Mandatory e-invoicing from 2027 – key questions and answers

The next key deadline for the introduction of e-invoicing is approaching: from 1 January 2027, new electronic invoicing requirements will apply to many businesses. Although e-invoicing has been embedded in German VAT law since 1 January 2025, many businesses are still postponing the practical changes required.

It should now come as no surprise that e-invoicing is being introduced in Germany and that the ViDA package to reform the VAT system is being implemented in stages. However, our advisory experience shows that many businesses of all sizes are delaying the necessary changes. The reasons often include limited IT resources and capacity. In addition, the requirements, deadlines and consequences of mandatory e-invoicing are still not fully understood in practice.

But the clock is ticking. Implementing the necessary systems, interfaces and tools typically requires significant lead time. Incorrectly issued invoices may have serious financial consequences for the recipient, particularly in relation to input VAT deduction, additional advisory costs, discussions with the tax authorities and costly corrections.

Companies should therefore use the remaining transition period to review and adapt their processes, ERP systems, contracts, terms and conditions, supplier relationships, incoming invoices and internal compliance structures. Those who delay switching to e-invoicing risk operational disruptions, VAT-related risks and liability disputes.

These consequences should be avoided. We have therefore compiled the key questions and answers on mandatory e-invoicing that we are currently dealing with in practice.

Key questions and answers on mandatory e-invoicing

What is an e-invoice in terms of VAT?

Since the changes introduced by the Growth Opportunities Act (Wachstumschancengesetz), not every invoice sent electronically automatically qualifies as an e-invoice.

An e-invoice has to:

• be issued in a structured electronic format
• allow electronic processing, and
• meet European requirements, particularly the standard EN 16931.

Typical formats are:

• XRechnung
• ZUGFeRD, provided that the statutory requirements are met.

Important: A PDF invoice by itself, a scan or a Word file only constitute “other invoices” and do not meet the requirements for an e-invoice. A simple PDF file therefore does not meet the new definition of an e-invoice in VAT law, even if the process appears “digital” at first glance because the PDF file is sent by email.

For many businesses, this means a fundamental change to their existing invoicing processes. The practice of sending PDF documents by email, which was widespread until now, will no longer be recognised by the tax authorities once mandatory e-invoicing comes into force.

Particular attention should be paid to the receipt of invoices. All businesses should review how they will manage incoming invoices in their email inboxes in future. Before claiming input VAT deduction, every invoice recipient is required to verify that the invoice received has been issued correctly. They cannot simply assume that, from 1 January 2027, their supplier will have checked whether it is already required to issue e-invoices or whether it falls within a transitional arrangement, for example because its annual turnover is below EUR 800,000.

When does the mandatory e-invoicing apply from?

Mandatory e-invoicing makes a distinction between the obligation to receive e-invoices and the obligation to issue them.

Since 1 January 2025

As a general rule, businesses must be able to receive e-invoices. Unlike before, the recipient’s consent to the use of an e-invoice is no longer required.

Until 31 December 2026

There are still detailed transitional arrangements in place for the issuing of e-invoices. Businesses may continue to use paper or PDF invoices where e-invoicing is not already mandatory, particularly in public procurement in the B2G context.

Starting from 1 January 2027

Businesses whose total revenue exceeds EUR 800,000 in the preceding calendar year will be required to issue e-invoices for domestic B2B transactions.

Starting from 1 January 2028

The transitional arrangements for smaller businesses will expire. Issuing e-invoices will become standard practice for all businesses for domestic B2B transactions.

Which businesses are subject to mandatory e-invoicing?

The regulations on mandatory e-invoicing apply to domestic businesses in the B2B sector.

It is irrelevant whether the business is part of a corporate group, a mid-market company, manufacturer, retailer or a service provider. Exemptions may apply to small businesses and to businesses that provide exclusively tax-exempt services, among others.

Smaller businesses in particular often overlook that they must at least be able to receive e-invoices.

What are the size criteria for mandatory e-invoicing?

The revenue threshold of EUR 800,000 is particularly relevant for the transitional arrangements in 2027. This is determined by the total revenue for the preceding calendar year. If this threshold is exceeded, the obligation to issue e-invoices will already apply from 1 January 2027.

In practice, it is advisable to review revenue trends at an early stage to avoid any surprises when planning deadlines.

A particular practical problem arises for recipients of invoices. While the supplier is aware of their own revenue, the recipient does not usually know straight away whether an invoice issuer – who sends them a PDF file by email, for example – actually generated revenue of less than EUR 800,000 and therefore still falls under a transitional arrangement.

This creates a risk that input VAT deduction may be challenged. It remains open whether, in such cases, the principle of protection of legitimate expectations would apply. Recipients of goods or services are legally required to verify the accuracy of the invoices they receive.

The Federal Ministry of Finance (BMF) has stated that input VAT deduction should not be challenged solely because an invoice was issued in an incorrect format, provided that the recipient could reasonably assume, based on the information available to it, that the issuer was entitled to rely on the transitional arrangement. No separate enquiries are required for this purpose. However, the due diligence expected of a prudent businessperson must at least be observed.

The BMF does not provide a definitive statement on what these due diligence obligations might look like in practice. This is likely to mean, though, that the supplier will be asked whether they are permitted to issue “other invoices” in 2027.

Protection can also be achieved through contractual provisions, either on a case-by-case basis or by amending terms and conditions. This can ensure that the issuer commits to issuing properly formatted invoices and to being liable for any losses incurred by the recipient if a properly formatted invoice is not issued.

What are the risks to input tax deduction in the case of incorrect e-invoices?

Where e-invoices are issued incorrectly or improperly, particular attention should be paid to input VAT deduction. All recipients are obliged to verify that the invoice received has been issued correctly before claiming input VAT deduction.

Businesses cannot therefore rely on the invoice issuer having checked for themselves whether they are already required to issue e-invoices or whether they are still covered by a transitional arrangement.

In 2027 in particular, there is a key practical question: how is the invoice recipient supposed to know whether a supplier who continues to send PDF invoices actually falls below the revenue threshold of EUR 800,000 and is therefore not yet required to issue e-invoices?

The Federal Ministry of Finance (BMF) has clarified that the mere fact that an invoice was issued in the wrong format should not automatically give rise to issues with input VAT deduction. Nevertheless, the recipient remains obliged to exercise the due care expected of a prudent businessperson.

Businesses should therefore establish processes to document transparently the permissibility of PDF invoices during the transitional period. In many cases, it will make sense to have suppliers actively confirm that they have fulfilled the conditions of the transitional arrangement.

Individual contractual provisions or modified terms and conditions can provide additional security. This can help reduce risks to input tax deduction as well as potential financial losses.

Do terms and conditions need to be amended for e-invoicing?

While the debate about e-invoicing often focuses on technical formats and system adjustments, the implications of the change in terms of private law are frequently underestimated. But it is precisely in this area that significant risks can arise.

In fact, many standard contracts and terms and conditions contain provisions that are designed for traditional paper invoices or for sending an invoice as a PDF, and are no longer fully compatible with future requirements.

The introduction of e-invoicing will affect numerous contractual relationships. Terms and conditions often still contain provisions such as:

• “Invoices shall be sent by post”
• “Invoices shall be sent by email in PDF format”
• requirements for consent to issuing electronic invoices
• ambiguous instructions on receipt channels

Businesses should therefore check in good time whether their terms and conditions, framework agreements, purchasing terms and general contract templates need to be updated.

Particular importance also attaches to the question of who bears responsibility if an e-invoice cannot be processed for technical reasons. Possible scenarios include cases where a supplier sends a properly formatted e-invoice, but it is not processed by the recipient due to faulty interfaces. Similarly, disputes may arise if a company changes its receiving addresses or technical interfaces but fails to inform its business partners in good time.

Typically, the following particular points should be taken care of:

• permitted invoice formats
• designation of compulsory receipt channels for e-invoices
• notification requirements when email addresses, platforms or interfaces are changed
• obligations of contracting parties to cooperate
• responsibilities for technical transmission and receipt
• procedures in the event of faulty or illegible invoice files
• obligations to respond and cooperate in the event of faults in sending
• allocation of liability for organisational or technical errors.

Supplier management is also gaining considerable importance as a result of mandatory e-invoicing. Businesses should not take it for granted that all their business partners will implement the legal requirements on time. Instead, it is advisable to take stock ahead of time of key suppliers and customers. This should involve clarifying which formats are used, which technical solutions are being implemented and whether test runs may be necessary.

Our experience shows that the greatest risks often do not occur within the company, but at the interfaces with business partners. If technical requirements, responsibilities and communication channels are not coordinated in time, there will be a risk of delays in invoice processing, increased manual processing and avoidable tax disputes.

The time factor deserves particular attention. Amendments to terms and conditions and standard contracts should be made as far in advance as possible before the transition periods expire. Those who only begin reviewing their contracts shortly before the obligations come into force will risk operational problems and unnecessary contract negotiations.

Our team will be pleased to assist you with the legal and tax analysis of existing contracts, the review of terms and conditions, the drafting of practical liability provisions, and communication with suppliers and customers as part of the transition to e-invoicing.

Should suppliers and customers already be contacted about e-invoicing?

Absolutely.

Many companies focus exclusively on their own systems. But the biggest problems with e-invoicing actually often arise at the interfaces with business partners.

It is particularly advisable to clarify the following questions at an early stage:

• Which invoice formats are you using?
• Which transmission channels are you using?
• Who is the technical contact person?
• Are our ERP systems compatible?
• What test runs are planned?

Particularly in larger supplier structures or complex group relationships, it is often the case that the real challenge arises at the interfaces between the companies involved. Early test runs and pilot projects can help to prevent subsequent disruption to day-to-day operations.

Does the introduction of e-invoicing necessitate changes to incoming mail systems and compliance structures?

Yes.

Even though there is no explicit legal requirement to set up separate incoming mail systems for PDF invoices and structured e-invoices, in practice, such a separation may be advisable. Different invoice formats typically require different processing, verification and archiving procedures.

What is more important than the formal separation of mailboxes, however, is the clear organisational allocation of responsibilities. Businesses should clearly document:

• the channels through which invoices can be received
• who is responsible for monitoring these channels
• how proper processing is ensured, and
• what control measures are carried out prior to input tax deduction.

Practical problems with incoming invoices

At present, many businesses receive the following through the same channels:

• paper documents
• PDF invoices
• ZUGFeRD invoices
• XRechnung invoices,

all of which pass through the same inboxes and processes on their way to the accounting department.

This can cause risks, particularly from:

• misallocation
• delays in processing
• loss of structured data records
• deficient documentation.

Practical advice on e-invoices

In future, many businesses will set up:

• a separate inbox for structured e-invoices, and
• a separate inbox for other documents

This will enable processing steps to be structured more clearly and reduce risks associated with incoming invoices.

What adjustments to compliance does e-invoicing require?

E-invoicing is not just a technical issue, but above all a tax compliance issue.

The following areas in particular need to be reviewed:

Tax control framework (TCF)

• Adjusting existing control systems
• Documenting new processes
• Clearly allocating responsibilities

Procedure documentation

• Updating of documentation under the rules concerning the orderly management and storage of books, records and documents in electronic form and data access (GoBD)
• Describing import, verification and archiving processes
• Documenting technical interfaces

System of internal control

• Format checks
• Approval processes
• Archiving controls
• Access rights policies
• Documentation of exceptions and errors

Existing TCFs, systems of internal control and procedural documentation should be reviewed with regard to these points. In future, the tax authorities will expect businesses to be able to document clearly how e-invoices are received, processed, verified and archived.

What happens if the tax office does not accept a paper or PDF invoice?

This question is becoming increasingly important, particularly as the transitional arrangements come to an end. A distinction must be made between different categories of cases.

While transitional rules are in place

Paper or PDF invoices may still be permissible, depending on the circumstances. This is determined by the statutory transitional arrangements. The taxpayer must then set out the relevant conditions because they have the burden of proof.

Years later, this may become an issue in a tax audit if no precautions have been taken and the matter has not been properly checked and documented.

According to the requirements of the Federal Ministry of Finance (BMF), an invoice in an incorrect format should only be refused if the recipient, exercising the due care of a prudent businessman, could reasonably assume that the transitional arrangement applies to the supplier.

This is likely to mean asking the supplier whether issuing an invoice as an “other invoice” is permitted in 2027.

After the transitional arrangements have expired

If an e-invoice is mandatory and an “other invoice” is sent instead, this may give rise to significant risks:

• objections during a tax audit
• disputes regarding proper invoicing
• risks related to input tax deduction
• obligations to remedy and make corrections.

In critical cases, a subsequent correction of the invoice may be required. Businesses should therefore avoid postponing the transition until the very last moment. The sooner processes are implemented and tested, the lower the risk of subsequent disputes with the tax authorities.

Who is liable for damages resulting from non-compliance with mandatory e-invoicing requirements?

There is no one-size-fits-all answer. In principle, a supplier has an ancillary obligation under civil law, in accordance with the contract entered into, to issue an accurate and proper invoice. However, liability always depends on the specific breach of duty and the contractual provisions in each individual case.

Errors can arise on the part of both the issuer and the recipient of the invoice. The following scenarios are possible in particular:

• invoices are not issued in the prescribed format despite the obligation to do so
• electronic receipt channels do not work
• structured data sets are lost
• invoices cannot be processed due to technical errors.

In addition, external service providers may also be affected, if, for example, sending or archiving systems do not work properly.

Depending on the specific circumstances, the following are particularly relevant:

• Contractual liability claims
• Claims for damages
• Organisational liability issues within the company
• Claims against external service providers.

In light of this, it is advisable to assess now whether existing contracts include adequate liability and risk provisions. This may be of considerable financial significance, particularly in the case of outsourcing models or shared-service structures.

Members of the board, in particular, should bear in mind that the timely implementation of statutory compliance requirements can form part of proper corporate organisation.

Should liability provisions related to e-invoicing in the terms and conditions be amended?

Yes, this should be regularly reviewed.

It may particularly be advisable to include provisions regarding:

• responsibilities for technical sending
• failure of interfaces
• obligations to conduct updates
• limitations of liability in the event of technical disruption
• obligations of contracting parties to cooperate
• specifying mandatory receipt channels.

However, this always requires a case-by-case assessment, as the legal boundaries of terms and conditions must be observed. In particular, limitations of liability and the transfer of risk require careful legal scrutiny. Standard clauses developed so far for sending PDFs should therefore not be re-used without being reviewed.

Conclusion: Implement mandatory e-invoicing early and avoid risks

Businesses should not view e-invoicing as purely an IT project. It is in fact a legal, tax and organisational transformation project that affects virtually the entire organisation.

In addition to the technical capability to receive and issue e-invoices, particular attention should be paid to reviewing contracts, terms and conditions, supplier relationships, systems of internal control, procedural documentation and invoice receipt processes.

Those who prepare well in advance can make use of the remaining transition periods to migrate systems and processes in a controlled manner. But those who wait until shortly before the deadlines expire risk disruptions to their day-to-day operations, additional costs and tax disputes.

The most important to-do items at a glance

1. Check whether you are affected by mandatory e-invoicing and the deadlines.
2. Analyse ERP and accounting systems.
3. Ensure you have the capability to receive and process e-invoices.
4. Involve suppliers and customers early on.
5. Adapt terms and conditions and standard contract templates to e-invoicing.
6. Review and adapt the tax control framework, system of internal control and procedural documentation.
7. Clearly define internal responsibilities.
8. Carry out test runs in good time before the transition periods expire.

Our team supports businesses with all matters relating to the introduction of e-invoicing. This includes, in particular, assessing VAT requirements, reviewing and amending terms and conditions and contracts, analysing existing compliance structures, and providing legal support for practical implementation.

Companies should not view the remaining transition period as a temporary reprieve. Rather, it offers the opportunity to adapt systems, processes and contractual structures to future requirements without undue time constraints.

Saskia Hähne from the GT VAT team contributed as an author to this Insight.