What is Debit Notes?
A debit note is a formal commercial document issued by a buyer or a seller to indicate an increase in an amount payable, either by raising the buyer’s liability or correcting an under-billed invoice. It typically references the original invoice.
How It Works
- Identify the reason — additional charges, undelivered quantity adjustment, price correction.
- Issue a sequentially numbered debit note referencing the original invoice.
- Recalculate the VAT impact if the underlying supply is taxable.
- Record the adjustment in the ledger and update the relevant AR or AP subsidiary.
- Communicate the debit note to the counterparty and obtain acknowledgment if needed.
Saudi Context
Under Saudi VAT rules, debit notes for supplies must include all mandatory tax invoice fields and be issued within the deadline set by the VAT Implementing Regulations. ZATCA expects the debit note to be linked to the original invoice during electronic invoicing.
Example
A supplier originally invoiced SAR 100,000 + VAT but later discovered an under-billing of SAR 5,000 + VAT. A debit note for SAR 5,000 + SAR 750 VAT is issued, increasing the customer’s liability by SAR 5,750.