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A brief introduction to electronic invoices: What you need to know today 

In the past few years, a lot has changed in invoicing as well as in invoice receipt. More and more companies are turning to electronic invoices instead of sending traditional paper invoices. But what exactly is an e-invoice and how does it differ from a classic digital invoice?

Max. Reading time 9min

In this article, we provide a spotlight overview of electronic invoices. What are the differences, and what needs to be considered? Which mandatory elements must such an electronic invoice contain? This article provides answers to these and many other questions.

e-invoice, e-invoicing or electronic invoice – are they the same?

As long as the invoice format of the electronic invoice consists of structured data, both terms apply. We therefore use the above identifiers as synonyms. However, e-invoicing is more than just an electronic invoice format, because the concept goes beyond the format to also describe the exchange of data between the invoice issuer and  Invoice receiver via special platforms. 

What is an e-invoice?

These electronic invoices are generated, transmitted, received, and processed in a digitally structured format

The advantage of electronic invoices in a structured data format is that they have a semantic data model. This means: How the invoice data of the electronic invoice is arranged, labeled, and linked determines its meaning. The data can be read and processed by a computer. 

What does not count as an electronic invoice?

All invoice formats that do not use structured data: Image and PDF files or paper invoices, for example. These are not considered electronic invoices.

In this case, the recipients of the electronic invoice are forced to rely on other digital methods for invoice processing. Usually, this consists of optical character recognition (OCR). However, the recognition rate of OCR is around 90 percent, depending on the scan quality and invoice-processing software. 

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Background: Legal basis for e-invoicing in Europe 

The driver for the introduction of electronic invoices in Europe is the European Union. Directive 2014/55/EU of 16 April 2014 created the framework. One reason for the introduction of this EU directive: 

Several global, national, regional and proprietary standards on electronic invoices exist and are currently used in Member States. None of those standards prevails, and most of them are not interoperable with one another.

All EU member states are now required to implement this directive in national law. In this country, the Coordination Office for IT Standards (KoSIT, based in Bremen) developed an electronic invoice standard called XRechnung

8 steps to the introduction of electronic invoicing in Germany 

The introduction of the XRechnung standard as one of several possible formats for e-invoicing was the result of a long development period. In Germany in particular, the focus was on the exchange of invoices between companies and public-sector clients as well as service providers in government. Numerous steps have been taken to optimize these invoice exchange processes. Here follows a brief outline of the most important milestones: 

  • 04 & 09/2017: The German government promotes the introduction of e-invoices in public administration through the E-Invoicing Act and the E-Invoicing Ordinance
  • 05/2017: The XRechnung standard 1.0 (PDF) is published for the first time by the Coordination Office for IT Standards in Public Administration (KoSIT). 
  • 11/2018: Top federal ministries and constitutional bodies must accept e-invoices in XRechnung format. 
  • 11/2018: The federal government introduces the Central Invoice Receipt Platform (ZRE)
  • 11/2019: All other federal agencies are now also required to accept electronic invoices. 
  • 04/2020: All state agencies, as well as municipalities, must send and accept e-invoices 
  • 11/2020: Invoices of 1,000 euros or more are sent by suppliers to the federal administration only as electronic invoices; deviations may exist at the state level 
  • 01/2023: The XRechnung format is now part of the XStandards purchasing standards family

Who must use electronic invoices? 

Since 2018, all federal ministries and constitutional bodies must be able to receive e-invoices when acting as a customer. In 2019, all other federal agencies followed suit. As of 2020, the E-Invoicing Ordinance requires all state as well as local governments to accept e-invoices. For the contractors, as a rule private companies, the obligation to issue invoices in electronic invoice format correspondingly applies. 

Are there any exceptions to the e-invoicing requirement? 

The E-Invoicing Ordinance (ERechV) describes the exceptions as follows: 

Now, however, the devil is in the details: This is because, due to Germany’s federal structure, each federal state is responsible for implementing EU Directive 2014/55/EU itself. The regulations therefore do not automatically apply to the public administrations that are subordinate to the respective federal states, such as municipalities, district offices, and administrative districts. The implementation of the directive therefore varies from state to state.

Which invoice formats are suitable for e-invoicing? 

Essentially, 2 formats have emerged for e-invoicing over the last 10 years. These two invoice formats have one thing in common: They are both based on the Extensible Markup Language (XML). This makes them structured electronic invoice formats that are machine-readable. 

XRechnung – for invoicing public agencies 

As an electronic invoice, this format is used for invoicing by private companies to German public agencies. This is required by Section 4 of the E-Invoicing Ordinance. The requirement originates in EU Directive 2014/55/EUand the specification EN-16931. 

ZUGFeRD – readable by human and machine 

This invoice format is also classified as an electronic invoice. It is used in invoicing between companies (B2B) and was created by the Forum for Electronic Invoicing Germany (FeRD)

The clincher: The ZUGFeRD format is a hybrid format. To the user it appears as a PDF, but at the same time it contains the invoice data as embedded XML. As of version 2.2.0, ZUGFeRD is a proper electronic invoice.

The ZUGFeRD 2.2.0 profile XRECHNUNG fundamentally satisfies the requirements and enables the submission of invoices via the federal government’s platforms.

As an electronic invoice, you can therefore use the ZUGFeRD format for invoicing to German public agencies. But this invoice format also has advantages in practical everyday invoicing, such as in invoice receipt: Even if you are not currently able to process the XML data of the electronic invoice, you will still receive a PDF invoice that you can process with OCR. Not without reason, this format enjoys a certain popularity. Against the background of EU Directive 2014/55/EU, France, for example, relies on Factur-X for electronic invoicing, which has major similarities with ZUGFeRD 2.1. 

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Europe goes digital 

The introduction of e-invoicing in Europe is progressing and offers public agencies and companies numerous opportunities to save costs and increase efficiency. In our Newsroom, you can read about which EU countries have already implemented Directive 2014/55/EU and how this relates to “e-invoicing / invoice exchange platforms”. 

faq on electronic invoices

Thanks to the structured data, not only can invoice information be transmitted quickly and securely, it can also processed automatically. Electronic invoices can be sent in the traditional way by email or via invoice platforms such as PEPPOL. This not only saves time and resources, it also minimizes the risk of errors and inconsistencies. Of course, Directive 2014/55/EU, its national implementations and their acceptance (DE: E-Invoicing Act and E-Invoicing Ordinance) play a key role here. 

In addition to the mandatory elements of an invoice, which must be included for VAT reasons (e.g. Section 14 VAT Act (UStG)), e-invoices in Germany must have the following invoice components according to Section 5 of the E-Invoicing Ordinance: 

  • Routing identification number 
  • Terms of payment or alternatively the due date 
  • Bank details of the payee 
  • The De-Mail or email address of the invoicing party 

This depends on whether the invoice PDF has structured data, such as the ZUGFeRD format. A PDF-only invoice does not in itself constitute an electronic invoice. 

In Germany all contractors and suppliers to federal and state agencies as well as local governments must send electronic invoices.

Both electronic invoice formats are based on Directive 2014/55/EU and constitute electronic invoices in their national implementations. The obvious difference is that XRechnung is a pure XML format. This electronic invoice is not easily readable by humans. The respective invoicing software takes care of its presentation. In contrast, as a hybrid format, ZUGFeRD 2.2.0 has all the prerequisites for an electronic invoice, but ZUGFeRD invoices can also be read in the PDF viewer of the incoming invoice software. Likewise, the XML embedded in the PDF can be processed by the invoicing software. The big advantage: No arrangements are necessary before sending invoices, as PDFs can be handled by any invoicing software. 

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