Introduction of e-invoicing – a look at the draft of the second BMF letter

Since 1 January 2025, the issuance of electronic invoices (so-called e-invoices) between German entrepreneurs has been mandatory (Sec. 14 para. 2 no. 1 sent. 2 of the German Value Added Tax Act (Umsatzsteuergesetz, “UStG”)). The German Federal Ministry of Finance (Bundesfinanzministerium, “BMF”) published an initial letter on this subject on 15 October 2024 (BMF, letter dated 15 October 2024 – III C 2 - S 7287-a/23/10001 :00), which specified the requirements for e-invoices with regard to permissible formats, transmission channels, mandatory information and attachments.

A draft of a second BMF letter on the introduction of mandatory e-invoicing (III C 2 - S 7287-a/00019/007/230) is currently available, which supplements the first BMF letter. The principles of the second BMF letter apply to all transactions carried out after 31 December 2024. 

The draft was published for general information purposes while still in the draft stage because this issue is of great importance to the economy.

The final publication of the BMF letter is expected in the fourth quarter of 2025.

A. Permissible formats for e-invoices and their components

From 1 January 2025, any e-invoice issued must comply with a specific format. If the requirements of the European standard EN 16931 are met, the format is considered permissible. The XRechnung structured format and the ZUGFeRD hybrid format (with a structured and unstructured part) commonly used in Germany are also permitted, with the exception of the MINIMUM and BASIC-WL profiles.

Furthermore, the format of an e-invoice can also be agreed between the invoice issuer and the invoice recipient if the format used allows the correct and complete extraction of the information required under the UStG from the e-invoice.

B. Key contents of the draft BMF letter

The draft contains several clarifications and additions regarding the practical handling of e-invoices:

• Consequences of format errors (amendment to margin note 7)

If a file does not meet the requirements for the structured electronic format of an e-invoice pursuant to Sec. 14 para. 1 sent. 6 UStG due to formatting errors, it is considered a different type of invoice under the provisions of Sec. 14 para. 1 sent. 1 UStG. This provides relief for all those who are not required to issue e-invoices.

This means that even if there is a format error, the entrepreneur still has the option of correcting it and, in this respect, a proper invoice within the meaning of Sec. 14 and 14a UStG can be generated retroactively to the date of issue of the other invoice, which entitles the recipient to deduct input tax.

• Consequences of errors in content (amendment to margin note 35)

Errors in the content (e.g. those identified during validation) should not affect classification as an e-invoice. However, in this case, the invoice should be considered improper. A mandatory correction is therefore required in order to preserve the right to deduct input tax, even if the service provider could issue another invoice for this particular case. Furthermore, supplementing the structured data with a reference to unstructured data shall not result in a proper invoice.

• Extension of exceptions (amendment to margin note 22)

In future, small businesses will also be able to issue and transmit other invoices. In this case, the use of such other invoices requires the informal consent of the invoice recipient, which may also be implied. 

• Retention obligations (amendment to margin note 60)

When it comes to keeping e-invoices, the structured part of each e-invoice must be stored so that it is available in its original form and meets the immutability requirements.

The draft clarifies that, with VAT in mind, no violation of Sec. 14b para.1 and 14 para. 3 UStG occurs if e-invoices are not saved in systems that comply with the GoBD. 

In addition, the draft contains amendments to the VAT Application Decree. 

C. Classification of the planned additions by the draft

The planned amendments mainly contain clarifications, which are welcome insofar as they contribute to legal certainty. Accordingly, we expect that businesses that are subject to the e-invoicing obligation and already comply with it will not have to make any fundamental changes. 

D. Dealing with the introduction of e-invoicing and outlook for further developments

Transitional provisions will apply for the period from 1 January 2025 to 31 December 2027. Businesses will even be able to continue using the previous invoice formats (e.g. paper or PDF) for transactions carried out before the end of 2026 without any conditions.

It makes sense to start dealing with the changeover early, as longer processing times are likely to be expected by the end of 2027 at the latest if third-party providers are used for the technical implementation of the changeover. This is the only way to avoid delays in issuing valid invoices in the new year. Otherwise, some customers may not pay their invoices due to not receiving a proper invoice. Issuing e-invoices more than six months late may result in fines (Sec. 26a para. 2 no. 1 UStG), as not issuing or issuing late an e-invoice constitutes a punishable offence according to the wording of the law.

Going forward, service recipients should ensure that they confirm the accuracy of invoices using suitable validation applications. If errors are found, the invoice issuer should be asked to issue a proper invoice. The invoice recipient has a civil law claim to this. The state of Baden-Württemberg provides a validator for XRechnungen (here).

This is particularly important in light of the fact that the Council of the European Union adopted a package of measures on VAT in March of this year as part of "VAT in the Digital Age" (information and recommendations for action in English), which includes a mandatory e-invoicing requirement. This requirement will apply to B2B transactions in the EU from 1 July 2030.

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The above information is for informational purposes only and does not constitute legal or tax advice.

Our legal trainee Christian Müller contributed to the preparation of this article.