A credit note is the polite way to say "that invoice needs fixing." Maybe the goods came back, the price was wrong, or a service was cancelled after you had already billed it. For a freelancer it is the clean, audit-friendly way to undo or reduce a previous invoice without scribbling over your records. Clients actually like receiving one, because it shows you spotted the mistake and corrected it properly rather than ignoring it.
What to include
A credit note must tie back to the original document. Put the original invoice number and its date, the reason for the credit, the negative line amounts, and your VAT number. If you only credit part of the invoice, say so explicitly in the reason field. Miss the link to the original and the tax office cannot match the correction — which defeats the purpose and can trigger a review.
How the tax works
A credit note corrects or cancels an earlier invoice, so it carries negative amounts and must reference the original invoice number and date so the VAT can be adjusted. The rate applied here is 19% — the same rate as the invoice you are fixing. If the original was a cross-border B2B sale under reverse charge, apply that same 0% treatment. Always check which rule the original used before you finalise, so the credit note lines up exactly with the invoice it reverses.
Example line items
Invoice
credit note
- Invoice no.
- INV-2026-014
- Date
- 2026-07-15
From
Your Company
123 Business Rd, Your City
To
Client Name
Client Company, Client City
| Description | Qty | Rate | Amount |
|---|---|---|---|
| Refund – defective item | 1 | $-150.00 | $-150.00 |
| Refund – overcharge | 1 | $-40.00 | $-40.00 |
- Subtotal
- $-190.00
- Tax (19%)
- $-36.10
- Total
- $-226.10
Notes
This credit note cancels part of invoice {orig}. We apologise for the inconvenience.
Example preview — not a real invoice
A credit note simply reverses what was billed:
- Refund – defective item — 1 × -$150 = -$150
- Refund – overcharge — 1 × -$40 = -$40
Show the quantities, unit prices and the (negative) tax per line so the adjusted total is obvious. The net effect should cancel precisely the part of the original invoice you are correcting.
Practical tips
Always link the credit note to the original invoice number; never issue one floating free. Match the VAT rate used on the original exactly. If only part of a sale changed, issue a credit note for that part rather than cancelling everything and raising a fresh invoice. Keep your numbering consistent so the pair stays traceable, and store both documents together. If you would rather not work out the negative maths by hand, the invoice generator handles it for you.
A credit note is not an admission of failure — it is proof you keep your books honest. Clients respect a freelancer who fixes mistakes cleanly.