Growth Opportunity Law draft - plans for e-invoicing

On 8 December 2022, the EU Commission presented a draft on how it envisions the digitalisation of VAT invoicing and reporting obligations as part of the VAT in the Digital Age (ViDA) project. The BMF quickly followed suit and submitted a draft law to the associations for discussion. The result has been incorporated into the draft of the Growth Opportunities Act and now provides for more leeway during the transition.

Overview of the planned e-invoice regulations

• New definition: Only invoices meeting the requirements of Directive 2014/55/EU are considered electronic invoices (e-invoice). Everything else is considered an "other invoice", meaning that invoices transmitted electronically but not meeting this standard are legally speaking not e-invoices.
• E-invoicing will be mandatory from 1 January 2025 onward for supplies meeting all of these criteria:
• The place of supply is in Germany and the supply is either not VAT exempt or VAT exempt according to § 4 No. 1-7 UStG (German VAT Code).
• The supply was by a supplier established in Germany.
• The supply was made to another taxable person, established in Germany, for their business.

A supplier is considered to be established in Germany if the registered office, management, a permanent establishment involved in the transaction or, in the absence of a registered office, domicile or habitual residence are located in Germany. The draft law does not address the difficult issue of dual establishment, but it can be assumed that these cases will also be resolved according to the general principles of the VAT Regulation.

• The recipient's consent to the e-invoice is no longer required if the e-invoice is mandatory. In cases where the e-invoice is not mandatory, e.g., if the place of supply is in Germany but the supplier and/or the recipient is not established here, an e-invoice (like any other electronic invoice) still requires the recipient's consent.
• The deadline for issuing the e-invoice will initially remain at six months; once the changeover to the electronic "almost-real-time" reporting system has also been completed, the deadline will be only two days according to the EU Commission's draft.
• Generous transitional rules ensure that those who so desire can leave everything unchanged for quite a long time.
  • For transactions occurring between 1 January 2025 and 31 December 2025, an "other invoice" (another electronic format or on paper) can be issued instead of an e-invoice until 31 December 2025.
  • For transactions occurring between 1 January 2026 and 31 December 2027, an "other invoice" can also be issued instead of an e-invoice until 31 December 2027 if it is transmitted via EDI. Paper invoices are no longer permitted.
  • In both cases, the recipient must agree to receive an electronic invoice that does not comply with the e-invoice requirements. The recipient cannot refuse to accept a paper invoice.
• The criteria of the authenticity of the invoice’s origin, the integrity of its content and its legibility are newly summarised in § 14 (3) of the Draft VAT Code, but, as  before, more detailed information is not provided.
• Tickets and small-value invoices remain exempt from the new regulations.

According to the EU Commission's ViDA timetable, EU Member States will be allowed to introduce e-invoices on a mandatory basis as early as 2024. However, since the Member States are not yet permitted to do so under the current version of Art. 218 of the VAT Directive, the German government's proposed legislation depends on the ViDA timetable, compliance with which is not guaranteed. However, Germany, like other Member States before it, was granted an individual authorisation on 23 June 2023 to introduce an obligation to e-invoice in derogation of Art. 218 and 232 of the VAT Directive, which does not require the recipient's consent. To summarise:  e-invoicing is coming, and businesses should prepare for it if they have not already done so. The issues are likely to be mainly IT-related because it must be ensured that the e-invoice meets the requirements of Directive 2014/55/EU. On behalf of the European Commission, the European Committee for Standardisation (CEN) has defined a semantic data model of the core elements of an electronic invoice to implement the Directive. An IT expert knowledgeable in VAT should be consulted for the implementation.

Dated: 03 August 2023

Author

Nadia Schulte
+49 211 83 99 330