In this article
- What a credit note is, and what a debit note is
- You cannot cancel or rewrite an invoice you have issued
- Every note must point back to the original invoice
- The type of note follows the type of invoice
- What the returns rush does to your invoice trail
- Refunds on advance payments
- Arabic is required on the note, not only on the invoice
- A checklist before the returns season
- What to look for in the system that issues them
- Frequently asked questions
A ZATCA credit note is the document you issue when a tax invoice you have already sent has to come down in value, and a debit note is the one you issue when it has to go up. Under the e-invoicing rules in Saudi Arabia both are electronic notes, and both carry the same legal weight as the invoice they correct.
That matters more in the weeks around White Friday than at almost any other point in the year. Returns, partial refunds, agreed discounts and cancelled orders all land at once, and each of them has to leave a proper trail in your invoicing system instead of a pen correction on a printout.
What a credit note is, and what a debit note is
ZATCA sets out both in its e-invoicing guideline. Credit notes "are issued by the sellers in order to refund buyers and are used to correct invoices information if generated with an error". Debit notes "are used for increasing the value of the original invoice or the VAT amount". In each case the note follows the same format as the invoice it was issued upon.
The practical test is direction. If the customer ends up owing you less, you need a credit note. If the customer ends up owing you more, you need a debit note. The VAT moves with the value.
| Situation | Document | Effect on output VAT |
|---|---|---|
| Customer returns goods and you refund them | Credit note | Reduced |
| Discount agreed after the invoice was issued | Credit note | Reduced |
| Order cancelled before delivery | Credit note | Reduced |
| Quantity or unit price was invoiced too low | Debit note | Increased |
| VAT was applied at a rate lower than it should have been | Debit note | Increased |
You cannot cancel or rewrite an invoice you have issued
This is the point most finance teams get wrong in their first year on Phase 2. ZATCA states it plainly in the guideline FAQ: "Invoices cannot be cancelled." If an invoice is rejected at clearance, you fix the errors and submit the XML as a new invoice with its own invoice counter value and hash. If an invoice has already been cleared or reported, the only lawful way to change the outcome is a note.
The same guideline requires a compliant solution to hold a tamper resistant electronic invoice counter that cannot be reset or reformatted, and that counter must increment for each generated invoice or associated note. In other words, the sequence is designed so that nothing quietly disappears. A deleted invoice leaves a gap that an auditor can see.
Every note must point back to the original invoice
A note on its own is not a valid document. ZATCA requires that credit and debit notes be issued with a reference to the original invoice or invoices they relate to, and the guideline is blunt about the consequence: "Issuing Credit Note without reference to Original Invoice will be violating requirements of Article 54 of KSA VAT Regulations."
The reference fields carry the invoice reference number of the original invoice. Where one note covers many invoices, ZATCA accepts a range rather than a list of every single number. The guideline gives the example of invoice reference numbers 001 to 100 issued during the period 1 January 2022 to 31 March 2022.
Practically, this means your system needs to know which invoice a refund belongs to before the refund is paid. A credit note raised against "the customer" rather than against a specific invoice number is the version that fails an audit.
The type of note follows the type of invoice
ZATCA puts it in one line: the type of credit or debit note follows the type of invoice that it is issued against. A standard tax invoice to a business buyer takes a standard note, and a simplified tax invoice to a consumer takes a simplified note. That decides which route the document travels.
| Original invoice | Note type | Route to ZATCA | Timing |
|---|---|---|---|
| Standard tax invoice (B2B) | Standard credit or debit note | Clearance through Fatoora | Before the note is shared with the buyer |
| Simplified tax invoice (B2C) | Simplified credit or debit note | Reporting to Fatoora | Within 24 hours of issuance |
Clearance, in ZATCA's own definition, is the process where the Authority verifies that electronic tax invoices and their associated electronic notes meet the controls in the E-Invoicing Resolution, and it applies to all tax invoices and their associated credit and debit notes. Reporting is the near real time model, where simplified tax invoices and their associated credit and debit notes are uploaded within 24 hours from issuance.
What the returns rush does to your invoice trail
Picture a store with several branches and a dozen cash registers. Through the White Friday weekend each register issues simplified tax invoices with a QR code, and all of them are reported to Fatoora within 24 hours. Then the returns start on the Sunday.
Each refund at the counter is a simplified credit note that references the original sale, and each of those notes also has to reach Fatoora within 24 hours. A branch that processes 300 refunds over a weekend has created 300 documents with their own 24 hour clock. If the cashier handles the refund in the till and nowhere else, the gap between your reported sales and your actual VAT position grows all weekend.
On the business side the pattern is different but no easier. A wholesale customer rejects two pallets as damaged, you agree a partial refund, and the standard credit note has to be cleared before you send it. Only then is it the document your customer can use to adjust the input VAT they claimed.
Refunds on advance payments
Advance payments are the case worth rehearsing in advance. The ZATCA guideline works through a scenario where an advance payment is adjusted against a final invoice and the amount due for payment ends up negative, which means money goes back to the customer. In that case, it states, a credit note has to be issued for the amount refunded, and that credit note should also be sent for clearance or reporting.
So a refund of a deposit is not a treasury transaction that bypasses invoicing. It is a note, with a reference, on the same route as everything else.
Arabic is required on the note, not only on the invoice
Teams often set Arabic up correctly on the invoice template and then forget the note template. The guideline answers this directly: any information contained in the human readable form of the tax invoice must be in Arabic, including notes, and any additional translation is also allowed.
One more detail from the definitions: paper notes that are converted into an electronic format by copying, scanning or any other method are not considered electronic notes. A scan of a signed credit note is a scan, not a compliant document.
A checklist before the returns season
Run through this before the discount period opens, not during it.
- Confirm your system can issue both note types, standard and simplified, and not only credit notes.
- Check that a refund cannot be completed without selecting the original invoice it belongs to.
- Make the reason for the adjustment a required entry, so the file explains itself a year later.
- Decide who is allowed to approve a note, and set a value above which a second approval is needed.
- Test the Arabic layout of the note itself, including amounts and the VAT line.
- Confirm simplified notes are queued and sent within 24 hours, including on a Friday and Saturday.
- Reconcile notes against invoices at the end of the period, before the VAT return is filed.
If you are still working out which invoices and notes apply to your business at all, start with our guide to ZATCA e-invoicing phases and Fatoora, then come back to the note rules.
What to look for in the system that issues them
A note travels the same path as the invoice it corrects, so the questions you ask about your invoicing software are the same ones. Does it produce the XML format ZATCA accepts, does it stamp the document, and does it connect to Fatoora rather than leaving you to upload files by hand.
Daftarix and its ZATCA e-invoicing issue standard tax invoices for business buyers and simplified tax invoices for consumers, adds the QR code to every simplified tax invoice at the moment it is issued, generates each document as XML in UBL 2.1, signs Phase 2 invoices with a cryptographic stamp, and connects to Fatoora so standard tax invoices are cleared before they reach the buyer. It works in Arabic and English, prices in SAR with 15% VAT, and keeps each issued document on record with the customer it belongs to.
Want to see how your returns and corrections would run end to end? Book a demo and bring a real invoice from last season.
Frequently asked questions
Can I delete a wrong invoice and issue a corrected one instead?
No. ZATCA states that invoices cannot be cancelled. If the invoice was rejected at clearance you fix the errors and submit it as a new invoice with its own counter value and hash. If it was already cleared or reported, issue a credit or debit note that references it.
Does a credit note have to be cleared by ZATCA?
It depends on the invoice behind it. Clearance applies to tax invoices and their associated credit and debit notes, so a note against a standard B2B invoice is cleared before you share it. A note against a simplified invoice is reported to Fatoora within 24 hours of issuance instead.
Can one credit note cover several invoices?
Yes. ZATCA expects the invoice reference numbers of the original invoices to be given, and because the field is a text field you can state them as a range when there are too many to list individually.
Which period does the VAT adjustment belong to?
The note changes the VAT you report, and ZATCA links the adjustment to Article 40(1) and Article 54(3) of the VAT Implementing Regulations. Keep the note with the original invoice in your records and confirm the period treatment with your accountant before filing.
Is a signed paper credit note acceptable if we scan it?
No. Paper notes converted into an electronic format by copying, scanning or any other method are not considered electronic notes. The note has to be generated in the structured electronic format in the first place.
Sources: ZATCA, E-Invoicing Detailed Guideline and What is e-invoicing, checked 27 October 2026.
