A credit note is a document issued by a seller to a buyer that reduces the amount owed on a previously issued invoice. It corrects billing errors, acknowledges returns, or applies agreed discounts after an invoice has been raised.
Under UAE VAT law, a tax credit note must be issued whenever the taxable value of a supply is reduced after the original tax invoice. The FTA requires the credit note to reference the original invoice number, state the reduction in value, and show the adjusted VAT amount. Both supplier and customer must update their VAT return accordingly.
A credit note reduces the buyer's liability. A debit note — issued by the buyer to the supplier — increases the amount owed. Both are standard tools in double-entry bookkeeping.
Finanshels records all credit notes in your accounting system, ensures VAT adjustments are reflected in the next filing, and maintains an accurate general ledger. See our bookkeeping services.
