Adapting and modernizing the European Union’s VAT system to the requirements of the digital age is long overdue. VAT evasion and fraud, facilitated by digitalization, lead to considerable tax losses in the member states, particularly in the context of cross-border EU deliveries. In addition, there are high compliance costs for companies that operate across EU borders. Some member states have tried to put a stop to this development by introducing national regulations—particularly in the form of digital reporting obligations.

However, such moves come with the risk of a fragmentation of EU VAT law, which is at odds with the idea of a single European internal market. For this reason, the EU Commission published a draft directive (VAT in the Digital Age, or ViDA) on 8 December 2022. Among other things, the draft provides for the mandatory introduction of e-invoicing in the B2B sector and the introduction of an electronic reporting system for cross-border transactions beginning from 1 January 2028.

This path is to be taken earlier in Germany. In order for it to implement this reporting system independently of EU-level approval, Germany has applied to the Council of the EU for a derogation—limited to domestic transactions—from 1 January 2025 to 31 December 2027 and has since received it, on 25 July 2023. The Growth Opportunities Act (in German, Wachstumschancengesetz) is intended, among other things, to introduce a statutory transitional regulation for the (mandatory) use of e-invoicing in the B2B sector until the end of 2027. The draft Growth Opportunities Act amended by the decision of the Mediation Committee (Vermittlungsausschuss) dated 21 February 2024 provides for the following changes in this context:

• Introduction of the term “other invoice” and definition of the terms “e-invoice” and “other invoice” (Section 14 para. 1, sentences 2 to 5 of the draft VAT Act)
• Regulation of the mandatory use of an e-invoice: Supply in the B2B sector if both the supplier and recipient are based in Germany or a territory within the meaning of Section 1 para. 3 VAT Act (Section 14 para. 2 sentence 2 no. 1 of the draft VAT Act)
• E-invoice requirements: A qualified electronic signature or transmission via EDI procedure (Section 14 para. 3 sentence 6 of the draft VAT Act)
• Introduction of a staggered period for the mandatory use of e-invoices (Section 27 para. 38 of the draft VAT Act)

• Exceptions to the mandatory e-invoice: Invoices for small amounts and tickets as invoices (Section 33 sentence 4, 34 para. 1 sentence 2 of the draft VAT Implementing Ordinance).

At its meeting on 24 November 2023, the Federal Council did not approve the Growth Opportunities Act passed by the Federal Parliament on 17 November 2023 and referred the matter to the Mediation Committee. The Mediation Committee has dealt with the Growth Opportunities Act during its session on 21 February 2024 and has agreed on a consent proposal. Therefore, it is now up to the Federal Parliament to vote on the amended Growth Opportunities Act on 23 February 2024. Afterwards, it still has to be approved by the Federal Council at its next meeting on 22 March 2024. 

It is already clear that the introduction of e-billing will present companies with challenges—what kinds of challenges remain to be seen. Following the introduction phase, the hope remains that efficiency will increase and costs will be reduced.

If you have any questions on this topic, please do not hesitate to contact us. We would also like to draw your attention to the newsletters from our colleagues in France and Poland.