Mandatory E-Invoicing in Germany from 2027: What Companies Must Now Prepare from a Tax and Civil Law Perspective

The introduction of electronic invoicing in B2B transactions is often treated as a purely tax-related matter. This is not only a misconception but a real business risk. Anyone who ignores the civil law aspects risks unenforceable contractual clauses, payment delays and, in the worst case, damages claims from contracting parties. 

The legal foundation: When does the e-invoicing obligation apply? 

With the Growth Opportunities Act (Wachstumschancengesetz) of 27 March 2024, the German legislator created the basis for mandatory electronic invoicing in B2B transactions (invoices issued by businesses to other businesses). The core element is the new version of § 14 (2) sentence 2 no. 1 of the German VAT Act (UStG), which obliges businesses established in Germany to issue invoices between businesses exclusively in a structured, machine-readable format from 1 January 2027 onwards. Only formats compliant with the European standard EN 16931 are permitted – in practice, this means the use of XML-based formats such as XRechnung or ZUGFeRD, which are standard formats in Germany. 

The transitional periods for the e-invoicing obligation are staggered according to company size: As of 1 January 2025, all domestic businesses have already been obliged to be able to receive and process e-invoices. This receiving obligation has therefore been in force for more than a year – yet many companies are still not prepared. There are no exceptions: even small businesses (Kleinunternehmer) and businesses without input VAT deduction rights, such as healthcare providers, must be able to receive e-invoices. 

For issuing e-invoices, the following applies: Companies with prior-year turnover (2026) exceeding EUR 800,000 must issue e-invoices from 1 January 2027. Smaller companies benefit from a transitional period until the end of 2027. From 1 January 2028 at the latest, the obligation will apply to all legally non-privileged domestic B2B transactions. 

When do non-Germany based companies need to comply? 

For our international clients, the central question is: When does the German e-invoicing obligation apply to my company? The decisive criterion under § 14 (2) of the German VAT Act (UStG) is whether the issuing business is established in Germany for VAT purposes – meaning it has its registered seat, place of management, or a permanent establishment (Betriebsstätte) involved in the relevant transaction in Germany. 

In practice, three typical scenarios arise for non-Germany based groups: 

Scenario 1: Foreign company without a German permanent establishment, invoicing German B2B customers 

Such transactions do not trigger the German issuing obligation. The foreign supplier may continue to issue invoices in any format permitted under its home jurisdiction. However, German customers will increasingly request – and may operationally require – structured invoice formats to streamline their own incoming invoice workflows. Foreign suppliers should therefore consider voluntary adoption of EN 16931-compliant formats as a competitive and operational matter, even where no legal obligation exists. 

Scenario 2: Foreign company with a German permanent establishment involved in the transaction 

Where a permanent establishment in Germany is involved in the supply, the e-invoicing obligation applies in full. This includes branches, fixed places of business, and certain project-based structures. Determining whether a permanent establishment is "involved" in a specific transaction is a question of fact and requires careful documentation. Headquarters-driven invoicing processes that bypass the German branch are a particular source of risk: if the German establishment is functionally involved, but invoicing is centralized abroad, the resulting invoices may not meet German requirements. 

Scenario 3: German subsidiary of an international group 

A German subsidiary (e.g. a GmbH) is a domestic taxable entity in its own right and therefore subject to the full e-invoicing obligation – regardless of where the group's shared service center or central ERP system is located. This is frequently overlooked in groups with centralized invoicing processes. International groups operating in Germany should review whether their global invoicing platforms can produce EN 16931-compliant outputs for German entities, and whether the issuing entity in the structured XML data is correctly identified as the German subsidiary. 

Receiving obligation – no exception for international structures 

The receiving obligation in force since 1 January 2025 applies to every domestic business, regardless of group affiliation. International groups must ensure that their German entities are technically able to receive and process EN 16931-compliant invoices from German suppliers. A purely foreign accounts payable infrastructure is no longer sufficient. 

Exceptions to the e-invoicing obligation 

• Transport tickets (bus, train, plane etc.) 
• Low-value invoices up to EUR 250 gross under VAT Implementation Regulation § 33 UStDV 
• Invoices from VAT small businesses (Kleinunternehmer) under German VAT Act § 19 UStG 
• Invoices for fully VAT-exempt supplies (e.g. certain medical treatments, insurances, financial services under § 4 UStG) 
• Invoices to private individuals (B2C) 
• Invoices to foreign businesses (non-German B2B recipients) 

A simple PDF invoice – even when sent by email – will no longer qualify as a proper invoice within the meaning of the German VAT Act once the relevant transitional period has expired. PDF invoices may continue to be used during the transitional period, but only with the express or implied consent of the recipient. 

E-Invoicing: Overview of transitional periods 

• Since 01.01.2025: Receiving obligation for e-invoices – all businesses, no exceptions 

• Until 31.12.2026: Transitional period for issuing (all transactions); PDF still permitted with recipient consent 

• From 01.01.2027: Issuing obligation for companies with prior-year turnover > EUR 800,000 (reference year 2026) 

• Until 31.12.2027: Transitional period for companies with prior-year turnover ≤ EUR 800,000 (reference year 2026) 

• From 01.01.2028: Full obligation for all legally non-privileged domestic (in Germany) B2B transactions; paper and PDF no longer permissible 

The civil law dimension: An overlooked risk 

Anyone treating the e-invoicing obligation purely as a tax compliance matter misses half the picture. The obligation has substantial implications for existing contractual relationships, for the legal receipt of invoices and thus for the maturity of payment claims, and for late payments and damages. Long-term obligations in particular – such as ongoing service or supply contracts – give rise to challenges that must now be actively addressed. 

General terms and contractual clauses: Do existing contracts need to be amended? 

Existing contracts and general terms and conditions frequently contain provisions on invoicing that will no longer comply with the statutory framework once the transitional periods expire. Clauses such as "Invoices will be sent by post" or "Invoicing shall be made by PDF file via email" will then conflict with the German VAT Act § 14 (2) sentence 2 no. 1 UStG. 

Such a tax law violation does not automatically render the relevant contractual clause null and void under § 134 BGB (German Civil Code), since the provision primarily governs the relationship with the tax authorities and does not constitute a civil law prohibition statute in the strict sense. Nevertheless, enforcement issues may arise on a case-by-case basis: a clause interpreted as excluding the receipt of statutorily compliant e-invoices will, after expiry of the transitional period, no longer be reconcilable with statutory requirements – relying on it would not be permissible vis-à-vis the contracting party. 

Companies should therefore now systematically review all current contractual relationships for such clauses. We recommend either a contractual addendum or a side letter expressly recording the conversion to electronic invoicing. New contracts should already refer to e-invoicing as standard going forwaed. Special attention should be paid to long-term obligations: if a party refuses adaptation, the question arises which contractual obligations remain in force and whether claims for adjustment under § 313 BGB (loss of basis of the contract) may be available. 

The situation has also changed for invoice recipients: from the relevant cut-off date, existing consents to determine the invoice format will lose their effect. The recipient must then accept the e-invoice without separate consent. 

Receipt and maturity: When is an e-invoice deemed legally received? 

From a civil law perspective, it is important to specify when an e-invoice is deemed received, to determine the start of the payment period and the payment deadline. § 130 of the German Civil Code (BGB) applies to the receipt and maturity of an e-invoice. Accordingly, an electronic declaration is deemed received as soon as it enters the recipient's sphere of control – for example, by being made available in an invoicing portal or by arriving at the agreed email address. The point in time at which the invoice is actually read or processed is irrelevant. With portal-based solutions, receipt may, in individual cases, depend on whether the recipient was required to expect the provision. 

This implies that the recipient must ensure technical capability to receive e-invoices. A blanket refusal to accept an e-invoice does not release the recipient from the payment obligation. Conversely, payment periods start from the time of technical receipt – regardless of whether the recipient's internal processes already reflect this. 

For invoice issuers, attaching a human-readable PDF as a transitional measure is recommended to facilitate review by recipients. Please note that such a PDF attachment no longer has any legal invoice quality (the requirements under VAT law are not met). If the content of the PDF deviates from the structured XML data set, only the XML data set is decisive. Errors in the structured part – even if the PDF appears correct – jeopardize the recipient's input VAT deduction. 

Payment under protest and right of retention 

What happens if a non-compliant format is used despite the 2027 e-invoicing obligation? After expiry of the transitional period, an invoice sent as a PDF file is not effective for VAT purposes. Consequently, the recipient may, on a case-by-case basis, assert a right of retention under § 273 (1) BGB (German Civil Code) given that they suffer a concrete, demonstrable disadvantage from the lack of a proper invoice – for instance, because input VAT deduction is not possible from the PDF-invoice. Whether and under what conditions this applies in individual cases has not yet been clarified by the highest courts and is not yet conclusively answered in the legal literature. 

For invoice issuers, this means not only payment delays but, in serious cases, also damages liability where the contracting party suffers concrete financial disadvantages as a result of the defective invoicing. This applies in particular where the breach occurs culpably. 

To avoid such situations, internal control mechanisms are essential: systems should ensure that the correct format is dispatched without exception. In addition, it may be contractually agreed that the recipient must promptly notify any invoice errors so that correction of the e-invoice can be effected swiftly. 

Compliance and risk of fines 

Breaches of the e-invoicing obligation may also have consequences under the law on regulatory offences. The legal literature discusses whether breaches of the format requirements – i.e. issuing an invoice in the wrong format – fall within the scope of § 26a (2) no. 1 UStG (German VAT Act), which covers the failure to issue or the late issuance of an invoice. This question has not yet been conclusively clarified; settled administrative practice or judicial clarification is not yet available. The more direct and practically significant consequence is that the recipient's input VAT deduction is suspended pursuant to § 15 (1) no. 1 sentence 2 UStG (German VAT Act) until a proper invoice is available. 

The e-invoicing obligation should therefore be integrated into the company's internal control system (ICS). Clear assignment of responsibilities, technical validation of incoming invoices, and robust monitoring of outgoing invoices are not optional but mandatory measures. 

Master data management: "Know your counterparty" 

A strong master data foundation is closely linked to e-invoicing compliance. Anyone unsure whether a business partner is established in Germany – and thus subject to the obligation – will quickly run into operational difficulties. A systematic process should clarify the following for all relevant customers and suppliers: 

• Is the business partner established in Germany for VAT purposes? 
• Is the specific transaction subject to the e-invoicing obligation? 
• Which format and transmission channel are agreed or technically feasible? 
• Are foreign group companies informed of the invoicing obligations? 

Incorrect master data – such as a missing country code in the ERP system – may result in domestic transactions being wrongly classified as international, or vice versa. The sooner the database is reviewed and completed, the smoother the operational conversion will be. 

Questions regarding EU law 

From a legal perspective, not all questions concerning the 2027 e-invoicing obligation have been conclusively clarified. There is debate as to whether the rule is compatible with the freedom of establishment under Art. 49 TFEU. Critics point out that foreign companies with branches in Germany must meet additional system requirements without the hoped-for control opportunities for combating tax evasion being immediately realized in return. In this initial phase, the e-invoicing obligation primarily serves to prepare for future live reporting obligations planned under the EU initiative VAT in the Digital Age (ViDA) from 2030. 

Judicial review up to the European Court of Justice is conceivable. For the time being, this does not affect the binding nature of the current regulations– companies are obliged to meet the transition deadlines. 

Outlook: ViDA and the digital reporting system as of 2030 

The 2027 e-invoicing obligation is not an isolated measure, but rather the first step toward a comprehensive digitalization of VAT law at EU level. Under the ViDA initiative (VAT in the Digital Age), an electronic reporting system based on structured invoice data is currently envisaged. 

The precise timeframe has not yet been politically finalised; introduction is currently expected from around 2030, although further coordination at EU level is required. Companies that now adapt their processes to robust e-invoicing management will not only achieve compliance for 2027, but also lay the foundation for the next stage of digitalization. 

Our recommendation: Act now 

If you haven't taken any concrete steps, the clock is ticking. 

The 2027 e-invoicing obligation concerns at least three fields of action that must be addressed simultaneously: 

• Technical: Adapt ERP systems and invoice workflows to EN 16931-compliant formats (XRechnung, ZUGFeRD), ensure receipt and validation of incoming e-invoices, adjust archiving processes in line with GoBD* requirements. 
• Legal: Review existing contracts and general terms for impermissible invoice clauses, prepare contractual amendments (side letters, addenda), draft new contracts in compliant form already 
• Organizational: Review and complete master data, anchor responsibilities within the ICS, inform business partners of your own conversion plans and verify their systems for compatibility. 

Companies that only begin preparations at the end of 2026 risk operational bottlenecks, legal disputes with business partners, and tax disadvantages through loss of input VAT deduction. Those who convert early, on the other hand, benefit from more efficient, automated processes – and are at the same time prepared for the future requirements of European tax digitalization. 

For internationally based clients, an additional aspect should be considered: Even if your group is not directly subject to the German issuing obligation, your German customers, branches and subsidiaries are. A timely review of group-wide invoicing infrastructure, contractual clauses and master data is therefore essential to avoid friction with German trading partners and to preserve input VAT positions of German group entities. 

Our experts in tax and legal advisory around Lars Rinkewitz and Esengül Aslan support you in reviewing your contracts, adapting your general terms and in the tax-compliant implementation of your e-invoicing processes. Please feel free to contact us. 

*Principles for the proper management and storage of books, records and documents in electronic form and for data access