E-invoicing: obligation also applies to landlords

Digitalisation is bringing about many changes. This also affects the way invoices are received and issued.

With effect from 2025, the Growth Opportunities Act has introduced new regulations into the VAT Act that are important for business owners in Germany – and these include landlords! These changes are aimed at digitalising the process of issuing and receiving invoices. E-invoices are becoming mandatory!

The Federal Ministry of Finance published a letter on this subject on 15 October 2024 to clarify some outstanding issues. This letter is intended to help businesses better understand and implement the new regulations.

What applies to invoice receipt?

From 1 January 2025, all entrepreneurs must be able to receive and process electronic invoices in a structured format such as XStandard or ZUGFeRD. Simple PDF invoices will then no longer be recognised as proper electronic invoices.

Important: This also applies to landlords, even if the property is rented out tax-free for residential purposes. Depending on the format used, they too must then be able to receive corresponding invoices (e.g. from craft companies) using suitable software.

Although the tax authorities had planned to provide free software, this is now no longer the case. As a result, other commercially available software products must be used.

Regulations for issuing invoices

The question of who has to issue electronic invoices themselves from 1 January 2025 is complex and depends on various factors.

The most important points are summarised below:

• Obligation to issue: All domestic entrepreneurs, including landlords, must issue electronic invoices if the transaction is carried out with another domestic entrepreneur for their business (so-called B2B transaction) and is not tax-exempt under Section 4 No. 8 to 29 of the German VAT Act (UStG).
• Tax-exempt transactions: Long-term residential leases are tax-exempt. Landlords who exclusively carry out such transactions are not required to issue e-invoices. However, if they opt for VAT liability, e.g. when renting to commercial tenants, there could be an obligation to issue e-invoices. The tax authorities have not yet provided any final clarification on this.
• Credit notes and small businesses: According to the letter from the tax authorities, the regulations also apply to credit notes and small businesses. However, the 2024 Annual Tax Act is expected to exempt small businesses from the requirement to issue e-invoices under the current system. Invoices for small amounts of up to €250 do not have to be issued as electronic invoices.

Important for the transmission of e-invoices: :
There are no fixed rules on how e-invoices must be transmitted. They can be sent by email, via electronic interfaces or by downloading them from a platform.

Transitional periods for invoicing

There are transitional arrangements for issuing invoices (not for receiving them!):

• Transitional period until the end of 2026: Businesses that are required to issue electronic invoices (certain B2B transactions) may continue to issue non-electronic invoices (e.g. PDF or paper invoices) until 31 December 2026. Other electronic formats that do not meet the requirements of an e-invoice can be agreed by mutual agreement without a form.
• Rule for 2027: If the total turnover of the invoicing company in 2026 did not exceed 800,000 euros according to § 19 UStG, no electronic invoice has to be issued for transactions carried out by the end of 2027. Again, the consent of the invoice recipient is generally required for non-electronic invoices.
• From 2028: From 1 January 2028, electronic invoices must be issued in accordance with the prescribed standards if there is an obligation to do so (certain B2B transactions)

What else needs to be considered?

• Input tax deduction and e-billing: A proper e-invoice is required to claim the input tax deduction, provided there is an obligation to issue one.
• Rental contracts as recurring invoices: Rental contracts can be considered recurring invoices. It is sufficient to issue an electronic invoice for the first partial service period (first rental period) (provided there is an obligation to do so), with the rental contract attached. In the event of changes, a new e-invoice must be issued (once) for the subsequent partial service period.
• Storage of e-invoices: The structured part of an e-invoice must be stored electronically in its original form, unchanged. The tax authorities must be able to evaluate these invoices by computer.

Conclusion

From 2025, landlords who rent out long-term residential property (VAT-exempt) are not obliged to issue electronic invoices. Nevertheless, it is important that they are able to receive electronic invoices and display the structured part of an e-invoice. The Bundesrat originally called for a postponement of the implementation date due to an insufficiently long transition period, but However, the transition to e-billing and a smooth process will certainly take a while.