Are you familiar with how a Credit Note is used?
In Japan, Credit Notes are often associated with trade transactions.
However, for companies located outside Japan, such as in Thailand, Credit Notes are accounting documents that are occasionally required.
Let’s take a look at how Credit Notes are actually used.
【1-1】What is a Credit Note?
In simple terms, a Credit Note is
“a document used to adjust or correct the amount stated on an issued invoice.”
Only persons or entities registered for Value Added Tax (VAT) are entitled to issue a Credit Note.
If an invoice contains multiple items and only part of it needs correction,
a Credit Note can be issued for the reduced amount only.
If all items and quantities on the invoice need to be canceled,
a Credit Note for the full amount can be issued.
【1-2】Why is a Credit Note necessary?
Why do we need a Credit Note when an invoice already exists?
Once an invoice has been issued, it generally remains legally valid,
even if errors are found, and it cannot be amended or canceled.
In the following cases, a Credit Note must be issued:
- Overcharging the invoice amount
- Return of goods
- Discounts granted after invoice issuance
- Incorrect items delivered
【1-3】How to issue a Credit Note
How should a Credit Note be issued?
Although there is no fixed format,
a Credit Note must include information required under the Revenue Code, such as:
- The wording “CREDIT NOTE”
- Seller’s company name, address, and tax ID
- Buyer’s name and address
- Date of issuance
- Reason for issuance (e.g. discount, return of goods)
- Original invoice number and issue date
- Amount details, for example:
Example
- Original invoice amount ① : 1,200
- Corrected amount ② : 1,000
- Difference between ① and ② : 200
- VAT 7% : 14
- Total : 214
Reference (Thai Revenue Department):
https://www.rd.go.th/3574.html
【1-4】Settlement of Credit Notes
In general, Credit Notes are not refunded in cash.
Instead, the amount is offset against the original invoice
or deducted from the next payment.
【1-5】Credit Note and Debit Note
A Credit Note has a corresponding document called a Debit Note.
Either the seller or the buyer issues a Debit Note — not both.
It is not necessary for both parties to issue them.
【1-6】Credit Notes and VAT Filing
Credit Notes affect the monthly VAT filing (Form P.P.30).
Both the buyer and the seller must include the Credit Note in their VAT filing in the same month as the original invoice.
- The buyer records it as an adjustment to input VAT.
- The seller records it as an adjustment to output VAT.