Since e-invoices are much more efficient than paper invoices and offer streamlined processing, many businesses and governments have started to transition to electronic invoices.  Some of these transitions are becoming mandatory.  

As there are many ways in which they can be formatted, governments are requiring standardised data formats to make invoicing more seamless. One key format is the German standard XRechnung (rechnung means invoice in German). 

As part of Directive 2014/55/EU, implemented in 2017 to standardise invoicing processes across borders, XRechnung has as of November 27th, 2020, become the business-to-government (B2G) standard in Germany for e-invoicing exchanges. It complies with the European standard known as EN16931.  

XRechnung uses two supported XML formats, UBL (Universal Business Language), and CII (UN/CEFACT Cross Industry Invoice). ZUGFeRD can also be used as long as it's version 2.1 using the EN16931 profile.  (ZUGFeRD is a hybrid format consisting of PDF and XML)

It is largely required for all major invoices used at the German state and federal level with a few minor exceptions. It’s expected that as businesses standardise their invoice format to XRechnung to do business with the German government, the format will see increased adoption in business-to-business (B2B)  invoicing.  

One of the leading benefits of using the XRechnung format is that it’s extremely efficient, automating the invoicing process and providing real-time processing features that are designed to be compatible with a variety of today’s globally standardised structured data format XML types. It also provides cost savings for governments and businesses because it delivers the necessary e-invoicing options to work with suppliers that use the format at home and abroad. 

Not only does the XRechnung format streamline the billing process and eliminate human errors via automation, but also includes media and data files along with the structured XML invoice.  

Who needs to use XRechnung?

In terms of the adoption of the XRechnung format, as mentioned above it has become the standard method for nearly all German businesses and governments. This means anyone doing business with the German government regardless of their location needs to use it for invoicing purposes including all the countries in the EU, as well as the UK. 

Will it be required for B2B exchanges?

It is not mandatory yet for XRechnung to be used in B2B transactions, but a proposed regulation could see that come into effect in 2026.  Beyond the cost savings realised in e-invoicing, businesses should be prepared to comply.  

XML file structure and content

Routing ID: XRechnung employs several specific and unique technical specifications to ensure streamlined and accurate invoicing, such as a routing ID that’s used to forward electronic invoices to the right software system for processing. This means that all users need to have the correct routing ID information for their invoices to be processed properly.

The ID structure is complex and needs to be followed and implemented strictly for success, and consists of these components:

State code: This code identifies the specific state or region in the country where the invoice sender is located. 

Administrative district code: This is a subdivision that exists within the state/region of the invoice sender. 

County or municipal code: Invoice senders with additional subdivisions in their administrative district code will often be required to enter a county code or municipal code directly following that of their administrative district. 

Delimiter “-”: Hyphens are used to separate or distinguish between fixed parts of routing IDs for invoices and any variables that follow with specifics regarding that invoice. 

Check digit: This part of the ID structure is calculated by the values entered in the fields above, to ensure correctness. 

To create invoices in the XRechnung format you’ll need to use software that has support for the format. In your software, you'll likely need to navigate to “create a template” or “create an invoice” for the customer you are trying to bill.  Then you’ll be presented with an option for the type of e-invoice you want to create.  During the creation process you’ll want to make sure that the correct routing ID, state code, administrative district code, and other data are entered correctly. The invoice can then be sent by email, through the PEPPOL network, or as a manual file upload to the respective German government web portal. 

As you can see, the benefits of implementing the XRechnung format open the doors for UK enterprises to do business with German government agencies, and as adoption increases German businesses in general. Additionally, by doing so, it eliminates the need for manual data entry and saves time, and money, and businesses can focus their personnel and resources elsewhere.