How to Issue a Credit Note in South Africa (and What SARS Requires)

Why you can't just edit the invoice

Once an invoice has gone to the client, it's part of your records. Their bookkeeper may already have captured it, and if you're VAT registered, the VAT on it may already be in a return. Changing the numbers on that same document, or sending a second invoice for the same job with a lower figure, leaves two versions of the truth.

For VAT vendors there's a firmer rule. SARS's VAT 404 guide says it is illegal to issue more than one tax invoice for a taxable supply, and that another tax invoice may not be issued to change the amount on the original. The credit note is the document the VAT Act gives you for that. The original invoice stays exactly as it was, and the credit note records what changed and why.

If you're not VAT registered, the law is less strict about it, but the same habit keeps your numbering clean. Our guide to creating an invoice explains why a running sequence with no gaps matters.

When you need a credit note

SARS lists the events that call for one after a tax invoice has gone out:

• The job or sale is cancelled
• What you supplied changes in a fundamental way
• You and the client agree a lower price, including a discount given after the invoice
• Some or all of the goods come back to you
• The invoice overstated the price, for example a line charged twice

The opposite case, where the price goes up after the invoice, needs a debit note instead. Most small businesses rarely see one, because they simply invoice the extra work separately.

You don't need a credit note for a prompt payment discount if the discount terms were printed on the tax invoice, or for rounding a cash total to the nearest coin.

What goes on a credit note

According to VAT 404, a VAT vendor's credit note should show:

• The words "credit note"
• Your name, address and VAT registration number
• Your client's name and address (not needed if the original was an abridged tax invoice, which is the short form used for amounts under R5,000)
• The date you issue it
• How much the value of the supply and the VAT have come down
• A short explanation of why
• Enough detail to tie it to the original, such as the invoice number and date

The list doesn't include a serial number, but give each credit note its own number anyway, such as CN-2026-0001. It makes credit notes easy to find and stops them getting mixed up with invoices. The full checklist for the invoice itself is in our SARS tax invoice requirements guide.

How the VAT works on a credit note

A credit note reduces the VAT along with the price. If your prices include VAT, the VAT inside a figure is 15/115 of it. A credit of R1,092.50 including VAT contains R142.50 of VAT and R950.00 of value.

The VAT adjustment goes into the return for the tax period in which you issue the credit note, not the period of the original invoice. You reduce your output tax, and a client who is a VAT vendor has to give back, in their own return, the VAT they claimed on the credited amount. If you're registered on the payments basis, you make the adjustment when the refund is actually paid, rather than on the day you issue the note. Our VAT201 guide covers filing the return itself.

Credit part of the invoice, or all of it?

Either is allowed. A credit note can cover one line, as in the example above, or the whole invoice. If one or two lines are wrong, credit just those. If the invoice is wrong in several places, or went to the wrong client, it's usually cleaner to credit the whole thing and send a fresh, correct invoice with a new number. Your client's bookkeeper will thank you for not making them piece it together.

What happens to the money

If the client hasn't paid yet, the credit simply lowers what they owe. If they've already paid, you have two options. You can hold the amount as credit on their account and take it off their next invoice, or you can pay it back. Agree which one with the client in writing. If you refund, keep the proof of payment with the credit note.

Credit that sits on an account is easy to forget, so check your open credits each month. It also helps to make the terms clear before work starts. How to write a quote covers scope, deposits and what happens when a job changes, which heads off a lot of credit notes.

A credit note template you can copy

If you aren't VAT registered, leave out the VAT number and the VAT line, the same as on your invoices. Our post on invoicing without VAT explains why.

Doing this in Invo

Open the invoice and choose Create credit note. Invo asks for a reason, then creates a credit note for the full invoice, numbered after it (INV-2026-0042-CN, for example), with the same lines and VAT. The original invoice is left untouched. If you only need to credit part of it, credit the invoice and send a corrected one.

The credit lands on the client's account. From there you can apply it to another of their invoices, which records it as a payment, or record a refund once you've paid the client back yourself. Invo doesn't move money for you. The VAT report (Solo plan and up) includes credit notes, and credit notes don't count toward the 5 invoices a month on the Free plan. See how invoicing and credit notes work, start on the free plan, or compare plans on the pricing page.

Questions people ask