Anytime your small business provides services to another business or a private individual, you must generate an invoice. It’s not just a courtesy: It’s legally required.
Certain information must be on every invoice issued from a German copy. Other information isn’t required but may be beneficial to have for both you and your customers. And, of course, the maze-like regulations concerning VAT charges make certain invoices hard to fill out.
In this post, we’ll tell you how to do an invoice that’s thorough and compliant — and most importantly, gets you paid.
What Information Must Go on an Invoice in Germany?
The invoice (or Rechnung) is a legal document. So, there are a few German regulations about how to write an invoice, including certain items that are always required. They are the following.
Somewhere near the top, there needs to be an indication that this is, in fact, an invoice. The word “Invoice” or “Rechnung” will suffice.
Unique, Consecutive Invoice Number
No two invoices from your company can have the same number. The best practice is to simply issue them consecutively.
Names and Addresses
List complete names and mailing addresses for both your company and your client or customer.
Provide the VAT or tax ID numbers for both your company and the client or customer.
This is the day, month, and year the invoice is sent.
Products or Services Provided
For goods, put down the items the customer ordered. For services, describe the scope of work performed. Brief additional information, like the customer order number or more specific detail, can be helpful too.
Time of Delivery
When was the product shipped, or when was the work completed? Enter the date.
Net Amount Due
This includes the unit price, project cost, or hourly rate, whichever is appropriate. It also includes tax and VAT charges, if applicable (more on that shortly).
What Additional Information Can Go on an Invoice in Germany?
While the above items must be displayed on a German invoice, there are a few optional details that are always helpful to have.
Due Date and Payment Terms
These aren’t strictly required, but frankly speaking, they probably should be. It's always best to set up a defined date when payment is due. Doing so gives the recipient a clear, unambiguous deadline, and decreases the chances you'll have to wait to get paid.
Strictly speaking, the payment should be due now. Feel free to mention that, but also give them a drop-dead due date. Common terms are 7, 14, 28, or 30 business days from the date the invoice is issued. Be specific what day month, and year that is — just saying “in 14 business days” can sound too vague.
The total number of material goods sold should be somewhere by the product description. If you’ve just sold a client three air conditioners that are exactly the same, you can just list the item on one line and put the number “3” under the “Units” column.
For services or projects, the unit concept only matters if your charges are time-based — if you charge hourly fees, then “hours” are your “units.” For per-project invoices, or things like ongoing, contracted consultation, there may be no point in listing out units.
If you applied a discount to the items or services you sold, it’s a good idea to indicate how much somewhere near the item description. The customer will be aware that the price they paid won’t necessarily be the same later.
How Do VAT Regulations Alter Invoices in Germany?
VAT charges and regulations, and how they relate to invoices in Germany, probably deserve their own article. They’re that complex and potentially confusing. Since they’re important to consider, we’ll address them briefly here.
The VAT charge in Germany is currently 19% of products sold or services rendered. However, in certain circumstances, the VAT charge is either not required or outright disallowed.
If your sale price includes a VAT charge, it must be listed out in the “amount due” section. If there’s no VAT charge, you must explain why. This is a good use for the “memo” section on your invoice.
Here are situations when VAT charges aren’t necessary:
Small Business Regulation
If your company earns less than €22,000 a year, you don’t have to pay VAT. You therefore cannot issue VAT charges to your customers and must explain why on the invoice.
Certain services in Germany are exempt from VAT charges. They include community work, bank and health services, education, and post offices. If you’re uncertain whether your business applies, consult a tax advisor.
Many exported products from Germany are exempt from VAT charges. Sales to businesses in countries inside the EU, for example, incur no VAT charges.
As for sales to countries outside the EU — well, let’s just say there are a whole lot of them. And every one of them has a different tax policy when it comes to German exports. Some countries may not even have a tax treaty with Germany in place at all.
Like cross-border product sales, VAT policies and exemptions for international services are extraordinarily complex. They’re also treated differently if the customer is a business or a consumer, and whether their country is in the EU or not.
The whole subject is a little intimidating to think about, to be perfectly honest. We urge you to speak with a tax advisor about it.
Create Invoices with Monite
With Monite, you may not have to think that much about everything you've just read. Our platform generates automatic and accurate invoices, tailored to your business’s policies and German regulations. Monite integrates your invoices with your entire financial department for easy review and reporting. Contact us to learn more.