Credit Notes: When You Need Them and How to Create Them
Returns, refunds, and order corrections all require credit notes. Here's what they are, when to issue them, and how to stay compliant.
A credit note (creditfactuur) is a document that partially or fully cancels an existing invoice. If you run an online store, you will issue them more often than you think: every refund should have a credit note behind it.
When to issue a credit note
- Full return: Customer returns the entire order for a refund
- Partial return: One item from a multi-item order is returned
- Price correction: You charged the wrong amount
- Discount after the fact: A post-sale goodwill gesture
What goes on a credit note
A credit note must reference the original invoice and include:
- The credit note number (part of your sequential numbering)
- Reference to the original invoice number
- The amount being credited (negative amounts)
- VAT breakdown of the credit
- Reason for the credit
Why credit notes matter for VAT
Without a credit note, you're technically paying VAT on revenue you gave back. During your VAT return, credit notes allow you to deduct the refunded VAT. Skip them and you are overpaying tax, money you will never get back unless you correct your records.
Refunds in Shopify
If you use Marketplace Invoice, a refund does the work for you. Refund an order in the Shopify admin, in full, and we create the matching credit note automatically. It references the original invoice number, uses its own numbering series, shows the VAT you are crediting back and goes to your customer by email.
A partial refund is not credited automatically. The app only creates a credit note for a full refund. For a partial refund, make the credit note yourself for the amount you paid back, so the original invoice stays valid for the rest of the order.
Automating credit notes
Manual credit notes are tedious, especially in the weeks after the holidays. Letting your invoicing app turn refunds into credit notes keeps your books clean without the manual work, and it means the credit note is never forgotten on a busy day.
