Credit and debit notes: correcting the VAT on an invoice already issued

Giulia sold a hotel furniture worth €10,000 plus €2,200 of VAT. In December the 5% volume discount written into the contract kicks in: €500 of net value and €110 of tax to hand back. A correctly issued credit note gives Giulia those €110 back as a deduction. Had the discount instead come from a deal struck more than a year after the sale, the tax would have stayed due.

When the taxable amount changes after invoicing

An invoice captures a transaction on the day it is issued. Afterwards things move on: goods come back, discounts are granted, disputes arise, mistakes surface late. Article 26 of Presidential Decree 633/1972 governs changes to the taxable amount or the tax, and it draws a careful line between amounts going up and amounts coming down.

The first paragraph deals with increases. Whenever, after the invoice has been issued or recorded, the taxable amount or the tax on a transaction rises for any reason at all, including the correction of invoicing or recording errors, the invoicing rules apply again to the additional amount.

The second paragraph deals with decreases, and treats them differently. If an invoiced and recorded transaction falls away in whole or in part, or its taxable amount shrinks for one of the listed reasons, the supplier "is entitled" to deduct the tax matching the change, by entering it in the purchase register.

There is a reason for the asymmetry. When tax goes up, the State has no interest in restricting why: every extra euro must be declared. When tax goes down, the danger is that a reduction arranged on paper erodes revenue. That is why the legislator listed the permitted grounds and put a deadline on later agreements.

One detail of the second paragraph matters in practice: the option assumes the invoice has already been recorded. If the error is spotted before that, the question arises differently, and it is worth sorting it out with your software or adviser before issuing a string of corrective documents.

Grounds for a downward adjustment

The second paragraph lists the grounds precisely. The first group concerns what happens to the contract: a declaration of nullity, annulment, revocation, termination, rescission "and the like". The second concerns the price: allowances or discounts provided for in the contract. A third ground, non-payment, is added by paragraph 3-bis and is the subject of the second module.

• Nullity or annulment of the contract: the transaction falls as if it had never been valid
• Revocation, termination or rescission: the contract is dissolved, wholly or partly
• Allowances or discounts provided for in the contract: the price drops under terms already agreed
• Non-payment with insolvency proceedings or fruitless enforcement: paragraph 3-bis

Returned faulty goods are the everyday example of the first group: the customer sends back part of the delivery, the contract is terminated for that part and the taxable amount falls. A year-end volume discount written into a framework agreement is the classic example of the second.

The words "and the like" leave room for events similar to those listed, but they do not turn the list into an open door. A price cut granted for commercial reasons, where the contract has not fallen away and no discount was agreed, is not one of the grounds in the second paragraph.

Paragraph 9 adds a clarification for contracts performed continuously or periodically, such as a monthly support fee. If the contract is terminated for breach, the right to adjust does not reach the supplies for which both sides properly performed their obligations.

The one-year limit on later agreements

Paragraph 3 sets the most important limit. A downward adjustment cannot be made once a year has passed since the taxable transaction took place, when the events behind it stem from a "subsequent agreement between the parties". The year runs from the transaction, not from the invoice date or the date of the agreement.

The difference between a later agreement and a discount set out in the contract therefore becomes decisive. A volume discount written into the framework agreement is not a later deal: it applies terms that already existed, and paragraph 3 does not restrict it. A reduction negotiated after a dispute, with no basis in the contract, falls under the one-year limit.

The practical lesson is plain. If you expect to grant discounts, bonuses or allowances, write their conditions and size into the contract from the start. Anything arising from a later understanding is allowed, but only within a year of the transaction; after that, the price can still be cut commercially, but the tax is not recovered.

Paragraph 3 also allows, within the same one-year window, an adjustment to correct invoicing errors that triggered article 21, paragraph 7. A typical case is an invoice showing more tax than was actually due.

Article 21, paragraph 7, is strict. If a supplier invoices transactions that never took place, or shows prices or tax higher than the real ones, the tax is due in full as stated on the invoice. The mistake does not stay a private matter between the parties: the tax written down is owed until it is corrected.

What the customer does on receiving the note

A credit note has a mirror effect on the other side. Paragraph 5 provides that when the supplier uses the option in paragraph 2, a customer that had already recorded the transaction among its purchases must enter the adjustment in its register of invoices issued or of takings, up to the amount it had deducted.

In practice, the tax the customer had deducted comes back, for the part reversed, as tax it owes. The text preserves its right to get back what it paid the supplier by way of VAT recharge: if it had already paid the VAT now reversed, it can ask the supplier to refund it.

The words "up to the deduction made" matter to businesses with partial deduction. A customer that deducted half the tax on the original invoice puts back as owed only the matching half of the note. It does not hand the Treasury a tax it never deducted in the first place.

Paragraph 10 extends the option in paragraph 2 to customers who are liable for the tax under article 17, as with the reverse charge, and under other special rules. Paragraph 5 then applies to those customers: the adjustment follows the same logic, with the roles adapted to a buyer who owes the tax.

For clerical slips the route is simpler. Paragraph 7 provides that material or arithmetic errors in the registers and in periodic settlements are corrected by entering increases in the register of invoices issued and decreases in the purchase register. Paragraph 8 allows correcting entries in those same registers.

The electronic adjustment note

Between businesses established in Italy, adjustment notes follow e-invoicing too. An Agency answer illustrates it with an edge case: for a paper invoice dated 2018 and received in 2019, an adjustment note issued in 2019 still had to be electronic. What counts is the date of the note, not that of the original invoice.

The same set of answers flags a common error. If an adjustment note carries a supplier VAT number that exists in the tax register but was closed at the date shown on the document, the SdI rejects it. A business that has closed one VAT number and opened another must use the active one.

The document type code identifying a credit note in the XML file appears in the compilation guide the Agency publishes as a PDF, which was not read for this course. Invoicing software, including the Agency's free tools, nevertheless offers the credit note as a document type of its own.

The note must clearly refer to the invoice it corrects, by number and date, and show the net amount and the tax being adjusted. The recipient must be able to work out beyond doubt which transaction it concerns: that is what allows it to be recorded correctly and defended in an audit.

Checks before issuing the note

• Has the original invoice been recorded?
• Is the ground listed in paragraph 2: nullity, annulment, revocation, termination, rescission, contractual allowance or discount?
• Does the reduction come from a later agreement? Then has less than a year passed since the transaction?
• For a periodic contract terminated for breach, does it cover only supplies not performed by both sides?
• Does the note cite the invoice number and date and carry the active VAT number?
• Does the customer know it must put back the tax as owed, up to the deduction it made?

This module follows article 26 as the Official Gazette publishes it for 2026, in the last consolidated version before repeal. From 1 January 2027 Presidential Decree 633/1972 makes way for the new consolidated VAT act, so a note dated 2027 will need checking against the articles that take over these rules.