What to consider when writing invoices

Founders and entrepreneurs need to know the legal issues when writing an invoice. First and foremost, there is the tax office, which is mainly concerned with sales tax and profit taxation. In the next sections we will thus take a look at the following aspects:

1. Mandatory information on a proper invoice
2. GOBD or the question of manipulability of invoice documents
3. Invoice cancellation rules
4. Retention obligations
5. Retroactive issuing of an invoice and statute of limitations

1. Mandatory information on an invoice

According to § 14 of the German Value Added Tax Act (UStG), an invoice must contain 12 mandatory items of information:

1. Company name and address of the company issuing the invoice
2. Company name and address of invoice recipient
3. Tax number / VAT ID number. The tax number is obligatory. The VAT ID number is required for deliveries to other EU countries.
4. Invoice information This information makes it clear that the document is an invoice. If the document is a credit note, the document must state „Credit note“.
5. Invoice date. This is the date when the invoice was created.
6. Invoice number. Every invoice needs a unique invoice number. Ideally, the invoice will be numbered consecutively.
7. Service date/period. Indicates the date of delivery or the period during which a service was provided, for example, as part of a project.
8. Invoice items. Type of goods/service; quantity; net unit price; sales tax rate per invoice item, shown as value added tax (VAT); total price per invoice item.
9. Invoice amount. Net invoice total to which VAT is added.
10. Total VAT. VAT total(s), shown per VAT rate (19%, 7%, etc.).
11. Gross amount / payment amount. Net invoice total + value added tax (VAT): This is the amount the customer must pay.
12. Payment deadline. Payment deadline, until when the invoice must be paid. If a discount has been agreed, the discount period must be indicated here.

Other helpful details include:

• Bank details
• Information about the managing director or owner of the company
• Commercial register entry, if available
• Telephone number and e-mail address for queries, web address

A nice design of the invoice with CI and corporate colors of the company is useful. Because the invoice design is also part of the marketing or branding.

2. GOBD rules for invoicing

The GOBD are the principles for the proper keeping and storage of books, records and documents in electronic form as well as for data access. When writing an invoice, the entrepreneur is affected in several respects.

• It must not be possible to manipulate an electronic invoice document.
• Electronic invoices must be stored securely.
• Invoices must be stored in their entirety.

The background of the GOBD is the concern of the tax authorities that companies do not declare sales completely, but make them „black“. If invoices are manipulated or deleted, the state misses out on revenue from sales tax and income tax.

3. Rules for invoice cancellation

These rules are a consequence of the GOBD. If an invoice is cancelled after it has been issued, this invoice must be kept with the note „Cancellation“. You should always be able to justify the cancellation, especially if the auditor asks for it. The new invoice should have a reference number to the cancelled invoice.

4. Retention requirements

Invoices, including electronically stored invoices, must be kept by an entrepreneur for 10 years and must be able to be presented without gaps in the event of a tax audit.

5. Retroactive issuance and statute of limitations

In principle, you can issue invoices up to 3 years after the service has been provided. The decisive factor is that the claim to the invoice is justified. We generally recommend issuing invoices immediately after the services have been rendered. The right to payment also becomes time-barred after 3 years if the entrepreneur forgets to send a reminder for an open invoice. Thus, we also recommend writing a payment reminder or a reminder letter in good time.

Rules for electronic invoices

You may create and send any type of invoice in an electronic format. In the narrower sense, electronic invoices are machine-readable. This means that an electronic invoice contains a code that can be read by software. Electronic invoices no longer require a digital signature.

Writing invoices as a small business owner

This case is especially important for part-time self-employed persons. Those who choose the small business regulation do not pay sales tax and are not allowed to show sales tax on their invoices.

• The invoice is issued with the bare net amount.
• The following note is useful: „In accordance with § 19 UstG, no sales tax is included in the amount shown on the invoice.

Otherwise, all the mandatory information that we explained above with our infographic applies.