Electronic invoicing, or e-invoicing, is gradually becoming the standard in the business-to-business (B2B) sector in Germany. However, there are exemptions to mandatory e-invoicing, which frequently lead to uncertainty in practice. At the same time, it is often unclear which invoice formats the law actually considers electronic.

In this article, you will learn the most important information about required digital billing, including in relation to small-scale entrepreneurs. We will dispel common misconceptions and provide an overview of the permitted digital invoice types. We will also give a detailed explanation of what obligations apply to you and from when, what the potential consequences are of breaching the regulations, and how to prepare your accounting system for the new requirements.

What’s in this article?

• Misconceptions around mandatory electronic invoicing
  
• What qualifies as an electronic invoice in Germany?
  
• Who must comply with mandatory electronic invoicing, and when?
  
• What are the risks of issuing incorrect electronic invoices?
  
• How Stripe Invoicing helps small-scale entrepreneurs comply with mandatory electronic invoicing
  
• Checklist: Electronic invoices for small-scale entrepreneurs
  

Misconceptions around mandatory electronic invoicing

Small businesses in Germany, in particular, frequently assume that they are exempt from mandatory electronic invoicing. Below are some widely held misconceptions:

Electronic invoicing applies to big companies

Some self-employed individuals assume that required digital billing applies solely to larger firms. Yet, the size of a company has no direct bearing on whether or not e-invoicing is necessary.

Electronic invoicing is required just for government contracts

For a long time, compulsory electronic billing primarily applied to invoices issued to public-sector clients. Some businesses, therefore, assume that they are exempt from this type of billing, as long as they send invoices exclusively to other firms. Still, the new regulations are gradually expanding the use of e-invoices, including B2B invoicing. That means it is no longer just business-to-government (B2G) contracts that are affected by required digital billing.

Invoice volume determines whether electronic invoicing is mandatory

Another misconception relates to the volume of invoices. Some companies issue just a few billing documents and assume that the new digital regulations don’t apply to them. In practice, though, the statutory rules apply regardless of how many bills a company sends.

What qualifies as an electronic invoice in Germany?

An e-invoice is created, sent, and received digitally. It contains the same details as a paper or PDF billing document. Unlike those file types, it uses a structured, machine-readable layout that accounting or enterprise resource planning (ERP) systems can process automatically. For an electronic invoice to be considered an official payment request, it must meet certain legal criteria. In Germany, the formal requirements for e-invoices are regulated by Section 14 of the German VAT Act (UStG) and by EU Directive 2014/55/EU.

Electronic billing documents simplify digital processing, archiving, and auditing. They reduce errors, speed up handling, and improve security. E-invoices also help support compliance with statutory regulations and to prevent fraud or tax evasion.

To ensure smooth handling, e-invoices must follow a standardized structure. The main standards used in the country are XRechnung and ZUGFeRD.

XRechnung

XRechnung serves as the common structure for electronic billing in Germany. It relies on XML (Extensible Markup Language), and many refer to it as an XML-based invoice. Instead of a readable document, it consists exclusively of a dataset in the form of lines of code. It therefore requires specialized software to make the details it contains readable by humans. All invoice data has a predetermined space, and is thus set up to be fully machine-read and processed.

ZUGFeRD invoice

The ZUGFeRD invoice is a hybrid format that combines a PDF and an XML file into a single document. A human can read the PDF, and it resembles a typical billing document. The XML dataset stores machine-readable data that accounting or ERP systems can process through automation. Unlike the XRechnung, recipients do not need special tools to view the document.

Who must comply with mandatory electronic invoicing, and when?

Several European Union member states have been pursuing reforms aimed to digitize invoices for several years. In December 2022, the EU Commission presented a proposal for a directive as part of its “VAT in the Digital Age (ViDA)” initiative. One of the aims of this directive is to promote electronic billing and serve as a reliable source of data on value-added tax (VAT) reporting obligations.

At the national level, Germany implemented these rules through the Growth Opportunities Act, which the Bundesrat (Federal Council) ratified in 2024. As a result, B2B entities must use digital billing going forward. Lawmakers are phasing in the requirements to support a smooth transition from paper and PDF documents to standardized e-invoices.

Timeline of rollout

Authorities are phasing in the mandatory use of e-invoices as follows:

• Starting November 27, 2020, invoice issuers are obligated to bill supplies to public bodies as an electronic invoice.

• Starting January 1, 2025, all businesses in Germany must be capable of receiving e-invoices. Billing businesses can issue other types of invoices, in addition to e-invoices, from January 1, 2025, to December 31, 2026. Paper documents remain permissible at all times, while any billing format other than an e-invoice requires the recipient’s approval.

• Businesses with less than €800,000 in revenue in 2026 can continue issuing paper invoices or other electronic invoices until December 31, 2027.

• As a rule, e-invoices become the standard form from 2028 onward.

Exemptions to mandatory electronic invoicing for small-scale entrepreneurs

German businesses whose total revenue did not exceed €25,000 in the previous calendar year and are not expected to exceed €100,000 in the current calendar year could apply the small-scale entrepreneur rule under Section 19 of the UStG. Claiming that status exempts you from paying VAT. As a result, invoices do not need to show VAT, and no VAT has to be remitted to the tax office. The status also removes certain administrative obligations, including the obligation to file preliminary VAT returns.

Starting in 2025, small-scale entrepreneurs must be capable of receiving and processing e-invoices. At the same time, there is a special rule regarding the generation of electronic invoices. The German Annual Tax Act 2024 clarified that they do not need to send e-invoices. Section 34a of the German VAT Implementation Ordinance (UStDV) sets out this rule. According to this regulation, small-scale entrepreneurs remain free to issue so-called other billing documents, such as paper or PDF invoices. As a result, they will not be required to generate structured digital bills after 2027.

Other exemptions to mandatory electronic invoicing

Businesses in the country are not equally obligated to send an e-invoice in the following cases:

• Invoices to private individuals (business-to-consumer, or B2C): Senders do not need to create invoices for noncommercial recipients digitally. Issuers can continue to provide these bills as paper or PDF documents.

• Small-value invoices: A small-value invoice covers a total amount of up to €250, and issuers can continue to use another billing format.

• Tax-exempt revenue: The rules on mandatory electronic invoicing do not apply to many types of tax-exempt revenue, as defined by Section 4 of the UStG.

• Invoices for transit tickets: Invoices for transit tickets, as defined in Section 34 of the UStDV, are also exempt from mandatory electronic invoicing.

Regardless of whether sending digital invoices is required by law, every business in Germany must be able to receive, process, and archive e-invoices.

What are the risks of issuing incorrect electronic invoices?

Modern e-invoicing tools automatically check invoices for errors before sending. If mandatory information is missing or if the file does not comply with the required specifications, the system flags the issues and, as a rule, rejects the bill. The system identifies these problems before sending, which helps avoid mistakes.

Technical troubles could still arise, and people can make mistakes, for example, when entering amounts, invoice numbers, or tax rates. The software won’t always catch these inaccuracies on its own.

In some cases, recipients cannot correctly read e-invoices that contain errors or missing details. When this happens, accounts teams carry out additional checks and might decline the billing document. The sender then corrects the mistakes and resends it, increasing administrative work and delaying payment.

E-invoices that do not comply with statutory rules can also cause issues with fiscal authorities and, in the worst-case scenario, lead to penalties and back taxes. Businesses, for that reason, need to verify that their e-invoices meet formal criteria and that their content is checked.

How Stripe Invoicing helps small-scale entrepreneurs comply with mandatory electronic invoicing

Electronic invoicing obligations are also pushing small-scale entrepreneurs to adapt their accounting setups, if they receive—not send—digital bills. Many still handle billing documents in paper form or as simple PDFs. With the introduction of standardized e-invoice file types, they now have to read machine-readable invoices. Small-scale entrepreneurs can also voluntarily opt to send e-invoices.

Stripe Invoicing helps small-scale entrepreneurs generate, send, and manage electronic bills. With Invoicing, generating single or recurring e-invoices that are reviewed through automation and comply with the standards takes just a matter of minutes. By automating invoice generation at high capacity, small-scale entrepreneurs can minimize errors and stay aligned with all regulations.

Stripe automatically tracks invoice status, sends payment reminders, and processes refunds. Meanwhile, Stripe Payments gives small-scale entrepreneurs access to more than 100 payment methods they can offer their customers.

Checklist: Electronic invoices for small-scale entrepreneurs

Small-scale entrepreneurs in Germany can continue to issue their own invoices, including those sent after 2027. Nevertheless, getting familiar with structured e-invoice formats now is a good idea, in case one of your business partners prefers them. Additionally, electronic invoicing becomes compulsory for a company once it exceeds the small-scale entrepreneur threshold.

Transitioning to e-invoice file types doesn’t require a comprehensive overhaul to your accounts system, but it does require a few organizational and technical adjustments. By taking the following steps, small-scale entrepreneurs can ensure compliance with statutory rules and adjust their invoicing processes on schedule.

Make sure you can receive e-invoices

Starting January 2025, all businesses in Germany, including small-scale entrepreneurs, must be able to receive electronic invoices. Because of this, each operation has to confirm it has the technical capabilities to process standardized invoice formats, such as XRechnung or ZUGFeRD. The right software or an accounting system with e-invoice capabilities is needed for this.

Choose the right accounting software

Check whether your accounting or bookkeeping software supports standardized e-invoice file types—ideally, it needs to be able to both receive and generate e-invoices. If the current system does not have these capabilities, then choose an appropriate provider such as Stripe Invoicing.

Adjust invoicing processes

It’s a good idea to review existing invoicing and processing workflows carefully. The data needs to be captured in a structured layout so that it is processed automatically as required. Adjust those methods where necessary.

Notify employees and customers

Notify all employees involved in invoice processing of the new workflows and rules. A brief training on the tool in use or the new formats helps prevent errors. If you want to send e-invoices, you must notify your business partners well in advance.

Ensure your archiving is compliant

Electronic invoices have to be archived properly, just like paper records. Store all e-invoices in an audit-proof manner and keep them simple to trace when needed.

FAQs on e-invoices for small-scale entrepreneurs in Germany

Below, you will find answers to the most frequently asked questions on mandatory e-invoicing for small-scale entrepreneurs.