xrechnung format are as follows:

  • 27 November 2018 for the highest federal authorities and the constitutional organs of the federal government;
  • 27 November 2019 for all federal ministries all other federal contracting authorities, i.e. tax offices, police authorities, universities and hospitals;
  • 18 April 2020 for federal states and municipalities.

Timeline for suppliers (invoice issuers)

For suppliers, it may be an exhausting task to understand which receivers can receive what format of invoices, where to deliver them, and via which transmission or communication channel can be used.

Suppliers to federal authorities and Bremen state authorities must issue e-invoices in either Xrechnung format or another format that meets the European standard requirements from 27 November 2020. This means that paper-based or non-CEN-compliant PDF invoices can be rejected by invoice recipients.

Further timelines:

  • In Baden-Wurttemberg: If the buyer is an authority of the state, suppliers are obliged to submit their invoices electronically from 1 January 2022 to the state-owned Central Invoicing Office.

  • In Hesse(n): Suppliers in public procurement contracts to are obliged to send e-invoices to state-owned authorities from 18 April 2024.

Scattered approach to e-invoicing

Despite the implementation of all the previously mentioned measures, e-invoicing procedures remain heterogeneous throughout Germany.

Some of the regulations at the state (Länder) level differ considerably. Some states have spoken out in favor of using the federal online invoice receipt platform (OZG-RE). However, there will also be numerous self-operated platform solutions. Some federal states have not even made statements as to how the e-invoice receipt will work.

In addition, many country-specific legal and administrative requirements differ considerably—for example, a minimum or maximum amount at which only e-invoices are to be accepted, which e-invoice formats (e.g. Xrechnung, ZUGFeRD 2.0, etc.) are permissible, or which transmission channels will be available.

Where are they now?

The implementation status of German e-invoicing infrastructures as per April 2020 is as follows:

  • The infrastructure (Bundesportal ZRE) went live in November 2018
  • Some federal states (Länder) will use the (OZG-RE) which is now live:

    • Berlin
    • Brandenburg
    • Saxony
    • Thuringia
    • Mecklenburg Vorpommern