• One Document, Three Names
  • When a Credit Invoice Is Used

A credit invoice is another name for a credit note or credit memo: a document a seller issues to reduce what a customer owes on an earlier invoice. It's called an invoice because VAT law can treat it as one. The EU VAT Directive says a document that amends and refers to the initial invoice "shall be treated as an invoice". For what to put on one and the UK and India rules, see what is a credit memo.

Billed publishes this page. The EU and UK wording is quoted from EUR-Lex and GOV.UK, opened on October 30, 2026. VAT rules differ by country, so ask your accountant which apply to you.

One Document, Three Names

  • Credit note: the term HMRC uses for UK VAT. Its VAT guide (VAT Notice 700) (last updated June 25, 2026), section 18.2.6, starts: "When you issue a credit note or receive a debit note, you must adjust:"
  • Credit memo: short for credit memorandum, the name used on the credit memo page.
  • Credit invoice: the name that reflects how the document is treated under EU VAT law. Article 219 of Council Directive 2006/112/EC (the VAT Directive, consolidated text of April 14, 2025) says: "Any document or message that amends and refers specifically and unambiguously to the initial invoice shall be treated as an invoice." EUR-Lex notes that its consolidated text "is meant purely as a documentation tool and has no legal effect", so check the rules of the country you invoice in.

Whichever name your customer or your software uses, the document does the same job.

When a Credit Invoice Is Used

You issue one when the amount owed on an invoice needs to go down: returned goods, an overcharge, a price reduction after the sale, or part of an order that wasn't delivered. The credit memo page covers each case and what the document should show.

Credit Invoice, Debit Note, Refund or New Invoice?

  • The amount owed goes down: a credit invoice.
  • The amount owed goes up: a debit note or a new invoice.
  • The customer has already paid and gets money back: a refund, which can follow a credit invoice.
  • The invoice shouldn't have been issued at all: see the credit memo page's section on voided invoices.

Numbering a Credit Invoice

Give each credit invoice its own number, and refer to the number of the invoice it corrects. A separate series for credits, such as CR-0001, keeps them apart from your invoices. See invoice numbering best practices for setting up series, and what is an invoice number for the UK and EU rules on series. Ask your accountant whether your credit invoices belong in the same series as your invoices or a separate one.

Worked Example (sample figures)

A sample design studio, invented for this example, sent invoice INV-0142 for $1,800.00: a logo for $1,200.00 and two revision rounds at $300.00 each. The client used only one revision round.

  • Credit invoice CR-0007, referring to INV-0142: one revision round, −$300.00.
  • Amount owed on INV-0142 after the credit: $1,800.00 − $300.00 = $1,500.00.
  • If the client had already paid $1,800.00: the $300.00 credit is refunded or used against the next invoice.

This example leaves out sales tax and VAT; ask your accountant how a credit affects the tax you report.

When This Guide Isn't for You

If you're registered for VAT or GST, or you invoice customers in other countries, the rules for credit notes differ by country. Ask your accountant about the rules where you're registered.

Related Guides

FAQ

Is a credit invoice the same as a credit note?

Yes. Credit invoice, credit note and credit memo are names for the same kind of document: one a seller issues to reduce what a customer owes on an earlier invoice.

Why is it called a credit invoice?

Because VAT law can treat it as an invoice. Article 219 of the EU VAT Directive says: "Any document or message that amends and refers specifically and unambiguously to the initial invoice shall be treated as an invoice."

What is the difference between a credit invoice and a debit note?

A credit invoice reduces the amount a customer owes. A debit note increases it.

Does a credit invoice need its own number?

Give it its own number so it can be traced, and refer to the number of the invoice it corrects. Ask your accountant whether it belongs in your invoice series or a separate one.

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