BMF clarifies detailed questions on e-invoice in a letter dated 2 October 2023

The consultation of associations on the Growth Opportunities Act, which also provides for mandatory e-invoicing from 2025 (as reportedhereandhere), has raised many concerns and questions. The German Federal Ministry of Finance (BMF) addresses some of these in a letter dated 2 October 2023. This concerns above all the XInvoice, the hybrid ZUGFeRD invoice, and the EDI invoice.

What is an e-Invoice?

In everyday language, an e-invoice is anything that is transmitted electronically - including PDF files via email. However, the planned new regulation is based on a different definition: only XML formats that can be processed automatically by IT systems of the sender and recipient without manual intervention are considered e-invoice . PDF files, on the other hand, must be read by a human. Although OCR software for text recognition can read PDF files, this option is disregarded as it is error-prone and often requires manual post-processing. With XML formats, on the other hand, there are specific requirements on how these invoices must be structured so that they are machine-readable.  This structure enables the entire invoice verification process to be automated, including a reconciliation of the invoice and the order, and theoretically even payment initiation.

Can XInvoice, ZUGFeRD, and EDI formats still be used?

An already established form of e-invoice in this sense is the XML-based XInvoice. This is already obligatory in Germany for the exchange of invoices with public authorities, due to the E-Invoice Act of 4 April 2017. In its letter, the BMF clarifies that the XInvoice, in essence, represents an invoice in a structured electronic format that complies with the European standard for electronic invoicing and the list of corresponding syntaxes as specified by Directive 2014/55/EU of 16 April 2014.

Institutions in Germany and France have also developed a common hybrid invoice standard, which is called Factur-X in France and ZUGFeRD in Germany (the abbreviation stands for "Zentraler User Guide des Forums elektronische Rechnung Deutschland").  This is deemed a hybrid because the invoice consists of a PDF file readable by the human eye and an embedded machine-readable XML file.  In its letter, the BMF also allows the hybrid ZUGFeRD invoice as an  e-invoice – but only from version 2.0.1 onward.  This will also be accompanied by a change to Section 14.4 Para. 3 p. 4 of the administrative guidelines to the German VAT Code (UStAE). This section refers to the legal requirement that electronic invoices must be readable. The previous version required that the invoice be readable by the human eye, which is only possible with XML files after they are converted. If there are differences between the PDF and the XML file in the hybrid format ZUGFeRD, the part of the image that is readable by the human eye has so far taken precedence. The exact opposite will be true when the mandatory e-invoice is introduced: then, the structured part will take precedence.

In its letter, the Federal Ministry of Finance also recognises the importance of the EDI procedure for many economic sectors.  A solution is currently being worked on to ensure the continued use of EDI procedures as far as possible given the future legal framework, although technical modifications may be necessary.

Receiving e-invoice

Due to various enquiries, the BMF is taking steps, as a precautionary measure, to clarify an issue where there is still uncertainty.  During the transition periods, invoice issuers can decide whether they want to issue e-invoice . However, while e-invoice issuers have a choice, e-invoice recipients do not. This means that, , invoice recipients cannot refuse to receive an e-invoice , even within the transitional periods. This is a very important point because it forces companies to prepare technically for the receipt of e-invoice , even if they would like to make use of the transitional period for issuing e-invoice and avoid the issue for a while longer. The only way to escape this requirement would be to persuade suppliers to avoid e-invoicing or to end the relationship with suppliers who do not want to do so. Before taking such a step, however, entrepreneurs should bear in mind that e-invoicing brings considerable advantages and that it may be worthwhile to make the transition sooner rather than later. Above all, the time and cost savings should be mentioned here - for example, the average cost of preparing an invoice is estimated to drop from 23 to 6 euros. However, quite a bit of time and resources must be allocated for the conversion of all processes. Support from an experienced expert is recommended.

What other factors do companies need to consider?

The BMF letter only deals with a few selected questions, and others remain open.  It is unclear, for example, what the e-invoice obligation means for landlords, for whom the rental agreement was previously sufficient as an invoice if it contained all the information required by § 14 para. 4 UStG. According to the wording of the Growth Opportunities Act, this is no longer permissible, unless the BMF creates another simplification rule for this.

For entrepreneurs who provide VAT-exempt supplies and are therefore themselves not obligated to issue e-invoice , the problem comes from the other direction because they must be technically able to receive e-invoice. 

E-invoice cannot be sent to  private consumers without their consent. However, there is a group of "semi-private" entrepreneurs who are largely exempt from all VAT obligations by law; namely, the operators of photovoltaic systems on residential buildings. The obligation to receive e-invoice could cause them problems.

One piece of positive news at the end: there are increasing rumours that the mandatory introduction of e-invoice could be postponed by two years.

Dated: 23 October 2023


Nadia Schulte
+49 211 83 99 330