As of 2025, businesses in Germany will be obliged to issue electronic invoices in business-to-business (B2B) transactions. So-called XRechnung invoices will therefore become the new standard. In this article, you will learn what an XRechnung invoice is, how it is created, and what benefits it offers. We will also explain what alternatives there are to the XRechnung and what businesses need to integrate electronic invoices into their accounting.

What’s in this article?

• What is an XRechnung invoice?
  
• What is a ZUGFeRD invoice?
  
• How are XRechnung invoices created?
  
• Do XRechnung invoices have to be archived?
  
• What are the benefits of XRechnung invoices?
  
• What obligations will businesses have with regard to invoicing as of 2025?
  
• What do businesses need for XRechnung invoices?
  

What is an XRechnung invoice?

XRechnung is the German standard format for data exchange with electronic invoices. It is based on the XML format, which is why it is also called an XML invoice. Although it has the same content and legal consequences as a classic invoice, it cannot be easily read in contrast to an invoice in paper form or PDF format. The XRechnung invoice consists exclusively of lines of code. It can be processed electronically using the included XML dataset.

XRechnung invoices follow the European standard for invoicing, EN 16931, which was established in 2017 by the European Committee for Standardization (CEN). This guideline specifies how an e-invoice must be structured for use across Europe. It is fundamental that electronic invoices can be issued, transmitted, received, and processed in a structured electronic format. The specific configuration is left up to each EU country. The XRechnung is one of many possible options. In Germany, besides the XRechnung, another format is available: ZUGFeRD.

What is a ZUGFeRD invoice?

A ZUGFeRD invoice is a hybrid e-invoice. The abbreviation stands for “Zentraler User Guide des Forums elektronische Rechnung Deutschland” in German, translated as “Central User Guide of the Forum for Electronic Invoices Germany” in English. The ZUGFeRD invoice combines XML and PDF invoice formats. It was developed through cooperation between Germany and France, primarily because XRechnung invoices are difficult to read due to their code. In contrast, a ZUGFeRD invoice can be read by both machines and people. It consists of a PDF file, which looks like a classic invoice, in which an XML dataset is embedded. Billers can therefore also send ZUGFeRD invoices if the recipients are not able to technically process XML data. Another advantage is that while XRechnung invoices do not contain any graphic elements or individual fonts, ZUGFeRD invoices can be designed in line with the business’s corporate design. A ZUGFeRD invoice is also called an XRechnung 2.0 and a Factur-X invoice internationally.

How are XRechnung invoices created?

There are two options for creating an XRechnung invoice: using special accounting software or an online generator. XRechnung invoices are already part of the standard service offered by the leading providers of accounting software, and they can be automatically created and sent with just a few clicks. Archiving is also possible in this way. Online generators essentially offer the same service; however, in this case, invoices must be downloaded and archived in an additional step. For companies that process many invoices and want to ensure proper storage, a software solution is recommended instead. This is especially important because the number of invoices that an online generator can create free of charge is often limited, as are the design options when creating ZUGFeRD invoices.

In addition to the two options mentioned, it is also possible to convert a PDF file into an XRechnung format. A few service providers offer this type of service for a fee.

In principle, an XRechnung invoice has the same mandatory information as a classic invoice, including name and address of the principal and contractor, tax number, value-added tax (VAT) identification number, and invoice date. However, with XRechnung invoices, the so-called route ID for invoice recipients is also indicated. This string of up to 40 characters allows clear electronic addressing and forwarding of the invoice. The number is specified in the “buyer reference” field for XRechnung invoices. As for the frequently required supplier number, you can request the route ID from invoice recipients.

Do XRechnung invoices have to be archived?

XRechnung invoices, like invoices in other formats and business documents of all types, must be stored for 10 years. The retention period begins at the end of the calendar year in which the invoice was created. The “Grundsätze zur ordnungsmäßigen Führung und Aufbewahrung von Büchern, Aufzeichnungen und Unterlagen in elektronischer Form” (GoBD)—or “principles for the proper keeping and retention of books, records, and documents in electronic form” in English—also apply to XRechnung invoices. Among other things, the GoBD guidelines stipulate that storing invoices in paper form is not sufficient. The invoice must be electronically archived, preferably on a data storage medium that does not permit subsequent changes, yet still enables the invoice to be read and reviewed by machine at any time.

What are the benefits of XRechnung invoices?

Electronic invoices, such as XRechnung invoices, offer a range of benefits compared with classic invoices:

• Increase in efficiency: XRechnung invoices enable efficient and rapid exchange of invoice data between businesses. This reduces the processing time and accelerates the payment process overall.
  
• Error reduction: Because of clear and unambiguous standards as well as automatic validation, the rate of errors decreases with XRechnung invoices.
  
• Traceability: XRechnung invoices can be digitally archived easily and are retrievable at any time and anywhere. This facilitates the tracking of payments, security of audits, and compliance with retention periods.
  
• Security: Unlike paper invoices, XRechnung invoices can be secured with encryption technology. This reduces the risk of data loss, theft, or manipulation.
  
• Cost saving: XRechnung invoices save businesses money, particularly compared to invoices in paper form. Costs for printing, mailing, and storage are saved.
  
• Environmentally friendly: Giving up paper invoices also contributes to protecting the environment, and not only due to saved paper. If no physical documents are transported, this reduces carbon emissions.
  

What obligations will businesses have with regard to invoicing as of 2025?

On March 22, 2024, the German Bundesrat approved the government draft bill to the Growth Opportunities Act, resolving that electronic invoices will be obligatory in B2B transactions in the future. The background to this is the VAT in the Digital Age (ViDA) initiative of the European Commission, which stipulates the introduction of an electronic reporting system for B2B transactions. The reporting system will enter into force in 2028. However, a deferral to 2030 or 2032 is currently being discussed. A requirement for this intended standardization in data exchange is an e-invoicing obligation, which will be introduced in Germany with the Growth Opportunities Act.

Until now, businesses have also been able to issue invoices in paper form or as a PDF file. However, from 2025, other provisions will apply, including several transitional regulations from 2025 to 2027:

• From January 1, 2025, all VAT-registered companies must issue e-invoices and be able to receive them.
  
• In 2025 and 2026, other electronic invoices and paper invoices will be permitted in addition to e-invoices.
  
• In 2027, the ability to issue other electronic invoices and paper invoices (in addition to e-invoices) will apply only for businesses that had a total revenue of less than €800,000 in 2026.
  
• As of 2028, only e-invoices are permitted to be issued.
  

Invoices relating to tax-free revenue, invoices for small amounts, and invoices for public transport tickets (see Section 34 of the UStDV, or the VAT Implementation Ordinance) will be exempt from the e-invoice obligation. The businesses concerned do not have to issue XRechnung invoices but must be able to receive and process them.

To implement the EU plans on a national level, the German Coordination Office for IT Standards (KoSIT) developed the XRechnung invoicing format. This has been the standard in public administration since June 22, 2017. Businesses that cooperate with authorities and public contractors also have to use this invoicing format.

What do businesses need for XRechnung invoices?

Since electronic invoices will be obligatory for the business transactions of German companies as of 2025, there is no way around the XRechnung standard. It is the invoicing format of the future. Companies should therefore implement the appropriate structures promptly, especially because the changeover can be expensive and lengthy, depending on the company size and accounting systems.

To begin with, the key issue here is whether invoice data can be translated into an XRechnung or XML format. If the software that has been previously used is not able to do this, other programs or an online generator must be used. The mailing route should also be reviewed. If several invoices have to be sent to authorities, simple email distribution is not the best choice. One alternative is PEPPOL. Using the “Pan-European Public Procurement Online” method developed by the European Union, multiple connections to individual authorities can be established via a single access point.

However, there are more than just technical requirements that must be implemented. To integrate the new technology seamlessly into the accounting system, the responsible employees should be trained accordingly. Furthermore, companies need to decide whether they want to send XRechnung invoices or ZUGFeRD invoices.