Invoice or “Rechnung” in Germany

Invoice or “Rechnung” in Germany: What You Should Know

Why do we actually issue invoices?

The answer is simple: to allocate company expenses, deduct them from revenues, reduce profit, and consequently determine a lower tax liability.

Invoice requirements are regulated by each country individually, but within the EU, they are very similar.

When writing invoices, business owners, self-employed individuals, or small business owners must adhere to certain mandatory information.

The mandatory information for an invoice is specified in § 14 UstG (German Value Added Tax Act).

To ensure that an invoice is valid before the tax office, the following eight points must be included:

1. Full company name and, where applicable, legal form of the issuing/selling entity and the recipient.
2. Full address of the issuing and receiving company.
3. VAT identification number for entities subject to VAT, and personal tax number for entities exempt from VAT.
4. Invoice date.
5. Sequential invoice number.
6. Quantity and type of delivered goods or scope and nature of services provided.
7. Time of delivery of goods or other services, such as construction work.
8. Applicable tax rate, amount of tax due, or indication of tax exemption in the case of a tax-exempt delivery or service.

What is the deadline for issuing an invoice?

The legislator generously set deadlines for issuing invoices. The most important provisions regarding invoice deadlines are found in § 14 para. 2 sentence 2 UStG (German Value Added Tax Act).

Therefore, writing invoices can take up to six months. This deadline also applies to invoices for companies and other legal entities. Invoices for private individuals are only mandatory in a few exceptional cases.

Invoices for intra-community supplies of goods or services specified in § 6a UStG (German Value Added Tax Act) or § 3a UStG (German Value Added Tax Act) must be issued by the 15th of the following month.

Selected examples of invoice specifics for correct invoicing:

1. When a small business owner issues a detailed invoice for services rendered or sales, they do not include VAT. However, they must indicate the exemption. The following information can be included on the invoice:

“Als Kleinunternehmer im Sinne von § 19 Abs. 1 UStG wird keine Umsatzsteuer berechnet.” (As a small business owner according to § 19 Abs. 1 UStG, no sales tax is calculated.)

2. In the case of subcontracting services where the contractor and subcontractor are construction companies, the reverse charge mechanism for VAT should be indicated. The contractor does not show VAT on the invoice according to § 13b UStG (German Value Added Tax Act). It is mandatory to include on the invoice the basis on which the recipient is obligated to pay VAT, for example:

“Der Leistungsempfänger ist Schuldner der Umsatzsteuer gem. § 13b USt.” (The recipient of the service is liable for VAT according to § 13b UStG.)

Important! To issue or accept an invoice with this note, it is necessary to apply to the relevant tax office for a certificate (Certyfikat TG 1 – Nachweis der Steuerschuldnerschaft bei Bauleistungen und Gebäudereinigungsleistungen).

It is also essential to have a tax exemption certificate for construction (Freistellungsbescheinigung). Otherwise, the contractor will deduct 15% of the gross amount owed and transfer it to the tax office of the performing entrepreneur. Details are regulated by § 48 ff EStG (German Income Tax Act).

Did you know that… “Rechnung” (invoice) comes from the word “rehhanunga” or “rechenungo,” which first appeared around the year 1000 and later changed to “rech(e)nung.”

The word “Rechnung” as we know it today first appeared in 1316 and is still in use today.