Understanding Credit and Debit Notes

You can use a credit note (credit memo) to reduce the VAT charged and reclaimed on goods or services sold. You can reduce the value of the goods or service only if an order is canceled, returned, or if a contractual price reduction occurs. You can use a debit note (debit memo) to increase the value of the goods or service if a price increase occurs or if, based on agreed contractual terms, the final payment is higher than the price that is quoted on the original VAT invoice. The amount of VAT that is credited or debited must be separately itemized on the credit or debit note. You must associate the original VAT invoice with the credit or debit note.