Integrating Credit Notes with ZATCA: A Comprehensive Guide

Updated On : Feb 08th, 2024 | 23 min read

The credit note , also known as a credit memo, plays a pivotal role in business financial transactions. It signifies the return of funds to a company under various circumstances such as invoice errors, the receipt of incorrect or damaged products, or the cancellation of a purchase order. Credit notes can be issued for the full invoice amount or a partial sum. Not only do they adjust your account receivables, but they also rectify the taxes associated with the invoices. It`s essential to note that the credited sum should not surpass the invoice`s total gross amount.

Scenarios Leading to the Issuance of Credit Notes:

1. To rectify invoice errors. For instance, if the invoice amount is overstated or the correct discount has not been applied.
2. To cancel outstanding payments on an invoice. When companies anticipate a customer would not settle an invoice, they often produce a credit note to sidestep related taxations or VAT.
3. To refund payments made against an invoice, especially when products malfunction within the warranty period.

Illustrating Credit Note Integration with ZATCA

Below illustrates a scenario where a buyer procures products worth:

Net amount - 10,000 SAR

VAT amount - 1,500 SAR

Gross amount -11,500 SAR

The seller must get the invoice approved by ZATCA before dispatching it to the buyer. This process results in a VAT of 1,500 SAR, payable to ZATCA.

Suppose, weeks later, the buyer decides to return the products due to defects. They assert that 20% of the goods are flawed and request a refund. Given the seller has already processed the invoice with ZATCA, a credit note for the 20% refund becomes imperative.

The sellers credit note details would be:

Net amount - 2000 SAR

VAT amount - 300 SAR

Gross amount -2300 SAR

Upon sending this credit note to ZATCA, referencing the original invoice, the new VAT payable becomes 1,200 SAR (1500 – 300 = 1200 SAR).

Key Points on Credit Note Integration with ZATCA:

With Accqrate, handling credit note generation and its integration with ZATCA becomes seamless. Here are essential integration steps:

When sending a credit note to ZATCA, ensure you include the return invoice number, reason (instruction note), and return invoice date.

Tags to remember for ZATCA submission:

1. Reference document: cbd:ID
2. Reason for Credit note: cbc:InstructionNote

The approved XML from ZATCA will contain the references as shown below

approved, the VAT will be deducted from the relevant invoice immediately.

Why Choose Accqrate?

Accqrate offers a streamlined solution for integrating your ERPs with ZATCA, facilitating the sending of credit and debit notes for both B2C (Simplified credit and debit note) and B2B (Tax credit and debit note). If you are seeking an efficient way to manage your ZATCA Phase 2 Integration, especially concerning credit and debit notes, Accqrate has the expertise and perfect solution you need.

Got questions or need a demo? Drop us a mail at Contact@accqrate-erp.com