As of January 1, 2025, companies in Germany must be able to receive electronic invoices in the ZUGFeRD or XRechnung format. While only readiness to receive is required initially, the obligation to issue e-invoices begins in 2027 for larger enterprises and in 2028 for all B2B businesses.
The Fourth Bureaucracy Reduction Act allows for employment contracts to be concluded in text form starting in 2025, replacing the previous requirement for handwritten signatures. Exceptions apply to fixed-term contracts and non-compete clauses, which must still be signed manually.
From June 28, 2025, the Accessibility Strengthening Act (BFSG) mandates that companies make certain products and services accessible—especially digital applications and devices. Micro-enterprises are partially exempt.
From fiscal year 2025, companies with over 250 employees, €40 million in turnover, or €20 million in assets must include Environmental, Social, and Governance (ESG) data in their business reports. This often requires the digitalisation of internal data collection processes.
From 2025, employees—not employers—will be responsible for applying the tax benefit under the one-fifth rule in their tax returns. Employers should avoid making any commitments regarding tax treatment in severance agreements to mitigate legal risks.
From 2025, employees—not employers—will be responsible for applying the tax benefit under the one-fifth rule in their tax returns. Employers should avoid making any commitments regarding tax treatment in severance agreements to mitigate legal risks.
E-Invoice Readiness Becomes Mandatory
From January 1, 2025, all companies in Germany are required to be capable of receiving electronic invoices in a structured format that allows for automated processing. ZUGFeRD and XRechnung are the accepted formats. ZUGFeRD also includes a readable PDF version, while XRechnung is designed for machine processing only. Conventional PDFs are not compliant.
Initially, only the ability to receive such invoices is required. From 2027, companies with annual revenues exceeding €800,000 must also issue e-invoices. From 2028, this applies to all B2B enterprises, regardless of turnover. Small businesses under §19 of the German VAT Act are exempt. Nevertheless, early adoption is advisable, even for exempt entities, as they may need to receive or interact with businesses that have switched to e-invoicing.
Digital Employment Contracts from 2025
The Fourth Bureaucracy Reduction Act simplifies HR processes: as of January 1, 2025, employment contracts can be concluded digitally. The former requirement for handwritten signatures is replaced with text form, allowing agreements via email or digital documents. These documents must be accessible, storable, and printable by the employee. Acknowledgment of receipt remains mandatory.
Adjustments to existing employment contracts may also be made digitally, significantly easing administrative burdens. However, certain categories are excluded: fixed-term contracts and post-employment non-compete clauses still require written form. Moreover, sectors covered by §2a(2) of the Act to Combat Undeclared Work (e.g., construction, hospitality, logistics) remain excluded from these simplifications.
The Accessibility Strengthening Act (BFSG) Takes Effect on June 28, 2025
The BFSG obliges companies to design certain products and services in an accessible manner for individuals with disabilities. This includes hardware such as smartphones and computers, self-service terminals (e.g., ATMs and ticket machines), and telecommunication or banking services. E-commerce platforms are also covered.
The goal is to foster societal inclusion and eliminate digital barriers. Micro-enterprises (fewer than ten employees and under €2 million in turnover) are exempt—but only for services, not for products.
Compliance will require functional design adaptations such as voice controls, intuitive user interfaces, and compatibility with assistive technologies. Given the investment and lead time required, companies should begin preparations early.
ESG Reporting Requirements for Companies with 250+ Employees
Starting in the 2025 financial year, companies exceeding 250 employees, €40 million in turnover, or €20 million in total assets must integrate ESG (Environmental, Social, and Governance) metrics into their business reports. These must be based on quantifiable performance indicators that enable firms to define targets, implement improvement measures, and monitor progress.
Relevant standards include the Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Standards (ESRS), and the EU Taxonomy. These frameworks not only define KPIs but also provide guidance on meeting reporting obligations.
Meeting these requirements typically necessitates digitalisation of internal processes and systematic data collection. Beyond compliance, this offers opportunities: firms positioning themselves as sustainable partners stand to benefit in supply chain evaluations.
Changes to the One-Fifth Rule
Under the new Growth Opportunities Act, responsibility for applying the one-fifth rule for the tax-favorable treatment of severance payments will shift from employers to employees as of 2025. Previously, employers could apply this rule directly in payroll processing.
Going forward, employees must claim the tax benefit via their personal income tax returns. Employers should avoid including references to tax treatment in severance agreements. Ambiguities in contracts could lead to legal disputes if expected tax savings fail to materialise. Best practice: specify only the gross severance amount, leaving tax matters to the employee.
Despite political uncertainty, the former coalition reached a late consensus on the Tax Advancement Act (as of December 18, 2024). Key for businesses: restrictions on loss carryforwards will be eased, enabling broader use of past losses to offset future profits.
Depreciation rules will also become more generous. The declining balance depreciation method will be extended and expanded, offering accelerated write-offs for certain capital assets. This supports liquidity during early usage years.
Additionally, the threshold for immediate depreciation of low-value assets will be raised to €5,000, simplifying the treatment of minor investments.
The upcoming legal adjustments—mandatory e-invoicing, digital employment contracts, and accessibility obligations—require companies to rethink and adapt internal processes. The expanded ESG reporting duties and the new severance tax rules underline how crucial it is not only to comply with legal requirements but to act with foresight.
Entrepreneurs must stay informed and take timely action to avoid legal pitfalls and leverage strategic opportunities—be it through process digitalisation, positioning as a sustainable partner, or minimizing tax-related risks.
We’re here to help you stay on top of these developments and take the necessary steps to future-proof your business.
