<?php
$xml = '<employee><firstname>Ivan</firstname><lastname>Petrov</lastname></employee>';

$dom = new DOMDocument();
$dom->preserveWhiteSpace = FALSE;
$dom->loadXML($xml);
$dom->formatOutput = TRUE;  
echo $dom->saveXML();

<?xml version="1.0"?>                                                                                                                                               
<employee>                                                                                                                                                          
  <firstname>Ivan</firstname>                                                                                                                                       
  <lastname>Petrov</lastname>                                                                                                                                       
</employee>