Corrective tax document (credit note) in 2026: when do you need it?

A credit note is a common name for a document that corrects the original billing downwards (for example, in the case of a return, additional discount, claim or invoice error). In the case of VAT payers, it is typically a corrective tax document under the VAT Act, which adjusts the tax base and (depending on the situation) also the VAT. In contrast, in the case of non-VAT payers, a “credit note” is often issued only as an accounting/business corrective document, as the VAT is not addressed. The document is always linked to the original invoice and does not in itself mean that a refund has already taken place – this is only a separate payment or credit.

If you are not sure which period to include the credit note in and how to reflect it in VAT, our tax legal advice can help you – we can help with interpretation, setting up the procedure and preparing for any audit.

What is a credit note

In layman’s terms, it’s a piece of paper that a supplier uses to reduce the amount of the original invoice. Typically because you have returned goods, received an additional discount, or someone has made a mistake on the invoice (wrong price, wrong quantity, wrong services charged).

But Czech tax law (and VAT in particular) tries to be terminologically precise. Therefore, for a long time now, it has been using a uniform term “corrective tax document”, which includes both situations where the amount is reduced (formerly “credit note”) and situations where the amount is increased (formerly “vrubopis”). In common parlance, however, “credit note” sticks.

Importantly, a corrective tax document is not a new invoice from scratch. It’s a document that always ties back to the original document and says, “What we originally billed needed to be changed – and here’s exactly how and why.”

Why it’s not verbiage: the difference between a VAT payer and a VAT non-payer

The main thing that makes the difference is VAT:

1) When you are a VAT payer, the credit note triggers the VAT correction scheme.

With a taxpayer, the invoice is not just a piece of business paper, but also the basis for the VAT being paid (by the supplier) and often theVAT deduction being claimed (by the customer). Once the price changes after the transaction, the VAT law expects the tax base and the amount of tax to be corrected. This is what the corrective tax document is for.

Example: Company A supplies goods to Company B for CZK 10,000 + VAT. Company A pays the VAT and Company B (if entitled) deducts the VAT. A week later, part of the goods worth CZK 2 000 is returned. If company A just sent the money back without a credit note, the tax documents would not match and the system would say that the taxable supply was for CZK 10,000 when it was really only for CZK 8,000. Therefore, a corrective tax document is issued to reconcile not only the amount of the transaction but also the VAT.

2) If you are not a VAT payer, you often deal with the correction only in accounting terms

A non-VAT payer does not deduct any VAT on output and does not deduct any VAT on input. This means that when you return goods or change the price, you still need to keep your accounting or tax records in order (so that income and expenses match), but you don’t deal with the VAT correction.

A credit note is not automatically a refund: receipt vs. payment

This is the most common source of customer frustration: “They sent me a credit note, so I must be running out of refunds.” They don’t have to. A credit note is simply a document that says that the amount originally billed has changed (for example, by minus CZK 1,210) and, for payers, it also describes the change in the tax and VAT base.

The refund is the payment operation itself. It is a bank transfer, a refund to a card, a cash payment or perhaps a set-off against another claim. A receipt and a payment are typically related, but they are not the same thing. There may well be a situation where a credit note is issued today (because the accounting department needs it), but the money doesn’t leave until tomorrow or the day after (because card reimbursement has its own technical process). And vice versa: sometimes the money is refunded first and the receipt is sent afterwards.

Example. The store issues you a credit note (reduces the original bill) and then issues a refund. According to the Civil Code, the shop is supposed to refund the money without undue delay, within 14 days of the withdrawal, and in practice it can wait for the goods to be returned or proof of dispatch under certain conditions. The credit note in this story is mainly an accounting and possibly a tax document.

When is a credit note (corrective tax document) most often used

The most typical is a return of goods or cancellation of part of a delivery – originally invoiced but later it turns out that the delivery was not made in full. Similarly common is an additional discount (bonus, skonto, individual agreement) or a simple correction of a mistake in the price.

The important thing is that the credit note is linked to the original receipt – it should identify it (typically by number and date) and clearly describe the reason for the correction.

The correcting tax document: what it must contain

One thing to keep in mind with a corrective tax document: for the tax office, it is the document you use to correct the original taxation. The audit therefore typically checks two basic questions: what the document relates to and why the correction has been made. If this is not clear from the document, a problem arises.

The corrective tax document is supposed to link the original invoice and the new reality: for example, you have delivered fewer goods, acknowledged a discount or corrected a price error. The authorities therefore need to ‘read the whole story’ from the documents:

You originally invoiced and declared VAT on X amount. Then a specific event occurred (return, discount, claim…) that changed the price. This changed the VAT base and the VAT. And it is the corrective tax document that must show how much and for what reason everything has changed.

The law lists specific data for the corrective tax document. In practice, it is useful to divide them into three groups: ‘who’, ‘what for’ and ‘how much and why’:

1) Who issues the document and for whom it is

The document must clearly identify the supplier (the one who carried out the transaction) and the customer (the one for whom the transaction was carried out). This includes the names and addresses/locations and, for payers, the VAT number.

2) To what the correction relates (link to the original document)

The correcting tax document must contain the registration number of the original tax document (i.e. the invoice you are correcting) and the registration number of the correcting tax document (credit note number). The correcting tax document must also contain the date on which the facts relevant to the correction occurred (typically the date of the refund, the granting of a discount, the acceptance of a claim, etc.).

3) Why and how much is being corrected

The law wants the credit note to describe:

• the reason for the repair (return of goods, additional discount, error in price, claim…),
• the difference in the tax base (how much the base changes),
• the difference in VAT (how much the tax changes),
• the difference in the total amount (how much the total amount to be paid or refunded changes).

Simplified tax document and unknown customer

If the original document was a simplified document (typically a receipt) and the customer is not “sufficiently known” to the taxpayer (for example, a regular retail sale), the law allows that the corrected tax document may not contain some information about the customer. This is important, for example, for e-shops and stores where you do not always have complete buyer data.

Credit note vs. cancellation of invoice

The question “Isn’t it enough to just cancel?” is absolutely typical in practice – and it’s also the exact moment when it’s easy to make a mistake that hurts.

What is an invoice cancellation and what is it good for

Invoice cancellation is essentially cancelling the original invoice by offsetting it with an opposite invoice (typically for the same amount, just with a negative sign) to result in an impact of zero. In practice, a reversal is mainly used when you want to say “this invoice should never have been created in the first place” and it is also the administratively easiest way.

However, there is a major limitation for VAT payers: you can typically only cancel advance invoices on which VAT has not yet been deducted. For ordinary invoices that are already subject to VAT, the route of a correcting tax document is usually followed.

For advance payments, the terminology is often confused. In practice, there are normally two ‘advance’ documents:

1. Advance invoice (call for payment) – is not yet a VAT tax document and does not itself usually trigger VAT liability. If you change your mind before something is taxed, you can cancel it.
2. A tax document for a payment received – this is already issued when the advance is received and the obligation to deal with VAT under the VAT rules arises. At this point you are already “in the tax world” and corrections are made in a tax way – in practice it is the corrective tax document that is used for corrections.

Credit notes and refunds for consumers

For consumer purchases made remotely (e-shopping) or off-premises (e.g. doorstep sales), you often have the right to withdraw within 14 days. The Civil Code says that when a consumer withdraws, the trader must return the money received (including delivery costs) without undue delay and in the same way, unless otherwise agreed, within 14 days of withdrawal.

But at the same time, in practice, in certain situations the trader may wait for the goods to arrive or for you to prove that you have sent them – this is exactly the moment when people wonder, “The credit note has already arrived, so why haven’t I got the money yet?” A credit note is a receipt; a refund is the next step.

Sometimes the store will offer a voucher or credit instead of a refund. However, this cannot be done unilaterally – you are always entitled to a refund (unless you agree otherwise).

Summary

• Credit note ≠ automatic refund (receipt vs. payment).
• For a VAT payer, the credit note triggers a correction of the base and VAT.
• The credit note is always linked to the original document (number, date, reason).
• Invoice cancellation is especially useful where the invoice should not have been raised at all (and typically outside of the classic VAT correction mode).