E-Invoicing Becomes Mandatory in Europe, What Role Does Email Archiving Play?
Electronic invoice or e-invoice is becoming mandatory in Germany. In this article, we explain what an e-invoice is, who it will be mandatory for, why and when e-invoicing has been legislated, and the importance of having a professional email archiving solution in this context.
What is an E-Invoice?
The EN Standard 16931 defines an e-invoice as a structured, electronic document that is transmitted and received in an electronic format allowing for automatic processing. An electronic invoice must be created in a machine-readable format and sent electronically. A scanned paper invoice is not considered an e-invoice and is still treated as a paper invoice. The above also applies to standard invoices sent as PDF attachments in the post, as they contain unstructured information and cannot be processed electronically or automatically to a greater extent.
In Germany, the most common e-invoice formats are "XRechnung" and "ZUGFeRD".
XRechnung Invoice
The XRechnung standard is essentially the German version of a Basic Invoice Usage Specification (CIUS) and EN 16931 standard. XML-based XRechnung supports UBL (Universal Business Language) and CII (UN/CEFACT Cross-Industry Invoice) formats.
ZUGFeRD Invoice
ZUGFeRD ("Central User Guide of the Electronic Invoice Forum Germany") is also based on EN 16931. ZUGFeRD invoices are used for hybrid invoicing, where the invoice is primarily created in a format that is easier for humans to read (PDF/A) and then sent in a structured, machine-readable XML format.
In addition to XRechnung and ZUGFeRD invoices, other formats such as Factur-X, EDIFACT, and ebInterface may also be e-invoice compatible.
When Will E-Invoicing Be Mandatory in Germany and For Whom?
In principle, the transition to e-invoicing must be completed by January 1, 2025, and this applies to business-to-business (B2B) activities. The B2C market is not affected by the new legislation, nor are tax-exempt products and services, invoices below 250 Euros, and public transport tickets. Approximately 12 months later, all public sector suppliers should also be able to send e-invoices. Since April 18, 2019, central government authorities in Germany have been required to be able to receive and process e-invoices. Specific transition periods are in place to facilitate the shift to e-invoicing in the B2B sector, and these are listed below.
January 1, 2025: Companies in Germany that earn taxable income must be able to receive e-invoices by this date. However, these companies are not required to send e-invoices. For example, invoices can also be sent in another common format (e.g., paper invoice or PDF), provided the recipient approves. This temporary arrangement is valid until the end of 2026 for companies with annual revenues exceeding 800,000 Euros (p.a.).
January 1, 2027: From 2027 onwards, all companies in the B2B sector with annual revenues exceeding 800,000 Euros will be required to send e-invoices. Companies with lower revenues may continue to send invoices in another common format until December 31, 2027, provided the invoice recipient agrees.
January 1, 2028: From 2028 onwards, all B2B companies will be required to use e-invoicing.
Germany is not alone in making mandatory B2B e-invoicing: Similar regulations already exist in Italy, Poland, and Romania, and France and Hungary have also indicated their intention to do the same. The driving factor behind this is a proposal by the European Commission known as ViDA (VAT in the Digital Age) aiming to optimize tax procedures.
What is the Legal Background?
Mandatory e-invoicing is based on various laws and regulations. The EU Directive 2014/55/EU sets the standards for electronic invoicing in public procurement systems. In Germany, these standards are implemented as a specific e-invoicing regulation (E-RechV) dated October 13, 2017.
German legislation, within the scope of the "Growth Opportunities Act" (Wachstumschancen-Gesetz) dated February 23, 2024 (approved by the Federal Council on March 22, 2024), has paved the way for mandatory e-invoicing for companies. The law aims to increase economic growth by reducing bureaucracy. Mandatory e-invoicing aims to simplify taxation and make it fairer for all companies.
In addition, Germany's VAT Law (UstG) has recently defined the basic tax requirements for electronic invoices. These standards, derived from both the VAT Law and the German Tax Code (AO), are validated by GoBD ("the principles for the proper management and storage of books, records, and documents in electronic form as well as data access"). GoBD contains the requirements for recording, processing, and storing tax-related data electronically and applies to all companies that must pay taxes, freelancers, and self-employed individuals.
Why is E-Invoicing Being Introduced?
Tax authorities hope that the ViDA Initiative (VAT in the Digital Age) and e-invoicing will optimize VAT collection across the EU. The goal is to create an efficient and transparent VAT reporting system for all involved parties. Invoices that can be processed electronically mean that invoiced transactions can be directly transmitted to the relevant tax authority. Automated processes save time during data transfer, reduce errors in tax calculations, and prevent attempts at tax fraud. In addition to the advantages of faster invoice payment due to automated processing, e-invoicing also provides potential cost savings in paper and postage.
What Role Does Email Archiving Play?
E-invoices can be sent automatically via an ERP system or as an attachment to an email (ZUGFeRD invoice). In both cases, appropriate protection must be provided to prevent loss or manipulation of the invoice data and ensure that the invoice data is always available. If e-invoices are sent via email, the best way to protect the data is through a professional email archiving solution. This is because a professional email archiving solution can copy emails and their attachments to an independent archive before they become visible in the user's mailbox, regardless of the email client or server. This ensures that invoice documents are not lost in case they are intentionally or accidentally deleted from the mailbox. Additionally, emails stored in the archive are encrypted to prevent manipulation of the data. Furthermore, since the archive is independent of the platform, invoice data remains accessible even if technical issues or cyberattacks make personnel mailboxes or entire mail servers inaccessible. In conclusion, a professional email archiving solution such as MailStore Server has the capability to securely archive all e-invoices sent via email.