Credit Note Template South Africa
Understand when to issue a credit note, what the VAT Act requires, and how to handle invoice adjustments in South Africa.
Not a cancellation
You cannot delete an issued tax invoice. The correct procedure under Section 21 of the VAT Act is to issue a credit note that references the original invoice.
When to issue a credit note
Section 21 of the Value-Added Tax Act 89 of 1991 requires a credit note when:
- Goods are returned by the buyer
- The agreed consideration (price) is reduced after the invoice was issued
- The original invoice contained an error in the amount charged
- A discount is applied after the original invoice
- Services were not delivered as invoiced
The credit note must be issued within 21 days of the event (e.g., the return of goods or agreement to reduce the price).
What a credit note must include (VAT Act s21)
- The words 'Credit Note' prominently displayed
- Your business name, address, and VAT number
- The buyer's name and address
- The date of the credit note
- A unique credit note number
- Reference to the original tax invoice number and date
- The reason for the credit note
- The amount credited (excluding VAT)
- The VAT amount being credited
- The total credit including VAT
Example credit note
CREDIT NOTE #CN-2026-003
Langa IT Solutions (Pty) Ltd
55 Loop Street, Cape Town, 8001
VAT: 4234567890
To: Moyo & Associates
Date: 18 March 2026
Original Invoice: INV-2026-045 dated 1 March 2026
Reason: Service hours reduced from 40 to 30 hours
Credit: 10 hours consulting @ R850/hr
Credit excl. VAT: R8,500.00
VAT credit (15%): R1,275.00
TOTAL CREDIT: R9,775.00
How credit notes affect your VAT return
Credit notes directly impact your VAT201 return:
For the seller (you)
The credit note reduces your output VAT. In the example above, your output VAT decreases by R1,275 in the period the credit note is issued. Report this on your VAT201 under “Adjustments”.
For the buyer
The buyer must reduce their input VAT by the same amount (R1,275). If they already claimed the full input VAT from the original invoice, they must reverse the credited portion.
Credit note vs debit note
A credit note reduces the amount the buyer owes. A debit note (Section 21 of the VAT Act) increases the amount, for example, when the actual cost was higher than originally invoiced. Both must reference the original invoice.
Common mistakes with credit notes
- Deleting the original invoice instead of issuing a credit note. This breaks the audit trail
- Not referencing the original invoice number. SARS requires this link
- Issuing a credit note without a reason. The reason must be documented
- Not adjusting the VAT return. Both parties must reflect the credit note
- Issuing credit notes more than 21 days after the event, which falls outside the VAT Act timeline
How wabill handles credit notes
wabill does not currently generate credit note PDFs. If you need to adjust an invoice amount, the current workaround is to cancel the original invoice and create a new one at the correct amount. For informal billing this works fine, but VAT-registered businesses that need a proper credit note with its own reference number (CN-202603-0001) and a link back to the original invoice should note this is a feature we plan to add.
10 free invoice documents to start, then R49/month.
FAQ
What is a credit note?
A credit note is a document issued by a seller to reduce the amount owed by a buyer. It effectively reverses all or part of a previous invoice. Common reasons: goods returned, overcharging, discount applied after invoicing, or cancelled services.
When must I issue a credit note?
Section 21 of the VAT Act 89 of 1991 requires a VAT vendor to issue a credit note when: goods are returned, the agreed price is reduced, or an invoice was issued for an incorrect amount. You must issue it within 21 days of the event.
How does a credit note affect my VAT return?
A credit note reduces your output VAT for the period. If you issued an invoice for R11,500 (R10,000 + R1,500 VAT) and then credit R5,750, your output VAT decreases by R750. The credit note must be reflected on your next VAT201 return.
Can I just cancel the invoice instead?
Technically no. Once a tax invoice is issued, the correct procedure under the VAT Act is a credit note. In practice, many small businesses cancel and reissue, but this creates a gap in the audit trail. wabill currently handles this by letting you cancel an invoice and create a new one at the correct amount. A proper credit note feature with its own numbering is on the roadmap.
10 free documents. No card needed.