Mandatory E-Invoicing from 2025 – VAT Pitfalls and Practical Recommendations

1. Background: What Will Change from 2025?

With the German Growth Opportunities Act (Wachstumschancengesetz), the mandatory use of e-invoices in domestic B2B transactions will be introduced in stages. From 1 January 2025, businesses must be able to receive e-invoices; from 2027 or 2028 (depending on annual turnover), they will also be required to issue e-invoices.

From a VAT perspective, it is important to note that the legal definition of an invoice remains unchanged and continues to be based on Section 14 of the German VAT Act (UStG). However, an invoice will only qualify as an e-invoice if it is issued in a structured electronic format (e.g. XRechnung or ZUGFeRD version 2.0.1 or higher) that allows for automated processing.

2. Distinction: E-Invoice vs. Other Electronic Invoices

A common misconception in practice is to treat PDF invoices as e-invoices. For VAT purposes, the distinction is clear:

1. E-invoice: structured electronic format
2. Other electronic invoice: PDF, scanned document, email attachment

From 2025 onwards, PDF invoices will generally no longer be sufficient for domestic B2B transactions, unless a transitional rule applies. Companies must therefore ensure that they are able to clearly distinguish between different invoice types from both a technical and organizational perspective.

3. Input VAT Deduction: Where Are the Risks?

One of the most significant VAT risk areas concerns the right to deduct input VAT. As before, this right requires a proper invoice. If an e-invoice does not comply with formal requirements or uses an invalid format, the input VAT deduction may be denied during a tax audit.

Particularly critical issues include:

1. missing or incorrect mandatory invoice details (Section 14(4) UStG)
2. non-compliant data formats
3. media discontinuities between e-invoicing and accounting systems
4. missing linkage between the invoice and the underlying supply or service

Increased automation also means that errors may occur systematically and on a large scale, amplifying potential risks.

4. Impact on Internal Processes

The introduction of e-invoicing is not merely an IT project. VAT-relevant processes affected include:

1. invoice receipt and verification
2. approval and posting workflows
3. archiving in compliance with GoBD requirements
4. interfaces between ERP systems, accounting, and tax modules

Companies should review whether VAT checks are carried out before or only after posting, as this can be decisive in minimizing risks.

5. VAT-Focused Recommendations for Action

To reduce VAT risks, companies should take early and structured action:

1. Analyze invoice flows (incoming and outgoing invoices)
2. Verify invoice formats for VAT compliance
3. Adapt input VAT controls to automated processes
4. Train relevant departments (not IT alone)
5. Ensure close coordination between tax, accounting, and IT teams

6. Conclusion

Mandatory e-invoicing from 2025 is far more than a technical requirement. It directly affects key VAT principles, particularly the right to deduct input VAT. Companies that address the transition early from a VAT perspective can minimize risks while benefiting from more efficient processes.