Mistakes on an invoice can happen to anyone. However, they don't have to mean trouble – they just need to be corrected properly. In legal transactions, there are two documents that are easily confused: correction notes and correction invoices. Correction note versus correction invoice – what's the difference? When to use a correction note, and when a correction invoice? Who can issue them and in what situations? We explain!
Correction note versus correction invoice – differences beyond just the name!
A credit note and a corrected invoice are two instruments for rectifying errors on invoices. It is completely incorrect to use these names interchangeably, and this often leads to numerous misunderstandings and, consequently, accounting problems.
- Note A correcting invoice only rectifies errors in the invoice description, such as a mistake in the VAT number, address or date of sale. It can also be issued by the invoice purchaser.. So, you receive an invoice and notice that the issuer has got your company name wrong, provided an incorrect tax identification number (NIP), made a typo in the address, indicated the wrong date of sale, collection, or payment deadline, or even the vehicle registration number (in the case of fuel purchases) – you can prepare a correction note yourself (or ask your accountant to do it) and send it to the seller.
- Only a correcting invoice can now be used to correct errors in invoice items such as price and VAT rate.. And the only person authorised to issue it is the seller – the buyer cannot do it. Naturally, formal errors (NIP or address) are also corrected using a correcting invoice. The correcting invoice is then simply attached to the original one – and it can replace a correcting note. This is not how it works with a correcting note: it cannot replace a correction of an invoice if the errors concern the document's items.
A corrective invoice amending the items of the original invoice is subject to accounting in the records, while a corrective invoice for formal data is not accounted for, similar to a credit note.
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Correcting invoice and correcting note – what must both documents contain?
The rules for issuing both these documents are quite strictly regulated by the Act on Value Added Tax. In Article 106k(3) of the act, the legislator precises formal Requirements for correction notes, which must include:
- „CORRECTING NOTE”,
- serial number and date of issue,
- Names and surnames or names of the issuer of the note and the issuer of the invoice or corrective invoice, and their VAT identification numbers and addresses,
- all the details contained in the corrected invoice – namely the invoice number, the parties to the transaction, the date of issue, the names, and the quantities of the goods or services to which it relates,
- a comparison of the incorrect information and the corrected version.
The issuance of a correction invoice regulates the previous article (106j) of the indicated act. Due to the (usually) necessary booking of a correction invoice, there are slightly more formal requirements. A corrective invoice should include:
- date of issue,
- the invoice number within the applicable numbering series,
- the reference number of the invoice to which the corrective invoice relates, in the National e-Invoice System, for a corrective invoice that is a structured invoice,
- the full names and addresses of the buyer and seller,
- the number used to identify the taxpayer for tax purposes (usually the tax identification number),
- the number by which the purchaser of goods or services is identified for tax or value added tax purposes, under which the goods or services were received,
- the details contained in the invoice to which the correction relates, including the name (type) of the goods or services covered by the correction,
- when if the adjustment affects the tax base or the amount of tax due, it also affects the amount of the adjustment to the tax base or the amount of the tax adjustment due broken down into amounts relating to individual tax rates and exempt sales,
- if the change does not affect the tax base – the correct wording of the items being adjusted.
A corrective invoice may also bear the words „CORRECTIVE INVOICE” or „CORRECTION” and state the reason for the correction.
When should you issue a credit note, and when a corrective invoice?
Exhibition A correction note is sufficient to rectify most errors in the invoice details; this also applies to the purchaser’s tax identification number. So, if you receive an invoice with an error in your tax registration number (NIP) and are therefore unable to claim the VAT, you can use a credit note – rather than asking the seller to correct the invoice. Importantly, the law does not impose any time limits within which the credit note must be issued. You can therefore do so even if a considerable amount of time has passed since the incorrect invoice was issued.
Using However, you cannot completely change the entity in a correction note – You will need a credit note for this. In this situation, the seller should first issue a credit note for the amount of zero against the invoice containing the incorrect details, and only then issue a new sales invoice with the correct details.
Do you already know when a credit note is issued and when a correcting invoice? For the correct correction of an invoice, i.e. for You need to issue a corrective invoice if there are errors in the invoice items, such as the price, VAT rate, quantity or measurements. Additional grounds for preparing a corrective invoice include a change in the tax base or the tax amount indicated on the invoice, as well as the return of goods or packaging, or the whole or part of the payment, or the granting of a reduction or discount.
Corrective invoices vs. corrective notes – what about document approval?
When, as a purchaser, you issue an invoice If you issue a credit note, you must send it to the issuer of the invoice, who should accept it. It is certainly worth doing this the traditional way – that is, sending the seller two copies of the document and asking them to return one signed copy. Acceptance of the correction note is required by law, but the method has not been specified, so you can also use electronic means.
The acceptance of the document is also essential in the case of a corrective invoice in order to book it; in most cases, however, you need to have documentation of the correction conditions, as described below.
How is a credit note accounted for?
In the case of correcting an invoice that contains a calculation error and a mistake, but is „in plus”, i.e. increasing the tax base, the matter does not require any additional formalities – you simply need to go back to the time when the original invoice was issued, or book it in the current period if the correction relates to new circumstances such as a return of goods.
The situation is different in the case of a corrective invoice „minus”, reducing the tax base. In connection with Slim VAT, the seller is entitled to book a corrective invoice „in minus” only if it has documentation confirming the conditions of the correction. This includes, for example, contract addendums, correspondence, and proof of payment, which clearly indicate that both parties are aware of and accept the changed terms of the transaction. The obligation to have such additional documentation does not apply in certain situations (e.g., in the export of goods and intra-Community supply of goods), but it is worth bearing in mind.
Invoice and correction note – how to navigate them?
In summary, if you receive an invoice with an error in the description, such as the NIP number, you can issue a correction note: inform the issuer of the original invoice and ask for their acceptance. You do not book the note, but attach it to the invoice. If you receive or issue an invoice with an error in an item, you request the issuance or prepare a correcting invoice. You must ensure that you have acknowledgement of receipt and documentation confirming the terms of the correction (i.e., correspondence with the buyer, for example).
Issuing correction notes and invoices is usually enabled by invoicing software. You then book the document, going back to the relevant period or booking it currently, depending on the reason for the correction made after the invoice was issued.
Regarding Your accountant will help you with invoice corrections. And if you handle your own accounting, we encourage you to consult with Open Profit.. Our specialists will advise you on how to correctly resolve your issue.
FAQ – Frequently asked questions about correction notes and corrective invoices
A credit note and a corrective invoice are different in the following ways:
A correction note is a document that rectifies errors in the invoice description, such as an incorrect tax identification number or address, or the designation of products/services. It is not accounted for, but attached to the original invoice. If errors on an invoice appear in the line items, relating to prices, quantities, or VAT rates, a correction, i.e., a corrective invoice, should be issued for it.
When should you use a corrective invoice, and when a corrective note?
A correction note is only sufficient in cases of errors in the document description, such as an incorrect NIP number, address, entity name, but also the issue/sale/service performance date and payment deadline, and product/service designations. Other errors, especially in line items, require a correcting invoice.
Correction invoice - when is an invoice absolutely necessary?
A correcting invoice is necessary when mistakes appear on the invoice regarding prices, quantities, measures and units, or VAT rates. A credit note cannot replace a correcting invoice either, when the correction would fundamentally change the entity appearing on the invoice.
