Credit note
A credit note is the document a seller uses to reduce or cancel the amount of an invoice already issued, for example after a discount, a return of goods or a mistake. VAT Act Art. 125(5) treats it as a tax invoice if it refers unambiguously to the original invoice and carries the requisites of Art. 125(1), while a simplified credit note needs only the requisites of Art. 126, the original invoice’s date and number and the data being changed.
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Filled-in example
Credit note
No. PA-K-2026/003
Seller
SIA “Paraugs”
Reg. No. 40000000001
VAT No. LV40000000001
Parauga iela 1, Rīga, LV-1001, Latvia
Buyer
SIA “Pasūtītājs”
Reg. No. 40000000002
VAT No. LV40000000002
Klientu iela 2, Valmiera, LV-4201, Latvia
- Corrects invoice
- No. PA-2026/042, issued 25 September 2026
- Reason
- content upload took 4 hours, not 6; 10% discount for late delivery of the design
| No. | Line corrected | Unit | Qty | Unit price excl. VAT, EUR | Amount, EUR |
|---|---|---|---|---|---|
| 1 | Content upload: 4 h instead of 6 h | h | -2 | 45.00 | -90.00 |
| 2 | 10% discount on website design | pcs | -1 | 120.00 | -120.00 |
- Correction excl. VAT
- -210.00
- VAT 21%
- -44.10
- Total correction, EUR
- -254.10
After this correction the total of invoice No. PA-2026/042 is 1,648.02 EUR, including VAT of 286.02 EUR.
Prepared by
Jānis Bērziņš, board member, signature
The companies, numbers and accounts in the example are fictional.
An issued invoice is not corrected or rewritten under the same number. The original stays in the books, and the credit note adjusts it with negative amounts: the two documents together add up to what the client actually pays.
A discount granted after the client has received the goods or service reduces the taxable amount through a tax invoice that amends the original invoice (VAT Act Art. 39(2)). A credit note is exactly that document.
If you are not registered for VAT, a credit note needs only the requisites of Accounting Act Art. 11(5). A reference to the invoice being corrected is still needed so both parties understand what the document changes.
Required details
The table lists the requisites for a VAT-registered seller’s credit note. A simplified credit note under VAT Act Art. 126 can omit some Art. 125 fields, but the reference to the original invoice and the data being changed are required either way.
| Detail | Required | Legal basis |
|---|---|---|
| Document name, for example “Credit note” (“Kredītrēķins”) | Required | Accounting Act Art. 11(5)(1) |
| Date of issue | Required | VAT Act Art. 125(1)(1) |
| Unique sequential number, which may be in a separate series | Required | VAT Act Art. 125(1)(2) |
| Seller’s name, legal address and VAT number | Required | VAT Act Art. 125(1)(3) and (4) |
| Buyer’s name, legal address and VAT number, if any | Required | VAT Act Art. 125(1)(5) and (6) |
| Number and date of the original invoice | Required | VAT Act Art. 125(5) and 126(2)(2) |
| The specific data being changed: lines, quantity or price | Required | VAT Act Art. 126(2)(2) |
| Correction amount excluding VAT, with a minus sign | Required | VAT Act Art. 125(1)(13) |
| VAT rate and the VAT amount being corrected | Required | VAT Act Art. 125(1)(11) and (12) |
| VAT correction in euro, if the invoice is in another currency | If it applies | VAT Act Art. 129(5) |
| Signature, unless another document proves the transaction | If it applies | Accounting Act Art. 11(5)(9) and 11(7) |
| Reason for the correction | Recommended | Not required |
How to fill it in
- Find the original invoice You need its number, date of issue and the lines that change. The seller and buyer details must match those on the original invoice.
- Give the credit note its own number A credit note needs a unique number. The VAT Act allows several series, so credit notes can have a series of their own, for example PA-K-2026/003.
- Enter only the changes On each line show what changes, with a negative quantity or price. To cancel the invoice in full, repeat every original line with a minus sign. In the XLSX template the amounts, VAT and total calculate themselves.
- Work out the VAT correction Calculate the VAT correction at the rate applied to that line on the original invoice. If the mistake was the rate itself, it is usually clearer to cancel the whole invoice and issue a new one.
- Agree what happens to the money If the invoice is unpaid, the client pays the correction amount less. If it is already paid, refund the difference or, by agreement, deduct it from the next invoice.
- Keep both documents Do not delete the original invoice. Tax invoices, credit notes included, are kept for five years from the date of issue (VAT Act Art. 133(4)).
Common mistakes
- The original invoice is deleted or rewritten under the same number with different amounts.
- The credit note gives no number or date of the original invoice, so nobody can tell what it corrects.
- Amounts are entered as positive figures and end up added in the books instead of deducted.
- The VAT correction uses a different rate from the original invoice.
- The credit note’s number duplicates an invoice number in the same series.
A credit note straight from the invoice
Fakts builds the credit note from the original invoice: the reference, date and client fill themselves in, the credit note gets its own number, and the original stays untouched. The account is free.
Create a free accountFrequently asked questions
Does a credit note need its own number?
Yes. A credit note is treated as a tax invoice, so it needs a unique sequential number (VAT Act Art. 125(1)(2)). It can sit in the same series as invoices or in a separate credit note series.
Can I simply cancel the invoice instead?
VAT Act Art. 129(6) says a cancelled invoice must be kept in the books to explain the gap in numbering. If the client has already received and booked the invoice, a credit note is the clearer route, because both parties keep a document that refers to the original.
How do I document a discount given after payment or delivery?
With an invoice amending the original, which is a credit note. VAT Act Art. 39(2) lets such a discount reduce the taxable amount precisely when a tax invoice amending the original is issued.
Must the amounts on a credit note be negative?
The law does not prescribe the sign, but a minus sign is the clearest way to show that the document reduces the amount. The two documents can then simply be added together, and the result is what the client pays.
What about money the client has already paid?
Refund the difference or, if the client agrees, deduct it from the next invoice. A one-sided set-off is possible only when both claims are of the same kind and both are already due (Civil Law Art. 1847).
Can I issue a credit note if I am not VAT-registered?
Yes. It is then not a tax invoice, and it must meet Accounting Act Art. 11(5): name, date, number, both parties’ details, a description and amount. Add a reference to the invoice it corrects as well.