Navigating VAT invoice requirements in Germany: a complete guide
When operating a business in Germany, understanding the country's value-added tax (VAT) invoice requirements is crucial for seamless transactions and compliance. VAT invoicing plays a pivotal role, acting as legal documents that facilitate tax calculations, record sales of goods or services, and ensure proper reporting. With 33% of business-to-consumer transactions involving invoicing, mastering VAT invoice regulations becomes essential.
This comprehensive guide will navigate you through the intricacies of VAT invoicing requirements in Germany. We'll explore circumstances necessitating an invoice, mandatory invoice contents, simplified invoicing options, timelines for issuance, retention periods, and ways to streamline your invoicing processes - often, Enty can help with a lot of boring steps in business invoicing and offer e-invoices.
When to invoice?
In Germany, VAT invoices are mandatory for various transactions involving goods and services. Here are the key circumstances that require the issuance of a VAT invoice:
1. Business-to-business (B2B) transactions
Businesses based in Germany must issue invoices when supplying goods or services to other businesses, regardless of their location (within Germany, other EU countries, or outside the EU). This is so they comply with mandatory B2B e-invoicing regulations when conducting B2B transactions. This requirement applies to all taxable entities and legal bodies, including exports and intra-community transactions - if your’re issuing mandatory b2b e-invoicing, keep this in mind.
2. Supply of goods or services subject to German VAT
A VAT invoice is required when conducting a supply of goods or services that is subject to German VAT, even if the recipient is a non-taxable entity or an individual consumer.
3. Small businesses ("Kleinunternehmer")
Small businesses in Germany, known as "Kleinunternehmer," are also obligated to issue invoices or e-invoices for their supplies, despite being exempt from charging VAT. However, these invoices must not display or include VAT amounts.
4. Business-to-consumer (B2C) sales within the EU
For B2C sales of goods to private individuals in other EU countries, German businesses must issue invoices or e-invoices if they are not using the Union One Stop Shop (OSS) scheme.
5. Exempt services
While certain services may be exempt from VAT, there are still invoicing requirements for businesses in Germany to issue invoices when supplying these services to other businesses, with a few exceptions. Enty can help you create and manage mandatory e-invoicing process easily, ensuring compliance with the German VAT and invoicing requirements across various business scenarios. What’s even cooler - you don’t have to worry about VAT yourself - simply start creating an invoice, input company number and the VAT will be applied automatically.
Invoice contents
When it comes to the contents of invoices, German VAT regulations have specific invoicing requirements to ensure clarity and compliance. Whether you're issuing standard paper invoices or a simplified one for small amounts, it's essential to include elements described below for the party that is supposed to receive invoices.
When issuing VAT invoices in Germany, businesses have the flexibility to use any currency. It is not mandatory to mention an exchange rate or provide an equivalent amount in euros. However, it is considered best practice to issue invoices in the language of the customer for better understanding and clarity.
Mandatory information
German VAT invoices must contain the following essential information:
Date of issuance
A unique, sequential invoice number
VAT identification number of the supplier
Full addresses of both the supplier and the customer
A detailed description of the goods or services provided
Quantities of goods supplied, if applicable
The date of supply, if different from the invoice date
The net, taxable value of the supply
The applicable VAT rate(s) and the corresponding VAT amount(s)
Details supporting zero VAT, export, reverse charge, or intra-community supply, if applicable
The total, gross value of the invoice
VAT must be clearly displayed on invoices, showing the net amount, the VAT rate(s) applied, the VAT amount(s), and the total gross amount, including VAT.
Simplified invoices
For invoices under €150, German VAT regulations allow the issuance of a simplified 'invoice for small amounts.' These simplified invoices require fewer details, making the invoicing process more streamlined for low-value transactions.
While simplified invoices have fewer mandatory fields, they must still include the following essential details:
Date of issue
Supplier's VAT identification number
Type of goods or services supplied
VAT amount payable or the information needed to calculate it
A clear and direct reference to the original invoice and the particulars being modified (found on a credit note, debit note, or any document regarded as an invoice)
Germany has also moved toward embracing e-invoicing across the board. Companies are now required to receive e-invoices and process them efficiently. If you've ever received an e-invoice, you know how critical it is to have systems in place to handle them seamlessly.
Small business invoices
Small businesses in Germany, known as "Kleinunternehmer," can also benefit from simplified invoicing. While exempt from charging VAT, they must still issue invoices for their supplies. These invoices should include:
Business name and address
Tax/VAT identification number
Invoice date and number
A description of the goods or services provided
The total amount due (without VAT)
It's crucial for small businesses to reference the Section 19 VAT exemption on their invoices to clarify their VAT-exempt status. VAT must be clearly displayed on all e-invoices. This includes showing net amounts, VAT rates, and total gross amounts. Businesses can claim input tax deductions based on the accuracy of the e-invoice data. Ensuring compliance is simpler with Enty, which automatically calculates VAT when you create an invoice. This user-friendly invoicing platform can assist small business owners in creating and managing invoices that comply with the German VAT invoice requirements - make sure that the other party will receive e-invoices that work.
Correcting errors
If VAT is mistakenly included on a small business invoice, a corrected invoice or reverse invoice can be issued to rectify the error. Correcting errors in invoices that have already been issued is a cumbersome and in some cases lengthy task, which requires a lot of effort. With Enty, it has never been easier - simply erase the information you don’t want and enter the correct data.
Invoice issuance timeline
Timely issuance of invoices is crucial for businesses operating in Germany to maintain compliance with VAT regulations. Here are the key timelines to keep in mind:
Business-to-business (B2B) transactions: invoices must be issued within 6 months of supplying goods or services to another business.
Intra-EU B2B transactions: for supplies of goods or services to businesses within the European Union, invoices must be issued within 15 days after the end of the month in which the supply took place.
It's important to note that while the issuance timeline is a critical aspect, businesses must also ensure that their invoices comply with all other mandatory requirements, such as including the correct information and adhering to the appropriate format.
Failure to adhere to these timelines can result in penalties and potential legal consequences. To streamline your invoicing process and ensure timely issuance, consider leveraging Enty's invoicing software, which helps you create and manage invoices with ease.
Invoice retention period
Businesses operating in Germany are required to retain invoices for an extended period to comply with VAT regulations. The current legal requirement mandates that both sales and purchase invoices must be stored for 10 years. This obligation applies to invoices in paper or electronic form, ensuring proper record-keeping and facilitating potential tax audits.
Storage location
Paper invoices: paper invoices must be physically stored within Germany to meet the retention requirements.
Electronic invoices: electronic invoices can be stored outside of Germany, provided they can be accessed and downloaded promptly in the event of a tax audit. However, specific approval is required from the tax authorities to store electronic invoices outside the country.
The future of invoicing in Germany
While there have been discussions about reducing the retention period for German VAT invoices from 10 years to 8 or 7 years, the current legal requirement remains unchanged. Businesses should stay updated on any future amendments to the retention period to ensure compliance.
Germany, like all EU member states, now permits the use of electronic invoices under certain conditions. This move towards digitalization aims to streamline e-invoicing processes and promote efficiency. This is a big step and not everyone can adopt it straightaway, but that’s where Enty comes in handy. Enty’s invoicing services can assist you in creating and managing electronic invoices while adhering to the relevant retention requirements.
It's crucial for businesses to diligently maintain and store invoices for the mandated period, as failure to do so can result in penalties and potential legal consequences. By adhering to the invoice retention requirements, companies can ensure they have the necessary documentation for tax audits and maintain compliance with German VAT regulations.
Last thoughts
Navigating the VAT invoicing landscape in Germany requires careful attention to detail and adherence to specific regulations. Whether you're a small business owner or handling B2B transactions, understanding when and how to issue invoices correctly is crucial. Leveraging Enty's invoicing services can simplify this process, ensuring your invoices comply with German VAT standards while streamlining your business operations.
