What is a credit note?
A credit note (also called a "credit memo" or "avoir" in French) is a commercial document issued by a supplier to cancel or partially correct an invoice already issued. It is an essential tool in professional invoicing that allows you to rectify errors, grant discounts or manage returns while maintaining impeccable accounting records.
In Switzerland, credit notes are governed by the Code of Obligations and VAT legislation. Using them correctly is essential to remain compliant and avoid problems during a tax audit.
Terminology: credit note, refund and corrective invoice
Credit note / Credit memo
An accounting document issued by the supplier that reduces the amount owed by the client. The credit note references the original invoice and creates a credit in the client's favour.
Refund
A refund is the actual transfer of money from supplier to client. A refund often follows a credit note, but not always: the credit may be deducted from a future invoice.
Corrective invoice
In some contexts, a "corrective invoice" is a new invoice that entirely replaces the original. In Switzerland, standard practice is to issue a credit note for the erroneous invoice, then a new corrected invoice.
When to issue a credit note
1. Billing error
The most common case. You invoiced an incorrect amount, wrong quantity or wrong VAT rate. Rather than modifying the original invoice (which is prohibited), you issue a credit note.
2. Goods returned
Your client returns all or part of the goods delivered. The credit note cancels the billing for the returned goods.
3. Post-invoicing discount or rebate
You grant a commercial discount after issuing the invoice (loyalty discount, goodwill gesture for a delay, early payment discount).
4. Service cancellation
The client cancels all or part of a service already invoiced but not yet performed.
5. Resolved dispute
Following a disagreement on the quality or conformity of a service, you agree on a price reduction with your client.
6. Duplicate invoicing
You accidentally invoiced the same service twice. The credit note cancels the duplicate.
Mandatory information on a credit note
For a credit note to be valid for accounting and tax purposes, it must contain:
Basic information
- "Credit note" or "Avoir" clearly visible
- Unique number (sequence distinct from invoices)
- Date of issue
- Reference to the original invoice (number and date)
Party identification
- Name, address and UID number of the supplier (issuer)
- VAT number if registered
- Name and address of the client (beneficiary)
Correction detail
- Precise description of the reason for the credit note
- Net amount of the correction
- Applicable VAT (same rate as the original invoice)
- Total amount including VAT
The credit note must use the same VAT rate as applied on the original invoice. If the invoice contained lines at 8.1% and 2.6%, the credit note must break down the correction by rate.
For a reminder of mandatory information on Swiss commercial documents, see our guide on mandatory legal information on Swiss invoices.
Accounting impact of credit notes
For the supplier (issuer)
The credit note results in:
- A reduction in turnover: debit entry to the revenue account
- A reduction in accounts receivable: credit entry to the clients account
- A VAT adjustment: reduction in collected VAT
For the client (beneficiary)
The credit note results in:
- A reduction in expenses: credit entry to the expense account
- A reduction in accounts payable: debit entry to the supplier account
- An input tax adjustment: reduction in deductible VAT
It is essential to record the credit note in the same period as the original invoice (if possible) for a true and fair view of the accounts. For more on Swiss SME accounting, see our article on accounting obligations in Switzerland.
VAT impact of credit notes
VAT adjustment
When you issue a credit note, you must adjust the previously declared VAT:
- Supplier: VAT on the credit note amount is deducted from VAT due in the next return
- Client: input tax deducted on the original invoice must be reduced by the credit note amount
VAT return
The credit note is declared in the VAT return for the period in which it is issued. It reduces taxable turnover and consequently the VAT due.
Important: applicable rate
The credit note's VAT rate must match that of the original invoice, even if rates have changed in the meantime. For example, if the invoice was issued under the old 7.7% rate and the credit note is issued under the 8.1% rate, the 7.7% rate applies.
Step-by-step process
- Identify the need: determine the reason (error, return, discount, cancellation) and document it clearly
- Verify the original invoice: find the invoice and note its number, date, amounts and VAT rates
- Create the credit note: issue it with all mandatory information and a distinct number sequence (e.g. CN-2026-001)
- Send to the client: transmit via the same channel as the original invoice
- Record in accounting: enter the credit note and adjust your VAT return
- Process the credit: deduction from next invoice, direct refund, or credit balance maintained
Differences from other documents
Credit note vs Debit note
A debit note is issued when the supplier needs to increase the amount owed (additional charges, upward price adjustment). A credit note does the opposite.
Credit note vs Pro forma invoice
A pro forma invoice is a provisional document with no accounting value. A credit note is an official accounting document that modifies turnover and VAT.
Credit note vs Invoice cancellation
In Switzerland, you cannot simply "cancel" or "delete" an issued invoice. The correct practice is to issue a credit note for the full amount, then issue a new invoice if needed.
Create credit notes with To Bill
To Bill simplifies credit note management:
- One-click creation: generate a credit note directly from an existing invoice
- Automatic pre-fill: original invoice data (client, amounts, VAT) is carried over automatically
- Automatic numbering: distinct sequence from invoices (CN-XXX)
- Correct VAT: the original invoice's VAT rate is applied automatically
- Compliant PDF: the credit note is generated with all legal mentions
- Integrated accounting: the impact on your turnover and VAT is calculated automatically
- History: each credit note is linked to its source invoice for complete traceability
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Best practices
- Numbering: use a distinct sequence from your invoices (e.g. CN-2026-001)
- Archiving: keep credit notes for 10 years alongside the corresponding original invoice
- Client communication: always inform your client and explain how the credit will be processed
- Root cause analysis: if you regularly issue credit notes for the same reasons, investigate the underlying process issue
FAQ
Must I issue a credit note for every invoice correction?
Yes, if the invoice has already been sent and/or recorded. Never modify an issued invoice. Issue a credit note, then a new corrected invoice if needed.
What is the difference between a credit note and an "avoir"?
In practice, the terms are interchangeable. "Avoir" is the common French term, "credit note" the English equivalent. Both refer to the same document.
Does a credit note have an expiry date?
No, there is no legal deadline for issuing a credit note. However, it is recommended to issue it as soon as possible. General limitation periods apply (10 years in principle).
Can I issue a partial credit note?
Yes, a credit note can cover all or part of the original invoice amount.
How do I handle VAT on a credit note issued in a different period?
The credit note is declared in the VAT return for the period in which it is issued. The VAT rate remains that of the original invoice, even if rates have changed.
Does the client need to sign the credit note?
No, the credit note is a unilateral act by the supplier. However, it is good practice to communicate with the client and ensure agreement on the reason and amount.