eInvoicing in Germany – All you need to know in the real estate industry

Germany is introducing eInvoicing (in German: eRechnung) as of 1 January 2025. The real estate industry will also have to deal with new and adapted procedures.

In this article, we will outline the steps you need to take now to be 'ready to go' by the deadline.

What is an eInvoice and who has to issue it?

An eInvoice is issued, transmitted and received in a structured electronic format. This format enables electronic processing of the eInvoice. Format requirements are based on the EN 16931 standard, which is already used in the B2G area.

Other electronic formats are also permitted in principle, provided that they are mutually agreed upon by the parties involved and interoperability between the EN 16931 format and the format used is ensured or it is technically possible to extract the required data in the EN 16931 format.

The use of other invoice formats, such as the traditional PDF invoice as an email attachment or a paper invoice, will in most cases only be possible in the B2C area in the future.

The obligation to issue eInvoices applies to companies that have their registered office or management or a permanent establishment with revenue sharing in Germany. It should be noted here that a foreign entrepreneur's VAT registration does not result in (VAT) residency in Germany. However, the BMF letter refers to the regulation in the VAT application decree that a (foreign) entrepreneur who owns a property located in Germany and rents it out subject to tax is to be regarded as being resident in Germany for these transactions (i.e. the taxable rental). However, this view is to be critically questioned on the basis of the European Court of Justice's case law on VAT permanent establishments.

When a domestic taxable and non-exempt service (not exempt pursuant to § 4 no. 8 to 29 UStG) is provided to another entrepreneur based in Germany, an e-invoice must be used for billing in the future.[1]

There is an exception to the requirement to issue an eInvoice solely for invoices for small amounts or for transportation tickets that serve as invoices.

What are the changes for letting and leasing?

Let's start with the good news: the e-invoicing regulations do not apply to letting and leasing to private individuals (so-called B2C services). These letting services are VAT-exempt pursuant to § 4 No. 12 UStG, so no invoice with VAT is issued. As such, everything remains as it is.

The most significant impact of the introduction of e-invoicing is in the area of commercial leasing (B2B services). In this area, the option of tax liability is regularly exercised, so that an eInvoice is required. In particular, in the case of so-called long-term rental invoices (continuing obligation), there are special features that entrepreneurs in the real estate industry have to take into account. As a rule, the rental agreement is also considered to be an invoice if it contains the essential invoice details of a proper invoice[2]. Consequently, as a general rule no separate invoice is issued.

However, since the requirement for eInvoices must also be observed for B2B rental relationships in the future, merely falling back on the existing rental agreement as an invoice is no longer sufficient.

In German Federal Ministry of Finance's (BMF) letter of October 15, 2024 regarding eInvoices, the Ministry clarifies that it is sufficient to issue an eInvoice for the first partial performance period (e.g. month) with the underlying contract attached. It is also sufficient if it can be inferred from the content of the eInvoice that it is a recurring invoice. It is only necessary to create a new eInvoice for recurring invoices if the mandatory information (e.g. the assessment basis and consequently the tax amount in the case of a rent increase) on the invoice changes.

For recurring invoices issued as “miscellaneous” invoices before January 1, 2027, there is no requirement to additionally issue an (initial) eInvoice (contrary to the draft of the BMF circular) if the invoice details have not changed. In these cases, an eInvoice is only required if the mandatory details of a proper invoice change.

What are the transition rules?

All companies can continue to send invoices in paper form or as a PDF file (or in another electronic format) until the end of 2026.[3] While no consent is required for a paper invoice, consent is generally required for electronic invoices (not eInvoices), but only if it has not already been provided because the invoices are already being sent in this form. The BMF has stated that consent can also be implied, for example if the customer accepts the invoice and does not object to it.

However, unlike the rules for sending invoices, the law does not provide for any transitional arrangements for receiving invoices.

If the supplying entrepreneur intends to send eInvoices electronically as of January 1, 2025 and the recipient of the service is an entrepreneur based in Germany, the recipient is required to receive the invoice electronically for VAT purposes (de facto obligation to receive).

How to proceed and to what extent BDO can support?

It is imperative that entrepreneurs check their ERP systems and invoicing software to see if they are already able to create eInvoices. More importantly, however, it is necessary to determine whether eInvoices can be received and converted into a format that can be read by the human eye (de facto obligation to receive eInvoices from January 1, 2025). For example, is it sufficient to carry out a software update or is an additional tool/add-on required to be ready for eInvoices?

Another issue that companies need to consider is the audit-proof storage of eInvoices. The BMF letter explicitly states that the normal principles of the GoBD apply here. If companies are dealing with the storage of electronic documents for the first time due to e-invoicing, they will need sufficient preparation time to set up and establish these processes.

In addition to the 'IT-technical' review, it is also advisable to scrutinize the other relevant processes (e.g. purchasing and sales (prices), financial accounting, invoicing, invoice dispatch, etc.), as this offers the opportunity to simplify and standardize processes, thereby increasing efficiency and minimizing costs. Specifically, real estate companies will have to address the issue of recurring invoices.

The key question will be which technical options are best to use:

• Updating the ERP systems and directly creating eInvoices in the system
• Using a third-party provider to create eInvoices

In particular, mapping the invoice information from the existing ERP systems or invoicing systems to the EN 16931 format will be a challenge in both variants, and BDO will be happy to support you with either option.