Invoicing in Germany is regulated in detail by law. For example, businesses are typically obligated to indicate their tax identification (ID) numbers on outgoing invoices. That said, this isn’t a blanket rule.

This article will go over the role tax IDs play in invoicing, when you’re allowed to issue invoices without a tax ID, and the risks of invoicing without one. We’ll also explore things you need to know about tax IDs and data protection. Finally, we’ll give you a few tips for setting up your business.

What’s in this article?

• What are the legal requirements an invoice has to fulfill in Germany?
  
• Can companies in Germany issue invoices without a tax ID?
  
• Invoicing without a tax ID: Risks, penalties, and corrections
  
• What are the data risks around tax IDs?
  
• Things to remember when setting up your business
  

What are the legal requirements an invoice has to fulfill in Germany?

The German value-added tax (VAT) Act, or UStG, defines an invoice as a document that suppliers use to bill for a delivery, performance, or other service—regardless of how the document is referred to in the course of business. The document must contain certain pieces of mandatory information in order to be considered a compliant invoice.

Tax ID number

A tax ID number is one of the key pieces of information required on an invoice, in accordance with Section 14 of the UStG is the tax ID. This is a unique identification number issued by the tax office to taxable natural persons and legal entities in Germany so that tax returns and tax payments can be clearly matched to their senders. Small-scale entrepreneurs and the self-employed also require a tax ID. While tradespersons are given a tax ID automatically, freelancers have to request a tax registration form from the tax office. The tax office will then review the form and issue a tax ID.

VAT ID

According to Section 14, paragraph 4 of the UStG, you can use a VAT ID on your invoices in place of a tax ID. That’s because this number also serves to identify your business. You can apply for a VAT ID when filling in your tax registration form, or, alternatively, you can request one from the Federal Central Tax Office.

German businesses issuing invoices domestically have a choice: they can indicate either their tax ID or VAT ID on their invoices. However, if they are conducting cross-border transactions with other EU member states (i.e., intracommunity transactions), they are obligated to use their VAT ID. This is because these transactions are subject to the reverse charge mechanism. This procedure stipulates that invoices for intracommunity transactions must indicate the VAT ID of both parties.

Other mandatory information

In addition to the tax ID or VAT ID, compliant invoices in Germany must also contain the following mandatory information:

• The full name and address of the company supplying the goods or service
  
• The full name and address of the recipient of the goods or service
  
• A sequential, unique invoice number
  
• The issue date of the invoice
  
• The date of delivery or other supply (i.e., the performance period)
  
• The quantity and type of goods delivered, or the scope and type of other performance
  
• The net and gross amount
  
• The applicable tax rate and the corresponding tax amount or, in the case of a tax exemption, a reference to the tax exemption
  

Can companies in Germany issue invoices without a tax ID?

In principle, providing a tax ID—or alternatively a VAT ID—on invoices is mandatory. However, German tax law does allow for certain exemptions to this rule.

Small-value invoices

Businesses do not have to indicate a tax or VAT ID on invoices for small totals of no more than €250 gross—provided that the total indicated already includes VAT. The reason for this simplification of the rules is that it cuts down on the bureaucracy for smaller, everyday transactions. Typical examples of small-value invoices include cash register receipts, gas receipts, parking receipts, or transit tickets. While these documents are not required to contain as much information as regular invoices, they are still recognized as tax-compliant documents, so long as they fulfill the statutory minimum requirements for small-value invoices. This means they must include:

• The full name and address of the company supplying the goods or service
  
• The issue date of the invoice
  
• The quantity and type of goods delivered, or the scope and type of other performance
  
• The net and gross amount
  
• The applicable tax rate and the corresponding tax amount or, in the case of a tax exemption, a reference to the tax exemption
  

Issuing invoices during your startup phase

In Germany, a business is considered to have legal capacity as soon as it is registered in the Commercial Register or has begun conducting business. However, you might reach this stage and still be waiting on your tax or VAT ID. The process of getting an ID varies between the different local tax offices and can take between one week and three months.

During this time, you can prepare invoices without a tax or VAT ID and then provide the ID at a later date to the invoice recipients. This is generally not an issue for business-to-consumer (B2C) transactions, in particular, since the invoice recipients cannot claim input tax anyway. However, if you issue an invoice to a business without providing a tax or VAT ID, that business can refuse payment. That’s because they can’t deduct input tax without your business’s ID.

Invoicing without a tax ID: Risks, penalties, and corrections

Issuing invoices without a tax ID or VAT ID doesn’t just make it impossible for recipients to claim input tax deductions—it comes with downsides for you as well.

The tax office might flag invoices without a tax ID and deem your business’s tax return incorrect or incomplete. This could result in VAT amounts being rejected after the fact. If the incorrect invoice establishes a VAT liability, you might be subject to tax arrears and penalty interest. Therefore, in order to avoid tax issues further down the line, you should always ensure that all your outgoing invoices include a tax ID.

If you regularly issue invoices without a tax ID, you’re not just running the risk of problems with the tax authorities—you’re also putting your business relationships at risk, since incorrect invoices can negatively impact your customers’ trust. Repeated invoicing errors make for more administrative effort, both for you and the invoice recipients. Plus, your customers can refuse to pay a noncompliant invoice. In the worst-case scenario, you might lose your customer, which would have a negative impact on your revenue.

Invoice corrections

If you’ve accidentally issued an invoice without a tax or VAT ID, you must correct it. One way of doing this is to cancel the incorrect invoice and issue a new, correct invoice. You should correct the invoice as quickly as possible, since the tax office might not accept the correction if it is made too long after the fact. It’s also important for invoice recipients to get a correct invoice showing input tax, so that they can claim an input tax deduction.

What are the data risks around tax IDs?

Tax IDs contain sensitive information that clearly identifies the registered taxpayer. This includes a tax office and jurisdiction ID, plus a personal identification number (PIN). You should protect your tax ID against unauthorized third-party access, as this directly helps to protect your personal and company data. This is because tax IDs can be used as a sort of PIN—such as when providing tax information over the phone—so unauthorized parties could use it to access and misuse personal or company tax information.

Keeping your tax ID safe is particularly important for natural persons, such as sole proprietors and freelance professionals, whose personal and business identities are often closely linked. If a third party uses someone’s tax ID to gain unauthorized access to information, it’s possible that they will obtain sensitive data concerning the person’s personal finances.

Data protection

In order to keep your tax ID safe from unauthorized access, you should only ever transmit your tax ID itself and any invoice documents via secure channels. Unencrypted emails, for example, can be intercepted and read by criminals. Use encrypted emails instead, or use secure online platforms for exchanging confidential information.

An alternative to using your tax ID is to use your VAT ID. This ID does not contain any personally identifiable information that can be linked to the individual business owner. The personal risk of your VAT ID being used without your authorization is significantly lower. This is why many businesses in Germany issue invoices with their VAT IDs instead of their tax IDs, even when conducting business domestically.

Things to remember when setting up your business

There are a lot of legal and bureaucratic requirements to fulfill if you want to incorporate a company in Germany. Familiarize yourself with the various requirements at the earliest possible stage, and set up your operations and bookkeeping accordingly. When it comes to your tax ID, there are a few things in particular that you need to do.

Fill out your registration form promptly

To get a tax ID, you need to fill out a tax registration form. The tax office will usually send this form to you automatically, but you can also request it yourself if necessary. You should do this as soon as possible. Fill in the form as soon as it arrives. The later you send your completed form to the tax office, the later you will receive your tax ID.

Defer or negotiate invoices if necessary

There are tax implications to issuing invoices without the required mandatory information. When incorporating a new company, therefore, you should not issue any invoices without a tax ID. In the best-case scenario, you can defer your invoicing. If your financial situation allows, don’t invoice your supply or delivery until you have your tax ID. If you receive your VAT ID before your tax ID, then you can use that instead.

There are some exceptions—particularly B2C transactions—in which you can issue invoices without a tax ID, but this should be discussed with your customers beforehand. Explain the situation, and make sure you follow up with a corrected invoice as soon as possible. Since private individuals cannot claim input tax—meaning they don’t need your tax ID for input tax deductions—they will often accept invoices without tax IDs. That said, it’s still important to be transparent with your customers, so as to avoid misunderstandings or payment delays.

Consider automating your bookkeeping

Ensure your bookkeeping processes are smooth and your invoicing is reliable. It’s important that all outgoing invoices include the mandatory information required by Section 14, paragraph 4 of the UStG, as well as correct calculations of tax and gross amounts. If you’re looking to minimize errors and free up time for your administrative processes, consider using Stripe Invoicing.

With Invoicing, you can generate and send compliant invoices in just a few clicks. Each invoice contains all the mandatory information required by law, including the tax ID or VAT ID. Invoicing also ensures you apply the correct tax rates—whatever the product or performance, and wherever your customers are located. Further, recurring invoices or usage-based invoices, as well as individually negotiated contracts, can be processed using Stripe Billing. Billing also lets you integrate coupons, free trials, and discounts into your invoicing.