A tax credit note is the document a VAT-registered supplier issues to reduce the value or the VAT of a tax invoice that has already been issued. You use it when a sale is cancelled, goods come back, the price drops after invoicing, or VAT was charged by mistake. In the UAE it must be issued within 14 days of the event that caused the change. In Saudi Arabia it must be issued within 15 days after the end of the month in which the event happened. In both countries you do not edit or delete the original invoice: it stays in your records and the credit note explains the difference. This guide covers when one is required, what must be on it, how it works under Fatoora, how it reaches the VAT return, and two worked examples. It is general information, not tax advice.
Why can't you edit or delete an issued tax invoice?
Your customer may already have used the invoice to claim input VAT, you may already have reported it in a VAT return, and its number is part of your invoice sequence. Changing or removing it breaks all three. A credit note keeps the original intact and records the correction as a second dated document.
ZATCA's e-invoicing guidelines say an issued invoice may not be modified or deleted, and can only be "cancelled" by issuing a credit note against it and then a new invoice. In the UAE, the adjustment cases in the VAT Decree-Law require a tax credit note.
For where credit notes sit among quotes, proformas and invoices, see quote vs invoice in the Gulf.
When do you have to issue a tax credit note?
The UAE list is in Article 61 of Federal Decree-Law No. 8 of 2017, and Article 62 requires the credit note when the VAT you charged is more than the VAT that should have been charged. The Saudi list is in Article 40(1) of the VAT Implementing Regulations, and Article 54 covers the credit or debit note.
| Situation | UAE | Saudi Arabia |
|---|---|---|
| The supply is cancelled, in full or in part | Tax credit note | Credit note |
| Goods or services are returned and the price is refunded, in full or in part | Tax credit note | Credit note |
| The price is reduced after invoicing (discount, rebate, renegotiation) | Tax credit note | Credit note |
| The nature of the supply changes so that a different VAT treatment applies | Tax credit note if VAT goes down | Credit or debit note |
| VAT was charged in error, or the invoice was issued for too high an amount | Tax credit note | Credit note |
| The invoice was issued for too low an amount, or the price goes up | New tax invoice for the additional amount | Debit note |
A mistake that does not change the value, such as a wrong TRN or legal name, is fixed the same way in practice: credit the original in full and issue a correct invoice.
What is the deadline for issuing a credit note?
Deadline: In the UAE, a tax credit note must be issued within 14 days from the date the adjustment event occurs (Article 62 of the VAT Decree-Law, as amended by Federal Decree-Law No. 18 of 2022). The clock starts when the goods come back or the discount is agreed, not on the original invoice date.
Deadline: In Saudi Arabia, credit and debit notes must be issued within 15 days following the end of the month in which the event occurred. ZATCA states this in its April 2025 guideline on the amended VAT Implementing Regulations. A return on 7 October must be credited by 15 November.
The UAE penalty is specific. Cabinet Decision No. 129 of 2025, in force since 14 April 2026, sets a fixed penalty of AED 2,500 per detected case for failing to issue a tax invoice or a tax credit note within the required timeframe. Ten late credit notes are ten cases. In Saudi Arabia, a business in a Fatoora Phase 2 wave that issues notes outside the system can also face ZATCA's published Phase 2 penalties, which range from SAR 5,000 to SAR 50,000.
What must a UAE tax credit note contain?
The field list comes from Article 60 of the VAT Executive Regulations. The last row is not in Article 60 word for word, but you need it in practice.
| Field | Required by | Notes |
|---|---|---|
| The words "Tax Credit Note", clearly displayed | Article 60 | "Credit Note" alone is not the wording the regulation uses |
| Supplier's name, address and TRN | Article 60 | As on your tax invoices |
| Customer's name, address and TRN | Article 60 | TRN where the customer is VAT-registered |
| Date of issue | Article 60 | This is the date the 14 days are measured to |
| Value of the supply shown on the original tax invoice | Article 60 | See the 2025 change below |
| The correct value of the supply | Article 60 | |
| The difference between the two, and the VAT on that difference in AED | Article 60 | The VAT must be in AED even if the invoice was in USD or SAR |
| A brief explanation of why the credit note is issued | Article 60 | State the event: "return of 6 damaged units", not "adjustment" |
| Information that identifies the original supply | Article 60 | In practice: the original tax invoice number and date |
| Its own sequential number, and line detail of what is credited | Practice | Needed for your records and for structured e-invoicing |
Where a simplified tax invoice was allowed for the original sale, Article 60 allows a shorter credit note without the customer's details. For simplified invoice rules and the AED 10,000 limit, see UAE tax invoice requirements.
The 2025 change. Cabinet Decision No. 100 of 2025, effective 29 September 2025, amended Articles 59 and 60 to prepare for e-invoicing. Advisers including Grant Thornton report that under the e-invoicing framework a credit note only has to show the credit note amount and its VAT, not the original value, corrected value and difference. How far the shorter list applies to businesses that are not yet e-invoicing is not settled in the published guidance, so until you go live, keep showing all three values.
How do credit and debit notes work in Saudi Arabia?
Article 54 of the VAT Implementing Regulations requires a credit or debit note whenever one of the Article 40(1) events changes a supply after the tax invoice. ZATCA's guidance is direct: issuing a credit note without a reference to the original invoice violates Article 54.
| Rule | What ZATCA requires |
|---|---|
| Reference to the original invoice | Mandatory. One note may cover several invoices, and the reference field may list the invoice numbers or a range |
| Reason for issuing | Mandatory on credit and debit notes. The Fatoora validation rules reject a note with no reason |
| Type of note | Follows the original invoice: a note against a standard (B2B) tax invoice is a standard note, a note against a simplified (B2C) invoice is a simplified note |
| Clearance or reporting | Standard notes are cleared by ZATCA before you give them to the buyer. Simplified notes are reported within 24 hours |
| Technical form | The same as an invoice: structured XML or PDF/A-3 with embedded XML, cryptographic stamp, QR code. The readable version must be in Arabic |
| Deadline | 15 days after the end of the month of the event |
The Fatoora rows apply once your business is in a Phase 2 wave. For the waves and thresholds see ZATCA e-invoicing for small businesses.
What is the difference between a credit note and a debit note?
A credit note reduces what the customer owes and reduces your output VAT. A debit note increases both, and is used for an undercharge, a price increase or extra quantity delivered. Saudi Arabia uses both documents under Article 54. The UAE VAT law has no tax debit note: when the VAT due on a supply turns out to be higher than what you invoiced, Article 62 requires a new tax invoice for the additional amount.
Is a credit note the same as a refund or a bad-debt write-off?
No. They are three different things.
- A credit note changes the value of the sale and the VAT on it. It does not move money.
- A refund moves money. If the customer has already paid, you issue the credit note and then refund the amount or hold it as a credit against a future invoice.
- A bad-debt write-off is for a customer who does not pay. The sale itself has not changed, so a credit note is the wrong tool unless you and the customer agree to reduce the price. In the UAE, Article 64 of the VAT Decree-Law allows bad debt relief when the VAT was charged and accounted for, the amount has been written off in your accounts, more than six months have passed since the date of supply, and you have notified the customer of the amount written off. Saudi Arabia has its own bad-debt adjustment under Article 40 of the Implementing Regulations, with a longer waiting period that advisers generally cite as 12 months. Check the current conditions with a tax adviser before claiming.
How does a credit note flow into the VAT return?
| Supplier | VAT-registered customer | |
|---|---|---|
| UAE | Output VAT is reduced in the return for the period in which the adjustment happens and the credit note is issued. You do not reopen the original period | Input VAT already recovered on the original invoice is reduced by the VAT on the credit note |
| Saudi Arabia | The reduction is reported through the adjustments on the sales side of the return for the period of the credit note | The matching reduction is reported on the purchases side |
A credit note corrects an invoice. It does not correct a return that was filed with the wrong numbers for another reason. That is handled by a voluntary disclosure in the UAE and by the corrections process under Article 63 of the Saudi regulations.
Worked example 1: partial return in the UAE at 5%
A Dubai furniture supplier invoices a client on 25 August for 40 chairs at AED 450 each.
| Net (AED) | VAT 5% (AED) | Total (AED) | |
|---|---|---|---|
| Original tax invoice: 40 × 450 | 18,000.00 | 900.00 | 18,900.00 |
| Tax credit note: 6 chairs returned, 6 × 450 | 2,700.00 | 135.00 | 2,835.00 |
| Position after the credit note: 34 × 450 | 15,300.00 | 765.00 | 16,065.00 |
Check: 18,900 − 2,835 = 16,065, and 5% of 15,300 is 765. The six chairs come back on 3 September, so the tax credit note must be issued by 17 September. It shows the original value (AED 18,000), the correct value (AED 15,300), the difference (AED 2,700), the VAT on the difference (AED 135), the original invoice number and the reason. In the ledger, sales fall by AED 2,700, VAT payable by AED 135 and the receivable by AED 2,835. If the client had already paid AED 18,900, the supplier refunds AED 2,835 or holds it as a credit.
Worked example 2: post-invoice discount in Saudi Arabia at 15%
A Riyadh distributor invoices a retailer SAR 80,000 plus VAT in September. On 9 October the two agree a 5% volume discount on that invoice.
| Net (SAR) | VAT 15% (SAR) | Total (SAR) | |
|---|---|---|---|
| Original tax invoice | 80,000.00 | 12,000.00 | 92,000.00 |
| Credit note: 5% discount | 4,000.00 | 600.00 | 4,600.00 |
| Position after the credit note | 76,000.00 | 11,400.00 | 87,400.00 |
Check: 92,000 − 4,600 = 87,400, and 15% of 76,000 is 11,400. The event is in October, so the credit note is due by 15 November. It is a standard (B2B) note, so it is cleared through Fatoora before the retailer receives it, it carries the original invoice number, and the reason field states the volume discount. The distributor reduces output VAT by SAR 600 in that period's return, and the retailer reduces input VAT by SAR 600.
What will change when UAE e-invoicing starts in July 2027?
Credit notes become structured documents too. Under Ministerial Decision No. 244 of 2025, businesses in scope issue electronic credit notes through their Accredited Service Provider within 14 days, and Cabinet Decision No. 106 of 2025 adds AED 100 for each electronic credit note not issued and transmitted on time, capped at AED 5,000 per month. That is in addition to the AED 2,500 VAT penalty. For businesses with revenue below AED 50 million the go-live date is 1 July 2027, with an ASP appointed by 31 March 2027. The month-by-month plan is in our UAE e-invoicing July 2027 checklist.
From the platform: In Staks, a credit note is its own document type with its own automatic number sequence (CN000001, CN000002), separate from invoice numbers. You can link it to one of the customer's invoices and write a reason, and both print on the document. A draft posts nothing. Once the credit note is issued, Staks posts the journal entry automatically: sales and tax payable are debited and accounts receivable is credited (the ledger and reports are on the Growth plan). You can apply a credit note against one or more invoices, which lowers the balance like a payment, and download the PDF or email the customer a link to it. Credit notes are unlimited on every plan. Staks is not FTA or ZATCA accredited and does not clear credit notes through Fatoora, so compare the printed document with the field list above for your country.
What are the common credit note mistakes?
| Mistake | Why it is a problem | What to do |
|---|---|---|
| Editing or deleting the invoice and resending it | Breaks the number sequence, and the customer may have claimed VAT on the first version | Credit note against the original, then a new invoice if needed |
| Netting the refund off next month's invoice | The next invoice understates that supply and no document explains the original change | Issue the credit note, then apply it to the next invoice as a credit |
| Issuing at quarter end "when we do the VAT" | Misses the 14-day or 15-day deadline. AED 2,500 per case in the UAE | Issue when the event happens |
| Using a credit note to write off an unpaid invoice | The supply did not change. The VAT reduction may be rejected | Use bad debt relief if the conditions are met |
| Refunding without a credit note | Cash is returned but output VAT stays overstated | Credit note first, refund second |
Frequently asked questions
Can one credit note cover several invoices?
In Saudi Arabia, yes. ZATCA's guidelines allow a single credit note to refer to multiple original invoices, and the reference field may list the numbers or give a range. In the UAE the regulation asks for information sufficient to identify the supply, so list each invoice number and the amount credited against it. One credit note per invoice is simpler to audit.
Do I need a credit note if the customer has not paid yet?
Yes. The obligation comes from the change to the supply, not from payment. If the customer has not paid, the credit note reduces the receivable.
Can my customer issue the credit note instead of me?
Normally the supplier issues it. Both countries allow self-billing, where the customer issues tax documents on the supplier's behalf under a prior written agreement. Without it, a debit note from your customer's purchasing system does not replace your tax credit note.
How long do I keep credit notes?
VAT records are kept for at least five years in the UAE, and Saudi VAT records are generally kept for six years.
Related reading
- UAE tax invoice requirements
- ZATCA e-invoicing for small businesses
- UAE e-invoicing July 2027 checklist
- Quote vs invoice in the Gulf
Issue the credit note when the event happens, reference the original invoice and state the reason. Start a 14-day free trial of Staks to issue numbered credit notes linked to the original invoice.