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Credit and debit notes: correcting the VAT on an invoice already issued
The module’s worked examples, then cases to attempt before revealing their solution · 3 sections · 403 words · 4 min
Worked example
The interrupted maintenance contract
A business invoices a customer a maintenance fee of €400 a month plus VAT. The customer pays on time from January to June, then stops, and the contract is terminated for breach in September. For January to June, paid for and performed, a credit note is not allowed: both parties kept their side. The question concerns only the later months.
Worked example
The wrong rate
A supplier invoices a service taxed at 10% but applies 22% by mistake to a €1,000 net amount: €220 of tax instead of €100. Under article 21, paragraph 7, the €220 is due as shown. Within a year of the transaction, the supplier can issue a credit note for the €120 overcharged and deduct it.
Practical case
Two reductions for the same hotel
On 10 March 2026 Giulia delivers furniture to a hotel for €10,000 plus VAT at 22%; the invoice is issued and recorded the same day. The framework agreement provides a 5% discount if the year's purchases exceed a set threshold, which the hotel passes in December 2026. In April 2027, after a dispute over some finishes, the parties agree a further €300 cut in the net price of the same delivery, which the contract did not provide for. The hotel deducts VAT on purchases in full. How much tax can Giulia recover with the December note? Can she recover the tax on the April 2027 cut? What must the hotel do on receiving the December note?
Hint: Ask whether each reduction is a discount set out in the contract or a later agreement, and for the latter count one year from the delivery.
Show the solution
The December discount is provided for in the contract: it falls under paragraph 2 and is not subject to paragraph 3's one-year limit. Net amount of the note: 10,000 × 5% = €500; tax: 500 × 22% = €110, which Giulia deducts by recording the note. The April 2027 cut stems from a later agreement and comes more than a year after the 10 March 2026 transaction: a downward adjustment is no longer allowed, and the tax of 300 × 22% = €66 is not recovered. On receiving the December note, the hotel enters the adjustment in its register of invoices issued or takings and puts back as owed the €110 it had deducted.
Answer: €110 recovered in December; no recovery of the €66 from April 2027; the hotel puts back €110 as owed
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