Understanding Credit Notes (Facturas Rectificativas)

Credit notes (facturas rectificativas) are an essential part of Spanish business operations. Unlike many countries where you can simply delete or void an invoice, Spanish tax law requires you to maintain a complete, immutable record of all transactions. When corrections are needed, you issue a credit note to adjust or cancel the original invoice.

Understanding when and how to use credit notes properly ensures compliance with Spanish regulations while maintaining clear audit trails for your business.

What Are Credit Notes?

A credit note, legally known as a "factura rectificativa" in Spain, is a corrective document that modifies or cancels a previously issued invoice. Every invoice you create becomes a permanent part of your tax records and cannot be deleted. Credit notes provide the legal mechanism to make corrections while preserving the complete transaction history.

Purpose of Credit Notes

Credit notes serve several critical functions:

Correcting Errors: Fix mistakes in pricing, quantities, VAT rates, or calculations on already-issued invoices.

Processing Returns: Document product returns or cancelled services, adjusting revenue and VAT accordingly.

Applying Discounts: Apply post-sale discounts, volume rebates, or commercial adjustments after the original invoice was issued.

Cancelling Invoices: Completely void invoices issued in error, such as duplicates or invoices sent to the wrong client.

Adjusting for Issues: Compensate clients for damaged goods, quality problems, or service delays.

The fundamental principle: never delete an invoice—always correct it through proper documentation.

Credit Notes vs. Voiding Invoices

Many business owners ask: "Why can't I just delete the wrong invoice?"

The Legal Requirement

Spanish tax law, specifically Real Decreto 1619/2012, mandates that all invoices remain in your accounting records permanently. This requirement exists because:

VAT Tracking: The Agencia Tributaria (Spanish Tax Agency) uses invoices to track VAT obligations. Deleting invoices would create gaps in the VAT trail.

Audit Integrity: Tax audits examine complete transaction histories. Missing invoice numbers or deleted records raise immediate red flags.

Fraud Prevention: Immutable invoice records prevent businesses from selectively removing transactions to avoid taxes.

Client Rights: Your clients claim VAT deductions based on your invoices. Unilateral deletion would invalidate their tax records.

How Credit Notes Work Instead

Rather than deletion, credit notes create a corrective entry:

Original Invoice: Remains in your records unchanged Credit Note: References the original and documents the correction Net Result: Combined effect shows the corrected transaction Audit Trail: Complete history visible to tax authorities

Example:

Invoice 2025-042: €1,000 + €210 VAT (21%) = €1,210
Credit Note 2025-CR-008: -€1,000 - €210 VAT = -€1,210
Net Effect: €0 (invoice cancelled)

Both documents retained for 7 years

When to Use Credit Notes

Knowing when a credit note is required helps you identify situations requiring corrective documentation.

Price and Calculation Errors

Overcharged the client: Issue a negative credit note reducing the amount to be refunded.

Undercharged the client: Issue a positive credit note increasing the amount owed.

Wrong pricing applied: Correct to the agreed-upon rates from your contract or quote.

Calculation mistakes: Fix mathematical errors in subtotals, VAT, or totals.

Example: You invoiced €1,200 for consulting but the agreed rate was €1,000. Create a credit note for -€200 (plus applicable VAT adjustment) referencing the pricing error.

VAT Rate Corrections

VAT rate mistakes are common and must be corrected immediately:

Applied 21% instead of 10%: Correct to the proper reduced rate for applicable goods/services.

Used domestic VAT for EU B2B: Adjust to reverse charge (0%) with "Inversión del sujeto pasivo" notation.

Used domestic VAT for export: Correct to 0% with "Exenta de IVA - Exportación" notation.

Applied wrong rate for mixed goods: Split correctly between applicable rates.

Example: You charged 21% VAT on hospitality catering (should be 10% reduced rate). Issue a credit note correcting the VAT rate from 21% to 10%, refunding the excess VAT charged.

Product Returns and Service Cancellations

When clients return goods or cancel services:

Full returns: Complete cancellation via full credit note for 100% of invoice amount.

Partial returns: Credit note for only the returned items or cancelled portion.

Service cancellation before delivery: Cancel entire invoice since no service was provided.

Defective products: Credit note for defective items, plus replacement invoice if sending new products.

Example: Client returns 8 of 20 ordered items. Issue a credit note for the value of 8 items plus the associated VAT, leaving the remaining 12 items invoiced normally.

Post-Sale Discounts and Rebates

Commercial adjustments after invoicing require credit notes:

Volume discounts: Applied retroactively when client reaches purchase thresholds.

Loyalty rebates: Granted to regular customers based on total purchases.

Promotional discounts: Retroactive application of promotions or special offers.

Early payment discounts: If not already reflected on the original invoice.

Commercial compensation: For delivery delays, quality issues, or service problems.

Example: Your commercial terms offer a 5% discount when clients reach €15,000 in quarterly purchases. When they hit this threshold, issue credit notes for 5% of all applicable invoices from that quarter.

Duplicate or Erroneous Invoices

Sometimes invoices shouldn't exist at all:

Duplicate invoice: Created accidentally for the same transaction.

Invoice to wrong client: Issued to incorrect party (cancel and reissue to correct client).

Invoice before contract finalization: Deal cancelled before execution.

Completely incorrect service description: Requires full cancellation and reissue.

Example: You accidentally invoiced the same project twice to the same client. Issue a full credit note cancelling the duplicate invoice, keeping only the first valid invoice.

Creating Credit Notes in Factumo

Factumo streamlines credit note creation while ensuring compliance with all Spanish legal requirements.

Step 1: Access the Original Invoice

Navigate to Invoices and locate the invoice you need to correct:

1. Find the invoice in your invoice list
2. Click to open the invoice detail view
3. Review the invoice to confirm what needs correction

Step 2: Initiate Credit Note Creation

From the invoice detail view:

1. Click Create Credit Note button
2. Factumo automatically loads the original invoice information
3. All required linkages are set up automatically

Step 3: Choose Credit Note Type

Select the appropriate correction type:

Full Credit (Cancel Invoice)

• Cancels 100% of the invoice amount
• Use for duplicates, invoices issued in error, or complete cancellations
• Net effect: Invoice completely voided

Partial Credit (Adjust Amount)

• Reduces invoice by specific amount or percentage
• Use for partial returns, discounts, or correction of overcharges
• Net effect: Invoice partially corrected

VAT Rate Correction

• Adjusts only the VAT calculation while keeping base amount
• Use when wrong VAT rate was applied
• Net effect: VAT amount corrected

Positive Credit (Increase Invoice)

• Increases the invoice amount
• Use when you undercharged or need to apply additional charges
• Net effect: Invoice total increased

Step 4: Specify Correction Details

Enter detailed information about the correction:

Correction Reason (required) Provide a specific, detailed explanation of why the credit note is needed. Vague reasons like "error" or "correction" are insufficient under Spanish law.

Too vague: "Error in invoice" Proper: "Incorrect VAT rate applied - 21% general rate used instead of 10% reduced rate applicable to hospitality catering per Article 91 of VAT Law"

Too vague: "Client returned products" Proper: "Return of 8 units of Product SKU-45678 due to client order cancellation, received at warehouse on January 20, 2025 per return authorization RA-2025-023"

Correction Amount

• For full credits: Automatically set to 100% of invoice
• For partial credits: Enter the amount to be credited
• For VAT corrections: System calculates VAT adjustment automatically

VAT Adjustment Factumo automatically calculates the appropriate VAT adjustment based on:

• Original VAT charged
• Corrected VAT (if applicable)
• Net difference to be credited or charged

Step 5: Review Credit Note Preview

Before finalizing, review:

Original Invoice Information:

• Invoice number and date
• Client details
• Original amounts and VAT

Credit Note Information:

• Automatic sequential credit note number
• Issue date (today or custom)
• "Factura Rectificativa" designation
• Clear reference to original invoice

Correction Details:

• Detailed reason for correction
• Base amount adjustment
• VAT adjustment
• Net total correction (amount to refund or charge)

Example Preview:

FACTURA RECTIFICATIVA
Credit Note: 2025-CR-012
Date: January 25, 2025

Correcting Invoice: 2025-0089
Original Invoice Date: January 10, 2025

Reason: Return of 5 units of Product ABC per return authorization
RA-2025-018 dated January 22, 2025

Original Line Item:
- 10 units × €50.00 = €500.00
- VAT (21%): €105.00
- Total: €605.00

Credited Amount:
- 5 units × €50.00 = €250.00
- VAT (21%): €52.50
- Total Credit: €302.50

Net Amount to Refund: €302.50

Step 6: Finalize and Process

Once you've reviewed everything:

1. Click Create Credit Note
2. Credit note receives official sequential number
3. PDF generated automatically
4. Original invoice status updated to show credit note issued
5. VAT reporting automatically adjusted

Step 7: Deliver to Client

After creating the credit note:

Email to Client

• Click Send Email to send credit note PDF
• Explain the correction clearly
• Specify refund timeline if applicable

Download PDF

• Professional format with all legal requirements
• Includes your branding
• Ready to print or save

Process Refund (if applicable)

• Issue refund via original payment method
• Record refund details in payment tracking
• Attach payment confirmation to credit note

Credit Note Numbering

Credit notes must follow sequential numbering just like invoices.

Numbering Options

Factumo supports different credit note numbering strategies:

Integrated Series Credit notes share the same sequence as regular invoices:

• Invoice 2025-045
• Invoice 2025-046
• Credit Note 2025-047
• Invoice 2025-048

Separate Series Credit notes have their own distinct sequence:

• Invoices: 2025-INV-001, 2025-INV-002...
• Credit Notes: 2025-CR-001, 2025-CR-002...

Prefix System Credit notes use prefixes to distinguish from invoices:

• Invoices: INV-245, INV-246...
• Credit Notes: CR-001, CR-002...

All approaches are legal under Spanish law as long as:

• Numbering remains sequential without gaps
• Numbers are never reused
• System is applied consistently

Configure your preferred numbering in Settings → Invoice Settings → Credit Note Numbering.

Why Sequential Numbering Matters

The Agencia Tributaria uses sequential numbering to detect:

• Missing or deleted invoices (gaps in sequence)
• Out-of-order transactions (audit red flags)
• Backdated corrections (potential fraud indicators)

Factumo ensures compliance by automatically assigning the next available number in sequence.

Full vs. Partial Credit Notes

Understanding the difference helps you choose the right approach for each situation.

Full Credit Notes

Cancel 100% of the original invoice:

When to Use:

• Invoice issued by mistake (duplicate, wrong client)
• Complete cancellation of transaction
• Full product return
• Service completely cancelled before delivery

Effect:

• Original invoice remains in records
• Credit note completely offsets it
• Net revenue: €0
• Net VAT collected: €0
• Both documents retained for audit trail

Example:

Original: Invoice 2025-067 for €1,000 + €210 VAT = €1,210
Credit Note: 2025-CR-015 for -€1,000 - €210 VAT = -€1,210
Net Effect: €0 (transaction cancelled)

Partial Credit Notes

Reduce invoice by specific amount:

When to Use:

• Partial product returns
• Apply post-sale discounts
• Correct overcharges
• Compensate for quality issues

Effect:

• Original invoice remains at full value
• Credit note reduces net amount
• Net revenue: Original - Credit
• Net VAT: Original VAT - Credited VAT
• Both documents show complete transaction

Example:

Original: Invoice 2025-067 for €1,000 + €210 VAT = €1,210
Credit Note: 2025-CR-015 for -€300 - €63 VAT = -€363
Net Effect: €700 + €147 VAT = €847 (reduced transaction)

Multiple Corrections to Same Invoice

Sometimes you need to correct the same invoice multiple times:

First Correction: Credit Note A references Invoice 123 Second Correction: Credit Note B also references Invoice 123 (not Credit Note A)

All credit notes reference back to the original invoice, creating a clear chain:

Invoice 2025-100: €2,000
├── Credit Note 2025-CR-020: -€200 (discount applied)
├── Credit Note 2025-CR-035: -€150 (partial return)
└── Net Result: €1,650 (€2,000 - €200 - €150)

Factumo maintains this linkage automatically, showing all related credit notes in the invoice detail view.

Common Scenarios and Examples

Let's examine practical situations requiring credit notes and proper handling.

Scenario 1: Wrong VAT Rate

Situation: You invoiced graphic design services with 10% VAT instead of the correct 21% general rate.

Solution:

1. Create positive credit note (increasing invoice)
2. Reason: "Correction of VAT rate - 21% general rate applies to graphic design services per VAT Law Article 90"
3. Original: €1,000 base + €100 VAT (10%) = €1,100
4. Correction: €1,000 base + €210 VAT (21%) = €1,210
5. Credit Note: +€110 (additional VAT owed)
6. Client receives corrected invoice and pays additional €110
7. Client adjusts their VAT deduction accordingly

Scenario 2: Partial Return

Situation: Client ordered 30 units but returns 12 as excess inventory.

Solution:

1. Create partial credit note for 12 units only
2. Reason: "Return of 12 units of Product XYZ-500 per return authorization RA-2025-031 dated January 18, 2025"
3. Calculate: (€25 per unit × 12) + 21% VAT = €363 credit
4. Attach return authorization document
5. Process refund to client for €363
6. Net invoice: 18 units remain invoiced

Scenario 3: Volume Discount

Situation: Client reaches €25,000 purchase threshold qualifying for retroactive 8% discount on all Q1 purchases.

Solution:

1. Issue separate credit note for each invoice requiring adjustment
2. Each references its specific original invoice
3. Reason: "8% volume discount per commercial agreement dated December 15, 2024 - client reached €25,000 threshold on January 28, 2025"
4. Calculate 8% of each invoice base amount plus VAT
5. Attach sales report showing threshold achievement
6. Client receives total discount across all credit notes

Scenario 4: Complete Cancellation

Situation: You invoiced for training services but the client cancelled the event before it occurred.

Solution:

1. Create full credit note (100% of invoice)
2. Reason: "Cancellation of training event per client notice dated January 20, 2025 - services not delivered"
3. Credit entire invoice: base amount + VAT
4. Attach cancellation notice from client
5. Process full refund
6. No replacement invoice needed

Scenario 5: Duplicate Invoice

Situation: You accidentally created two invoices for the same consulting project.

Solution:

1. Identify which invoice to keep (usually the first issued)
2. Create full credit note for the duplicate
3. Reason: "Cancellation of duplicate invoice - same services already invoiced under Invoice 2025-0156"
4. Credit 100% of duplicate invoice
5. Notify client to disregard duplicate
6. Keep original invoice active

Impact on VAT Reporting

Credit notes directly affect your quarterly VAT declarations and must be reported correctly.

Reporting Period

Report credit notes in the VAT period when issued, not when the original invoice was created:

Example:

• Original Invoice: Q4 2024 (December 2024) → Reported in Q4 2024 VAT return
• Credit Note: Q1 2025 (February 2025) → Reported in Q1 2025 VAT return

This creates a VAT adjustment in Q1 2025, even though it relates to a Q4 2024 transaction.

Negative Credit Notes (Reducing Revenue)

When issuing credit notes that reduce amounts:

• Decreases your VAT collected for the period
• Decreases your revenue
• Client must reduce their VAT deduction accordingly

Report on Modelo 303 (quarterly VAT return) as negative adjustments.

Positive Credit Notes (Increasing Revenue)

When issuing credit notes that increase amounts:

• Increases your VAT collected for the period
• Increases your revenue
• Client must increase their VAT deduction

Report on Modelo 303 as additional VAT collected.

Maintaining Records

Keep clear records for VAT reporting:

• Total credit notes issued each quarter
• Net VAT adjustment from all credit notes
• Breakdown by VAT rate (21%, 10%, 4%, exempt)
• Individual credit note details for audit support

Factumo automatically tracks this in your VAT reports, accessible under Reports → VAT Summary.

Best Practices

Implement these practices for effective credit note management.

Issue Promptly

Don't delay when errors are discovered:

Immediate correction prevents compounding errors and confusion Timely VAT adjustment ensures accurate quarterly reporting Client trust benefits from quick acknowledgment and resolution Clearer audit trails when corrections happen close to original transaction

Recommended timeline: Issue credit notes within 7 days of discovering the error or receiving a return.

Provide Detailed Reasons

Always include specific, comprehensive correction reasons:

Include:

• What was incorrect
• What it should have been
• Why the correction is necessary
• Supporting reference numbers (return authorizations, contracts, etc.)

Legal requirement: Vague reasons can be rejected during tax audits, leaving you liable for the original VAT.

Communicate with Clients

Always inform clients when issuing credit notes:

1. Send the credit note document
2. Explain clearly why it was issued
3. Clarify any actions they need to take (adjust their VAT deduction)
4. Specify refund timeline and method if applicable
5. Request acknowledgment for your records

Sample communication:

Estimado/a [Client],

Le informamos que hemos emitido la factura rectificativa 2025-CR-018
por importe de -€363,00, corrigiendo la factura 2025-0145.

Motivo: Devolución de 12 unidades según autorización RA-2025-031.

Procesaremos el reembolso de €363,00 mediante transferencia bancaria
en un plazo de 5 días laborables.

Adjunto encontrará la factura rectificativa para sus registros.

Un saludo,
[Your Company]

Maintain Supporting Documentation

For every credit note, keep:

For Returns:

• Return authorization
• Delivery/warehouse receipt
• Photos of damaged items (if applicable)
• Client correspondence

For Discounts:

• Commercial agreement terms
• Sales records showing threshold achievement
• Approval documentation

For Errors:

• Documentation showing error discovery
• Calculation corrections
• Client communications

For Cancellations:

• Cancellation notice
• Contract termination documents
• Client correspondence

Store these documents with the credit note - Factumo allows attaching files to each credit note record.

Regular Reconciliation

Periodically review your credit notes:

Monthly: Ensure all credit notes have proper documentation attached Quarterly: Verify VAT adjustments correctly reflected in tax returns Annually: Review credit note patterns to identify systemic issues (e.g., frequent pricing errors suggest process improvements needed)

Next Steps

Now that you understand credit notes fundamentals:

• Real Decreto Compliance - Detailed legal requirements and compliance
• Managing Invoices - Comprehensive invoice lifecycle management
• Spanish Requirements - Spanish invoicing regulations

For more background on the legal framework, see our blog article Real Decreto 1619/2012: Understanding Credit Notes in Spain.

Need help with credit notes? Contact support at support@factumo.com