Regulatory updates - Germany

German Chancellor Angela Merkel announced the proposal on 3 June, which temporarily reduces the German VAT rates from 19% to 16% (regular VAT rate) and from 7% to 5% (reduced rate) for the period from 1 July 2020 to 31 December 2020.

The government’s plans were revealed after economic data showed that industrial production fell to record lows in April as the coronavirus pandemic forced manufacturers in Europe’s largest economy to shut down. Further, unemployment has risen to 6.3% from 5.8% over the past month

Given the short deadline of 1 July 2020, there is an immediate need for action by companies to ensure that sales are correctly recorded and especially that their ERP systems are up to date with the rate changes.

The VAT rate changes are as follows:

• The standard rate is to be reduced from 19% to 16%
• The discounted rate is to be reduced from 7% to 5%

The proposed reduction of rates is to become valid from 1 July 2020, and continue to be reduced until 31 December 2020.

The classification from the standard 19% rate to the reduced 7% VAT rate for catering food services was announced by the government earlier in May. The reduced rate will also become effective from 1 July 2020 and run until 1 July 2021. Take-away and delivered food are already liable to 7% VAT.

Early economic reports suggest that the coronavirus crisis will hit German tax revenues by nearly €100 billion in the year 2020. The hope is that their generous €130 billion stimulus package, which includes the temporary reduction of German VAT rates and the child bonus, will help reboot the country’s economy.

With six months to go, there are still many questions on the practicalities of the mandate. To prepare the taxpayers readiness and increase public awareness, the German Ministry of Finance (BMF) published a regulatory draft letter on 13 June 2024.

In the letter, the BMF goes through the regulatory changes introduced by the Growth Opportunities Act (Wachstumschancengesetz) and offers more practical guidance on what this means for businesses in Germany.

The draft letter contains guidance on the following topics:

• Regulations introduced by the Growth Opportunities Act
• Invoice formats (electronic/hybrid/other)
• Issuance/reception of e-invoices
• Storage of e-invoices
• Input VAT deductions
• Transitional provisions

Some main takeaways from the draft letter concern what is expected of German businesses with the introduction of the mandate. The German mandate starts 1 January 2025 with a requirement on having the capabilities of receiving e-invoices that are compliant or interoperable with EN 16931, while the requirement of mandatory issuance will introduced in phases during 2027/2028. The letter states that initially, it will be sufficient to just provide an e-mail address to meet the requirement of receiving capabilities. Parties may outside of that decide other methods of distributing the e-invoice.

BMF also gives some additional clarifications on what counts as a compliant distribution of an e-invoice under the mandate. The e-invoice must be distributed electronically (e.g. e-mail/electronic interface/downloadable), meaning you may not put the e-invoice on a USB stick and send it by carrier pigeon, as was previously theorized to be a compliant solution under the current legislation.

There is also some information on cases where the customer refuses to accept an e-invoice or lacks the capability to receive an e-invoice. The draft letter states that in such cases the customer has no right to an alternative invoice and the suppliers VAT obligations are considered fulfilled. This does however open the question if the initial carrots and sticks of the German mandate will be sufficient to drive change.

The draft letter is expected to be published in its final state in the fourth quarter of 2024.

Stay tuned with Pagero for the latest e-invoicing news in Germany.

The Release Package includes the following documents:

• Unified specification as a PDF for ZUGFeRD 2.4/Factur-X 1.08
• Technical appendix
• Excel sheet with all code lists and codes used in EN16931
• Schema and XSLT files (separate for each profile)
• Sample invoices (separate for each profile)
• ZUGFeRD logo

This version is based on UN/CEFACT CII D22B and maintains full backward compatibility with D16B. All five profiles have their own XSD and Schematron validation artifacts, which are updated in accordance with EN 16931.

In the new version of ZUGFeRD, sub-items in the EXTENDED profile can now be used in a VAT-compliant manner. Invoice items and invoice sub-items are clearly marked regarding their VAT relevance.

The new version should be implemented by January 15, 2026.

The information package for ZUGFeRD version 2.4 is available here.