A complete and formally correct incoming invoice is an essential resource for every invoice recipient. According to current German financial case law, the right to the deduction of input tax critically depends on the completeness and correctness of the incoming invoice. This article shows what elements an invoice of this type must have so that the full advantages can be gained from those invoices.

Incoming invoices – a definition

An incoming invoice is a document sent by third parties. Third parties could be service providers, vendors, retailers, etc. The function and objective of the invoice document is to instruct the invoice recipient to pay an outstanding bill. Almost anything can be entered in an invoice. However, it is crucial that the invoice itself is not relevant to the origination of the bill. The latter already originated with the signing of a contract or the performance of a service, for example.

What are the mandatory elements of an incoming invoice?

The necessary elements of a proper incoming invoice include the following (see also §§14 and 14a (DE) of the German Value Added Tax Act (UStG):

  1. Full name and address of the invoicing party
  2. Full name and address of the invoice recipient
  3. Date of the invoicing
  4. Unique invoice number
  5. Time of the service provision and/or delivery
  6. Identification and amount of the delivered goods or type and scope of the service performed
  7. Net invoice amount
  8. Value added tax
  9. Gross amount
  10. Tax liability of the service recipient, if applicable
  11. Tax number or VAT identification number
  12. Bank details of the invoicing party

Discounts, bonuses and reductions may be part of the incoming invoice, as reasonable extra information; however, they are not mandatory elements of the invoice.

Exception to the rule: incoming invoices with amounts less than 250 Euro

According to the VAT law, the number of mandatory elements is smaller for so-called small sum invoices. In those cases, the following information is enough – according to the Value Added Tax Implementation Ordinance (UStDV – DE)

  1. Full name and address of the invoicing party
  2. Date of the invoicing
  3. Identification and amount of the delivered goods or type and scope of the service performed
  4. Gross amount (net payment including VAT)
  5. Tax rate to be used or an indication of a tax exemption

It is not difficult to see that in the case of incoming invoices smaller than 250 Euro you do not need to file your own VAT certificate. This sort of invoice also does not require information on the time of performance or the recipient of the performance. Warning: A small sum invoice does not apply once a company creates several invoices for one and the same service – splitting the incoming invoice, so to speak, so that each invoice is under the limit of 250 Euro.

Advantages of a complete incoming invoice for the invoice recipient

Entrepreneurs in particular count the VAT during the purchase of goods and services. However, this money can be requested back from the tax office in the context of the input tax deduction. This is one of the essential advantages of a proper incoming invoice.

Incoming invoice media: electronic or on paper?

There are a lot of options here. First of all, electronic incoming invoices or those which were digitized via scanning have the same status from a legal viewpoint. The tax authorities are being particularly forward-looking here. According to GoBD, the original paper invoices may be destroyed after their digitization – provided that the digital version is archived and that the scanning process meets the company-specific rules for unchanged and proper digitization of the already prescribed process documentation. For further details please read the article “Paper on its way out“.

How long must an incoming invoice be retained?

An incoming invoice must be retained for ten years. In this context, make sure to select future-proof storage formats and media. Ideally, the incoming invoices will be archived in a way which will still be readable in ten years.

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Thorsten Schmidt
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