E-invoicing: Verification of incoming invoices to ensure input VAT deduction
An e-invoice may be technically flawless yet still contain errors that jeopardise the right to deduct input VAT. This article explains the three levels of verification and their consequences.
Introduction
With e-invoicing, the verification process has shifted. A mere visual check on screen is no longer sufficient, as the legally binding details are contained in the structured data record. We verify incoming invoices as part of the bookkeeping process – this article explains what is important in this regard.
A few clarifications first, as there are often misunderstandings in this area:
Separate validation is not required by law. However, the tax authorities recommend it because it safeguards the input tax deduction.
Nor is it sufficient for an invoice to appear technically correct. It may be formally valid yet still contain incorrect mandatory details – this is a distinct type of error with its own consequences.
This article walks you through the three levels of verification, explains the specific features of ZUGFeRD and sets out whether and how you need to carry out your own checks.
Three levels of verification
The verification of an e-invoice takes place across three levels, each building on the previous one. An invoice may be error-free at one level but contain errors at another.
Format errors
At the first level, the system checks whether the file is technically sound – that is, whether it has a valid XML structure in a permitted syntax. If the file is corrupted or incorrectly structured, it cannot be processed further.
Business rule errors
At the second level, the business rules set out in the EN 16931 standard are checked. These specify which fields must be filled in and how, and what logical dependencies exist – for example, that the tax amount shown matches the tax rate.
Content errors
The third level concerns the mandatory VAT details required under Sections 14 and 14a of the German VAT Act (UStG). A content error occurs if such a mandatory detail is missing or incorrect – for example, an incorrect tax rate, a missing tax number or an inadequate description of the service.
A content error may also exist even if the file is technically valid. The consequence: the invoice is deemed to be non-compliant and does not entitle the recipient to a VAT deduction.
| Level | What is checked | Possible consequence |
|---|---|---|
| Format | Valid XML structure, permissible syntax | File cannot be processed |
| Business rules | Fields complete and consistent (EN 16931) | Enquiry, rejection during exchange |
| Content | Mandatory information pursuant to Sections 14 and 14a of the German Value Added Tax Act (UStG) | Input tax deduction at risk |
What applies specifically to ZUGFeRD
A ZUGFeRD invoice consists of two parts: the visible PDF and the embedded structured data record. The structured part is legally binding.
If the PDF and the data record differ, this is to the detriment of the structured data record. Even if the PDF appears complete and correct, input tax deduction may be refused if mandatory information is missing or incorrect in the structured part.
A mere visual check of the PDF is no longer sufficient. If the hidden data record is incorrect, the input tax deduction may be disallowed, even though the PDF looks flawless. It is precisely this hidden layer that a validation check verifies.
Is validation mandatory?
Validation is not a legally required process. In practice, however, it is strongly recommended for legal certainty – for both incoming and outgoing invoices.
The reason lies in the input VAT deduction. The tax authorities make it clear: provided they observe the due diligence obligations of a prudent businessman, a business owner can rely on the technical outcome of a validation – in terms of format and business rules – if they carefully select and use a suitable tool. In this case, protection is afforded on the basis of good faith.
However, validation does not replace a substantive check for completeness and accuracy. It reliably detects errors in format and business rules, but not whether the content is factually correct – for example, whether the invoice matches your order.
To provide evidence, it is advisable to keep the validation report for every invoice checked. This allows you to prove later that the invoice was checked upon receipt.
How the check works in practice
In most cases, technical validation takes place automatically. Accounting software checks an incoming e-invoice for format and business rules during import and flags any anomalies.
If you do not use such software, you can check an individual e-invoice using a free tool, such as the tax authority’s viewer, which also checks the structure. We cover how to open and view an e-invoice separately.
You can then check the content for the mandatory details (e.g. correct description of the service, correct address).
You are responsible for forwarding the original file; we will check and post it – we will agree on the exact allocation. In the event of errors, you should request a corrected invoice from the supplier to ensure you can claim input tax.
Typical sources of error
- Only viewing the PDF: With ZUGFeRD, only the visible PDF is checked. If the hidden data record is incorrect, the error remains undetected and the input tax deduction is at risk.
- Confusing ‘technically valid’ with ‘correct’: An invoice that is formally flawless is assumed to be correct. However, there may still be errors in the mandatory details.
- No audit trail retained: The invoice is checked, but no report is saved. This makes it difficult to provide evidence of the check during a subsequent audit.
- Error only noticed at the time of payment: An incorrect invoice is paid without being checked. A subsequent correction is more time-consuming than making enquiries before payment.
- Correction not requested: An invoice identified as incorrect is left unprocessed. Without a corrected invoice, there is no basis for input tax deduction.
Frequently asked questions
Do I have to validate every e-invoice myself?
Validation is not required by law, but it is advisable. In practice, your software usually handles this during import, and we check the contents when posting the transaction.
What happens if an e-invoice is incorrect?
That depends on the error. Format or business rule errors prevent smooth processing; errors in the mandatory details can jeopardise the input tax deduction. In such cases, we request a corrected invoice.
A ZUGFeRD PDF looks correct – is that enough?
Not necessarily. The embedded data record is legally binding. If it differs from the PDF, the data record takes precedence, and any errors in it may result in the loss of the input tax deduction.
What does a validation check – and what does it not check?
It checks the format and business rules, i.e. whether the file is technically correct and consistent. It does not check whether the content is factually correct, such as whether it matches your order.
Does a validation protect me when it comes to input VAT deduction?
Provided you fulfil the due diligence obligations expected of a prudent businessperson, you may rely on the technical validation result. This provides protection on the basis of good faith, but does not replace a substantive check.
Should I keep validation reports?
This is recommended. A validation report for each invoice serves as proof that the invoice was checked upon receipt.
Is there a free tool available for checking invoices?
Yes. The tax authority’s viewer via the ELSTER portal displays the invoice and checks its structure. For regular volumes, software with automatic verification is more practical.
Legal notice
This article provides an overview and is not a substitute for individual advice. The legal situation and its interpretation may change; the current status at any given time is decisive. The consequences of an incorrect invoice for input VAT deduction depend on the individual case.
If you have any questions about checking your incoming invoices, please contact us directly.
As at: June 2026