Credit notes: how to correct or refund an invoice

Sometimes you invoice a customer, and then something goes wrong. They return goods. You delivered the wrong service and need to fix it. You overcharged them by mistake. In each case, you need a credit note — an invoice with a negative amount that reverses (in whole or part) a previous invoice.

A credit note isn't a new idea; it's a standard tool. But the tax rules around it are precise, and getting them wrong can mess up your VAT return or trigger questions in an audit. This guide shows you when to issue one and how to do it correctly.

When do you issue a credit note?#

Use a credit note when:

• The customer returns goods or services and you refund them.
• You charged the wrong price and need to correct it (e.g., you charged €1,200 instead of €1,000).
• You issued an invoice in error (e.g., to the wrong customer, with wrong description).
• You offered a discount retroactively (a rebate or trade discount).

Do NOT use a credit note for:

• A simple cancellation before the customer pays. Just void the original invoice.
• A down payment or deposit that's offset against a later invoice. That's a different transaction.

How a credit note works#

A credit note is an invoice with a negative amount. It references the original invoice and reverses the sale (or part of it).

Example:

• Original invoice #5: Customer ordered 10 widgets @ €100 each = €1,000 + 21% VAT (€210) = €1,210 due.
• Customer returns 3 widgets.
• Credit note #6: Reference invoice #5. Issue for €300 + 21% VAT (€63) = €363 negative.
• Net effect: Customer now owes €1,210 − €363 = €847.

The credit note is a formal invoice-like document; it needs all the mandatory fields. See invoice requirements for the full list.

What must be on a credit note#

A credit note is an invoice, so it needs:

• Your details (name, KvK, btw-id, address)
• Customer details (name, address, their btw-id if B2B EU)
• A credit note number (sequential, like invoices — see invoice numbering)
• A date
• Reference to the original invoice (e.g., "Re: invoice #5, dated 15 June 2026")
• Description of what's being reversed (e.g., "Return of 3 widgets")
• Negative amounts (e.g., −€300 for goods, −€63 for VAT)
• The VAT rate and amount of the reversal

Example credit note:

CREDIT NOTE #6

Reference: Invoice #5, dated 15 June 2026

Return of 3 widgets (out of 10 ordered)

Description                                Amount       VAT (21%)
Return of goods (3 × €100)                −€300        −€63
                                          ─────────────────────
Total credit (incl. VAT)                                −€363

The VAT effect: how it lands in your return#

This is the crucial part. The credit note reverses the VAT from the original invoice.

In the original invoice #5, you:

• Recorded €1,000 as revenue (turnover)
• Recorded €210 as VAT owed to the Belastingdienst

When you issue credit note #6:

• You reverse €300 of revenue
• You reverse €63 of VAT

In your VAT return for the quarter the credit note is issued:

• Your turnover goes down by €300
• The VAT you owe goes down by €63

This is automatic if you record the credit note correctly. If the credit note is dated in Q2 and shows −€63 VAT, your Q2 return reflects the reduction.

Getting the VAT rate right on the credit note#

The credit note must reference the same VAT rate as the original invoice.

If invoice #5 was issued at 21%, the credit note must also be 21%. If you're reversing a 9% sale, use 9% on the credit note.

Common mistake: a customer says "I paid too much VAT" and you issue a credit note at a different rate. Wrong. The rate on the credit note must match the original, or the VAT mismatch will trigger questions in an audit.

Can you correct an invoice without a credit note?#

If the invoice hasn't been paid yet, you can:

1. Reissue the invoice with the same number, marked "Corrected" or "Superseded," with the right amount.
2. The customer tears up the old one and uses the new one.
3. No credit note needed.

If the invoice has been paid, you must issue a credit note (even if the amount is small). The credit note creates a clear audit trail of the reversal.

An example: the full life cycle#

Invoice #10, 20 June:

• Customer: ABC Ltd
• Description: Consulting (8 hours @ €150/hr)
• Amount: €1,200 (net) + €252 (21% VAT) = €1,452
• Payment: 30 July (due within 30 days)

30 July — ABC Ltd calls: "We only used 6 hours, not 8. We shouldn't owe €1,452."

Your options:

1. If they paid: Issue credit note #11 (dated 30 July or later) for €300 + €63 VAT = €363 negative. ABC Ltd gets a credit of €363 against their next invoice or a refund.
2. If they haven't paid yet: Either reissue invoice #10 corrected to 6 hours (€900 + €189 VAT = €1,089) or issue credit note #11.

Credit note #11, 30 July:

CREDIT NOTE #11
Reference: Invoice #10, 20 June 2026

Correction: 2 hours of consulting overcharged.

Description                            Amount      VAT (21%)
Reversal of 2 hours consulting (−€300) −€300       −€63
                                       ──────────────────────
Credit total (incl. VAT)                          −€363

In your VAT return for Q3 (July–September):

• Your turnover for July is reduced by €300.
• The VAT you owe is reduced by €63.

In ABC Ltd's records:

• They deduct the original €252 VAT on invoice #10.
• They reverse €63 VAT on credit note #11.
• Net VAT deduction: €252 − €63 = €189 (matching the corrected 6-hour sale).

Common mistakes with credit notes#

1. Wrong VAT rate on the credit note. You issued the invoice at 21% but the credit note at 9%. The auditor will ask why.
2. No reference to the original invoice. The credit note stands alone and the connection is unclear.
3. Positive amount instead of negative. Writing "€363" instead of "−€363" confuses the intent.
4. Issuing a credit note for a cash refund without recording it. If you gave the customer cash, you still need the credit note in your books so the VAT reconciles.
5. Numbering issues. Credit notes must be numbered sequentially like invoices. Don't skip credit note numbers.

Can the customer refuse the credit note?#

No. Once you issue a valid credit note, it's binding on both sides. The customer can't say "I don't accept this credit note." However:

• If the original invoice was for goods and the customer disputes that the goods were actually returned, you may get a query.
• If the customer insists on a cash refund instead of a credit against their next invoice, that's a separate transaction (you refund them, they return the credit note, you void it).

Frequently asked questions#

A credit note is a crucial tool for fixing invoice mistakes and handling returns. The tax rules are straightforward: match the VAT rate to the original, show the amount as negative, and record it in the quarter it's issued. If you do that, your VAT return will be accurate and auditors will have no questions. With ZZP Belasting, credit notes are handled automatically, so the VAT always reconciles.

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