E-Invoicing: German Ministry of Finance Clarifies Requirements and Addresses Practical Questions

An Annual Tradition

Some dates make their way onto the calendar without anyone entering them. In the field of VAT, 15 October has become one of those dates.

On 15 October 2026, for the third consecutive year, the BMF published guidance on e-invoicing. The date has effectively become a fixed point in Germany’s e-invoicing framework. The latest guidance supplements the BMF letters dated 15 October 2024 and 15 October 2025 and amends the VAT Application Decree. A notable feature of the new guidance is its approach: for the first time, the tax authorities explicitly identify individual Business Terms.

Below is an overview of the key developments.

Advance and Final Invoices

Advance payment invoices and installment invoices only need to be issued as e-invoices once the issuer itself becomes subject to the e-invoicing obligation. As a general rule, this obligation applies from 1 January 2027 and, for businesses with annual turnover not exceeding EUR 800,000, from 1 January 2028. This also applies where the underlying supply or payment takes place only after the relevant implementation date.

In final invoices, deducted interim payments may now be reported as an aggregate amount in BT-113 (“Paid Amount”), while details of previously invoiced net amounts and VAT may be included in the free-text field BT-22 (“Invoice Note”). Alternatively, an embedded attachment containing the breakdown of net amounts and VAT remains permissible, provided that the structured part of the invoice expressly refers to it. Both approaches will be accepted until 30 June 2030. The previous deadline of 31 December 2027 has therefore been removed.

Business Customer Status in High-Volume Transactions

As a general rule, an e-invoice must be issued for supplies subject to German VAT where the recipient acquires the services for business purposes and both parties are established in Germany.

According to the BMF, the invoice issuer may rely on information provided by the recipient when acting with the diligence of a prudent businessperson, provided there is no information to the contrary. The use of a VAT identification number may, for example, indicate that the recipient is acting as a business customer.

The tax authorities will not object where the invoice issuer could not reasonably have recognized that it was supplying a business customer for business purposes.

For ongoing contractual relationships involving mixed customer structures, such as energy suppliers, the BMF now clarifies that the status of the customer only needs to be verified once, either at the start of the contract or upon a contractual amendment. Continuous monitoring is not required.

The rules governing input VAT deduction remain subject to paragraphs 55 to 59 of the BMF guidance dated 15 October 2024. This includes correction mechanisms and, in certain circumstances, the continued acceptance of input VAT deductions from non-electronic invoices during 2027.

Service Descriptions and Construction Industry E-Invoices

The requirements for service descriptions, an area that has created considerable uncertainty during implementation, have been further clarified.

The type, scope, substance, and, where relevant, location of the services supplied must be described within the structured part of the invoice in a manner that allows the remaining VAT-relevant information to be determined. Additional supporting information, such as timesheets, may continue to be included in an embedded attachment. The new guidance does not, however, provide further examples, simplifications, or practical relief.

For construction services, it is sufficient for the structured portion of the invoice to contain the individual work categories together with their aggregate amounts. The detailed bill of quantities should be included in a human-readable embedded attachment to which the structured section clearly refers. The bill of quantities may also be transmitted separately in a structured format, for example using the GAEB standard.

Discounts and Gross-Price Invoices

Where written agreements provide for price reductions, a general reference to those agreements is sufficient if the underlying documentation can be produced promptly and reviewed easily.

If the agreement changes subsequently, there is no requirement to amend the invoice.

As XRechnung and ZUGFeRD currently do not support gross-price invoices, such as those used for fixed-price books, it will be sufficient until 31 December 2027 to include only the total amounts per VAT rate in the structured part of the invoice in order to avoid rounding differences. Individual line items must then be included in an embedded attachment.

Corrections and Business Rule Errors

Invoice corrections must also be issued electronically.

Any correction method is permissible provided that the correct information can be clearly identified from the invoices considered as a whole. Whether the most appropriate approach is the issuance of a commercial credit note (UNTDID 100 code “381”) followed by reissuance, or a corrective invoice (UNTDID 100 code “384”), must be assessed on a case-by-case basis.

Subject to prior agreement and a specific, unambiguous reference to the original invoice, the BMF now confirms that an e-invoice may also be corrected through a VAT credit note issued by the recipient (UNTDID 100 code “389”). Although expressly permitted by the guidance, this approach may present practical challenges. It should therefore be used cautiously and only after obtaining the supplier’s express consent.

The BMF also reiterates its distinction between format errors and business rule errors. Where no format error exists, a document remains a valid VAT e-invoice even if a business rule error is present. Unlike format errors, business rule errors are only relevant for VAT purposes if they concern a mandatory VAT requirement. Consequently, input VAT recovery remains possible where business rule errors have no VAT relevance.

From a practical perspective, businesses should nevertheless ensure that invoices are technically compliant in order to avoid disputes regarding the VAT significance of individual business rule violations.

Public Sector Requirements, Penalties, and Further Changes to the VAT Application Decree

The VAT rules governing e-invoices apply alongside other public-sector e-invoicing requirements, including the German Electronic Invoicing Ordinance (ERechV). Where requirements differ, the stricter provision prevails.

Administrative fee notices may also qualify as VAT invoices. Until 30 June 2030, however, they may continue to be issued in non-electronic form.

One particularly welcome clarification for invoice issuers is that issuing a conventional invoice instead of a mandatory e-invoice does not constitute an administrative offence under Section 26a(2) no. 1 German VAT Act (UStG). No administrative fine applies in such circumstances.

That said, issuing a non-compliant invoice remains without risk neither for the issuer nor the recipient. Input VAT deduction may be jeopardized for the recipient, while the issuer may face correction obligations, invoice rejections, and payment delays.

A less visible but potentially significant amendment concerns terminology within the VAT Application Decree. In several provisions, the word “contained” has been replaced by “embedded”.

The tax authorities thereby clarify that supplementary documents, such as contracts, bills of quantities, or timesheets, must be technically embedded within the structured XML file itself. Separate email attachments or files attached solely to a hybrid PDF document are insufficient. This is particularly relevant for long-term contractual arrangements where the underlying contract is intended to serve as an attachment to the first e-invoice. As under previous guidance, a mere hyperlink to an external document remains insufficient.

Importantly, the BMF confirms that e-invoices issued up to 31 December 2026 in accordance with the previous guidance letters will continue to be accepted for input VAT deduction purposes.

Practical Note: From Statutory Requirements to Business Terms

Businesses issuing or reviewing e-invoices must effectively translate VAT requirements into technical data fields.

While the mandatory invoice requirements arise from Sections 14 and 14a German VAT Act, their technical implementation is reflected in the Business Terms (BTs) and Business Groups (BGs) of the EN 16931 standard.

To facilitate this process, KoSIT and FeRD have developed a mapping table that allocates each statutory requirement to the corresponding BT field. In its latest guidance, the tax authorities expressly recommend the use of this mapping table in its current version.

Businesses should therefore ensure that they work with the latest available version. In this context, the PDF version is preferable to the online version published by KoSIT. For example, the online version currently contains an incorrect reference for VAT credit notes, directing users to the code for commercial credit notes (UNTDID 1001 “381”) instead of the appropriate VAT credit note code (“389”).

Businesses should also note that the requirement under Section 14(4) no. 6a UStG, while already included in the mapping table, only becomes mandatory from 1 January 2027.

What Does This Mean in Practice?

The third BMF letter primarily provides legal certainty on specific details that had previously remained unclear in practice. For businesses, this means that the time remaining until the issuance requirement takes effect on January 1, 2027, should be used to specifically align existing invoicing and receipt processes with the new requirements.

The focus here is on the correct technical representation of mandatory VAT information in the structured portion of the e-invoice - from field mapping based on the current mapping table, through a service description sufficient for verification purposes, to the embedding of supplementary documents. Likewise, special scenarios such as final invoices, invoice corrections, and credit memos should be anchored in clearly defined processes. On the recipient’s side, a coordinated verification procedure is recommended that classifies validation results according to VAT regulations, thereby ensuring the right to claim input tax credits.

Do you have questions about implementation? Feel free to contact us.