The upcoming Growth Opportunities Act and VAT
Within the framework of the draft "Act to Strengthen Growth Opportunities, Investments as well as Tax Simplifications and Tax Fairness (Growth Opportunities Act)" ("draft of the Growth Opportunities Act") published in mid-July 2023, the German Federal Ministry of Finance ("BMF") has also taken up various VAT-related points.
The following points are of particular interest for business practice:
- Obligation to issue e-invoices as of 2026
- Exemption of small businesses from the obligation to submit the advance VAT return and annual VAT returns
- Increase of the total turnover threshold for VAT actual taxation
- Raising the threshold for a possible exemption from the obligation to submit advance VAT returns
- Obligation to notify the commencement of a VAT-taxable activity in Germany
Obligation to issue e-invoices as of 2026
The regulations on electronic invoicing are largely based on a discussion draft on electronic invoicing ("BMF discussion draft") recently presented by the BMF, which initially provided for the introduction of an e-invoicing obligation for domestic B2B deliveries from 1 January 2025. We discussed this BMF discussion draft in an earlier blog post.
Based on the draft of the Growth Opportunities Act, the e-invoicing obligation is to apply to all invoices issued by one business to another business for the latter's business, provided that the transaction is taxable in Germany and both businesses are resident in Germany. Residence is to be established by the registered office, the management or a permanent establishment in Germany. The permanent establishment would have to be involved in the relevant turnover for the e-invoicing obligation to apply. A business which is registered for VAT in Germany but is not domiciled here would therefore not fall under the e-invoicing obligation according to the current draft of the Growth Opportunities Act. In addition, small-value invoices (total amount not exceeding EUR 250) and invoices for travel tickets are excluded from the scope of application of the e-invoicing obligation.
According to the draft of the Growth Opportunities Act, this e-invoicing obligation for domestic B2B transactions will now be introduced as of 1 January 2026, i.e., still before the timeframe of 2028 set by the European Commission. Based on the draft of the Growth Opportunities Act, all invoices for domestic B2B transactions between domestic businesses must in principle be issued as e-invoices. Until 31 December 2025, paper and PDF invoices remain permissible within the scope of the e-invoicing obligation.
In addition to the changed time frame, the draft of the Growth Opportunities Act also contains further concretisations. In particular, the e-invoice is defined as an invoice issued, transmitted and received in a structured electronic format that enables electronic processing. So-called "other invoices" are then all other invoice formats such as paper or PDF invoices.
If electronic invoices are transmitted via an EDI interface, the CEN standard 16931 is only applicable from 1 January 2028. This means that if an EDI interface is used, invoices can also be issued and sent as other invoices in another electronic format with the consent of the recipient up to and including 31 December 2027.
Small businesses in particular will be relieved by the draft of the Growth Opportunities Act. The amendments to the law described below are to come into force on 1 January 2024. However, the new versions of Section 18, 19 of the Value Added Tax Act ("UStG") are to be applied already for the taxation period 2023.
Pursuant to Section 19 UStG, small businesses will in future be exempt from the obligation to submit advance VAT returns and annual VAT returns. However, the exemption only applies insofar as the small business regulation is applied, no case of Section 18 para. 4a UStG exists and the tax office has not requested the business concerned to submit the return. The possibility of waiving the application of the small business regulation and the revocation of the same waiver are also newly regulated.
In addition, the total turnover threshold according to Section 20 sentence 1 no. 1 UStG for the VAT actual taxation (possibility to calculate the tax according to receipts) is to be raised from currently 600,000 EUR to 800,000 EUR.
The threshold for a possible exemption from the obligation to file quarterly advance VAT returns is to be raised from the previous EUR 1,000 to EUR 2,000. This threshold refers to the tax for the previous calendar year. The businesses concerned will then only have to submit an annual VAT return.
Obligation to notify the commencement of a VAT-taxable activity in Germany
In future, businesses who have neither their domicile, registered office nor management in Germany are to be subject to a notification obligation for taking up a VAT-taxable activity in Germany. The notification is to be made to the competent tax office according to the VAT Competence Ordinance. For reasons of EU law, the obligation to notify is not applicable if the business in Germany exclusively performs taxable transactions according to Section 18i to 18k UStG (other services not performed in the territory of the Union, intra-Community distance sales and distance sales from a third country with a material value of less than EUR 150).
The draft of the Growth Opportunities Act also reduces bureaucratic obstacles in VAT law and strengthens Germany as a business location. Small businesses in particular benefit from the legislative changes in VAT law.
Above all, however, all companies of all sizes should deal with the topic of e-invoicing now at the latest and prepare to be able to introduce e-invoicing into their billing system or upgrade their existing systems accordingly. Paper and PDF invoices will no longer suffice when e-invoicing becomes mandatory from 1 January 2026.
Although the draft of the Growth Opportunities Act still must go through the legislative process, the obligation to issue invoices electronically will nevertheless come sooner rather than later. In general, the draft of the Growth Opportunities Act is thus also a good opportunity to digitalise internal processes and thus reduce bureaucratic hurdles within the company.
If you have any further questions in this context, please do not hesitate to contact the tax team at DLA Piper. Please call us or send us an email.