A credit note is a document a seller issues to reduce or cancel what a buyer owes on an earlier invoice
A credit note is a document a seller sends a buyer to say that an earlier invoice is being reduced or cancelled, in part or in full. You may also see it called a credit memo. It lets the original invoice stay exactly as it was issued, while the credit note is a separate document that records what changed.
In Singapore, a credit note also changes the GST. A GST-registered seller usually reduces the output tax it declared on the original sale, and the buyer adjusts the input tax it claimed to match. IRAS, Singapore’s tax authority, requires a GST credit note to show the number and date of the original tax invoice it relates to.
Credit notes come up whenever a sale goes slightly wrong. Goods come back, part of a project is cancelled, a price was too high or a discount is agreed after the invoice went out. You’ll deal with them as the seller who issues one and as the buyer who receives one from a supplier.
Quick answers
| Question | Short Answer |
|---|---|
| What is a credit note? | A document from a seller that reduces or cancels the amount owed on an earlier invoice. |
| Credit note or credit memo? | The same document under two names. |
| Is a credit note a refund? | No. A credit note reduces what’s owed. A refund is the money paid back. |
| Credit note or debit note? | A credit note lowers the amount owed. A debit note is used only to request payment where no GST is charged, or to record credit due from a supplier. |
| What must it show? | A credit note number and date, both parties’ details, the seller’s GST registration number, the original tax invoice number and date, what’s credited and the GST amount credited. |
| Which GST return does it go in? | Usually the return for the period you issued it, not the period of the original sale. |
| How long do I keep it? | At least 5 years from the end of the accounting period, the same as invoices. |
On the sample in this guide, a S$500 credit on a S$2,000 invoice also carries S$45 of GST, so the total credited is S$545.
Table of Contents
- What Is a Credit Note?
- Why Would a Credit Note Be Issued?
- Is a Credit Note a Refund?
- What Is the Difference Between a Credit Note and a Debit Note?
- What Must a Credit Note Show?
- How Do Credit Notes Work for GST in Singapore?
- How Do You Record a Credit Note in Accounting?
- How to Issue a Credit Note
- FAQs
What Is a Credit Note?
A credit note, also called a credit memo, is a seller’s document that reduces or cancels an invoice that has already been issued. It records the change instead of altering the original invoice, so both documents stay on file. This guide uses “credit note”, the term IRAS uses, and what’s here applies to both names.
Who issues it: The seller, also called the supplier or vendor. A studio that billed too much, a distributor whose goods came back damaged and an overseas software company that refunds part of a subscription all issue credit notes.
Who receives it: The buyer, who uses it to lower the amount they owe and, if they’re GST-registered, the input tax they claim.
Does it replace the invoice? No. The original invoice stays on file unchanged, and the credit note refers back to it by number and date. Our guide to what an invoice is covers the document a credit note corrects.
How it differs from an invoice: An invoice asks the buyer to pay, and a credit note reduces what they owe. Both carry their own numbers, and a credit note always points back to an earlier invoice.
What Is a Credit Note on an Invoice?
A credit note on an invoice is a separate document linked to that invoice by number and date. It isn’t a line added to the invoice itself. A GST credit note must show the original tax invoice’s number and date.
In your accounting records, the credit note then appears against the customer’s account as a negative amount, which lowers the balance still due on the invoice.
Why Would a Credit Note Be Issued?
A seller issues a credit note when an invoice contains a mistake, or when the customer is owed money back or a discount. IRAS lists six situations:
- A mistake on the invoice: For example, goods were invoiced as standard-rated when they should have been exempt or zero-rated.
- Goods or services weren’t supplied: The customer was billed for something that never arrived.
- Charges are waived: The seller drops part or all of the charge before or after delivery.
- The customer accepts goods or services that don’t fully meet the contract: Sub-standard goods are kept at a reduced price.
- Goods are returned or services aren’t accepted: The customer sends the goods back or rejects the work.
- A discount is given on a past sale: For example, a rebate agreed after the invoice went out.
Don’t edit or delete the invoice, because the customer may already have booked it in their accounts and claimed GST on it. A credit note leaves both documents in the record, so your bookkeeper, your customer or IRAS can follow exactly what changed and when.
Is a Credit Note a Refund?
No. A credit note is a document that lowers the amount owed, and a refund is a payment of money back to the customer. The two often go together, but they’re not the same thing.
IRAS’s guidance on returned goods shows how they connect. When a business refunds the selling price and GST on defective goods, it should issue a credit note that refers to the original tax invoice. The credit note records the reduction, and the refund is the payment.
What happens to the credit depends on whether the customer has paid:
- The customer hasn’t paid yet: The credit note reduces the invoice, and the customer pays the smaller balance.
- The customer has already paid: The seller either refunds the credited amount or leaves it as a credit balance on the customer’s account.
- The customer uses the credit later: The customer can use it against a future invoice from the same seller, if both sides agree.
A buyer who wants cash back rather than a credit balance should ask for the refund in writing and quote the credit note number.
What Is the Difference Between a Credit Note and a Debit Note?
A credit note reduces the amount a buyer owes. A debit note is used to ask for payment where no GST is charged, or to record credit due from a supplier.
| Credit note | Debit note | |
|---|---|---|
| What it does | Reduces the amount owed | Asks for payment where no GST is charged, or records credit due from a supplier |
| Who usually issues it | The seller, to the buyer | The party asking for payment or recording credit due |
| Typical reason | Returns, overcharging, cancelled items, discounts | Internal billing within a company, or credit a supplier owes you |
| Can it serve as a tax invoice? | No | Can double as a simplified tax invoice if it carries all the required details |
| GST effect | Reduces output tax for the seller and input tax for the buyer | Isn’t the document IRAS expects to support an input tax claim on a standard-rated supply |
IRAS lists only two cases for a debit note. The first is asking for payment where no GST is charged, such as internal billings within the same company. The second is recording credit that a supplier owes you.
For other standard-rated supplies to GST-registered customers, you must issue a tax invoice or a simplified tax invoice. A simplified tax invoice is allowed when the total including GST is S$1,000 or less. Either one lets your customer support their input tax claim. IRAS adds that a debit note can double as a simplified tax invoice if it contains all the required information.
IRAS’s example of charging more is goods replaced with higher-value ones. There you issue an additional tax invoice for the price difference and the GST on it, and it must refer to the original tax invoice.
A debit note can also record credit a supplier owes you. IRAS says it must show the same details as a credit note, and you should compare it against the credit note the supplier sends later so the figures match.
What Must a Credit Note Show?
A GST credit note must show the number and date of the original tax invoice, plus the details below. IRAS lists these particulars for a credit note.
| Detail | Example |
|---|---|
| Credit note identifying number | CN-0001 |
| Date of issue of the credit note | 15 January 2026 |
| Supplier’s name and address | ABC Pte Ltd, 123 Main Street |
| Supplier’s GST registration number | GST: 123456789A |
| Customer’s name and address | XYZ Company, 456 Business Avenue |
| Corresponding tax invoice number | INV-001 |
| Date of issue of the tax invoice | 14 January 2026 |
| Description of what’s credited, with quantity | Office supplies |
| Amount credited for each description | S$100.00 |
| GST rate | 9% |
| GST amount credited | S$9.00 |
| Total amount credited, including GST | S$109.00 |
Sometimes you can’t quote the original invoice, for example because returned goods can’t be matched to one tax invoice. In that case, IRAS says you must keep other documentary evidence that you accounted for GST on the original supply.
IRAS requires the title “Credit Note” only for credit notes issued because of a GST rate change. Label the document clearly anyway, so nobody mistakes it for an invoice. A plain layout with these details is a sensible starting point.
Sample Credit Note
The sample below continues the fictional studio and client from our invoice guide. The studio billed S$2,000 plus GST on INV-0042, then cancelled the social media templates, which it hadn’t delivered, and credits S$500.
| CREDIT NOTE | |
|---|---|
| Seller | Sample Studio Pte Ltd, 123 Main Street, Singapore |
| GST registration number | 123456789A |
| Customer | XYZ Company Pte Ltd, 456 Business Avenue, Singapore |
| Credit note number | CN-0007 |
| Credit note date | 17 November 2026 |
| Original tax invoice | INV-0042, dated 3 November 2026 |
| Reason | Social media templates (10 designs) not supplied |
| Social media templates: 10 designs | S$500.00 |
| Total credited before GST | S$500.00 |
| GST at 9% | S$45.00 |
| Total credited including GST | S$545.00 |
The original invoice was S$2,180 including GST. After this credit note, the customer owes S$1,635. Had the studio cancelled the whole invoice instead, the credit note would list both lines and credit S$2,000 plus S$180 GST, S$2,180 in total.
How Do Credit Notes Work for GST in Singapore?
A GST-registered seller who issues a credit note usually reduces its output tax in the return for the period the credit note was issued. IRAS says you generally account for the adjustment in the accounting period when you issued it.
The adjustment goes in your GST F5 return. In the sample above, the studio reduces two figures in the return covering November 2026. Standard-rated supplies (Box 1) go down by S$500, and output tax due (Box 6) goes down by S$45. The customer reduces its input tax claim by the same S$45. Our GST registration guide covers who has to register in the first place.
Do You Submit Credit Notes Through InvoiceNow?
Yes, if your business has been phased into the GST InvoiceNow Requirement. IRAS’s FAQ says the requirement supports two document types, Invoice and Credit Note. That includes a credit note issued with no GST adjustment, which IRAS still says you’re required to submit. Our GST InvoiceNow guide has the timeline.
Which GST Return Do You Use?
Most credit notes go in the F5 return for the period you issue them. Only a credit note that corrects a wrong GST treatment can need a GST F7 return. IRAS sets out three cases:
| Why you issued the credit note | Which return |
|---|---|
| A reason other than wrong GST treatment, such as returns or discounts | GST F5 for the period you issued it |
| To correct wrong GST treatment, and both conditions for correcting in the next F5 are met | GST F5 for the period you issued it |
| To correct wrong GST treatment, and at least one condition isn’t met | GST F7, correcting the original period of the sale |
Wrong GST treatment means, for example, charging GST on a supply that shouldn’t carry it, or applying the wrong rate.
There are two conditions for correcting in your next F5. The net GST in error across all affected periods must be no more than S$3,000. The error in the other boxes must also be no more than 5% of the total value of supplies (Box 4) declared for each affected period, leaving out Boxes 6, 7 and 12.
Take a credit note issued on 30 June 2026 to cancel an invoice for a sale made on 1 January 2026. If GST was correctly charged on that sale, the credit note goes in the F5 for the period covering June 2026. No F7 is needed.
Can You Issue a Credit Note Without Adjusting GST?
Yes, in a narrow case. IRAS allows a credit note that leaves the original GST amount unchanged if all of these hold:
- Both sides agree in writing: Letters or emails are enough, and both parties keep them with their GST records.
- The customer is fully taxable: That means it makes no exempt supplies.
- The credit note carries a statement: It must say “This is not a credit note for GST purposes”.
If any condition isn’t met, you must adjust the GST amount and declare the adjustment. Neither side adjusts its taxable supplies, purchases, output tax or input tax when the exception applies.
Which Exchange Rate Do You Use for a Foreign-Currency Credit Note?
A credit note for a foreign-currency invoice should use the exchange rate from the original tax invoice. IRAS says to use the historical exchange rate in line with the tax invoice. If your customer is GST-registered, you can choose the prevailing rate instead. Whichever you choose, apply it consistently.
If a supplier owes you a refund in a foreign currency: The money arrives in that currency, and receiving it in a matching account lets you choose when to convert it. YouBiz holds and receives funds in 8 currencies: SGD, USD, EUR, GBP, JPY, HKD, AUD and CHF. YouBiz describes receiving money into these accounts as free, though banks along the way may deduct their own fees from the amount that arrives.
If you’re paying the balance after a credit: An overseas supplier’s reduced invoice is paid by card at the Mastercard wholesale rate with 0% FX fees, or by overseas transfer. Our guide to paying overseas suppliers compares the routes.
How Do You Record a Credit Note in Accounting?
The seller records a credit note as a reduction in revenue, GST output tax and money owed to it. The buyer records the mirror image: a reduction in cost, GST input tax and money owed by it.
The entries below use the S$545 credit note from the sample, with amounts in Singapore dollars and a GST-registered buyer.
| Side | Debit | Credit |
|---|---|---|
| Seller | Sales returns and credits 500.00 and GST output tax 45.00 | Accounts receivable 545.00 |
| Buyer (GST-registered) | Accounts payable 545.00 | Expense 500.00 and GST input tax 45.00 |
These entries mirror the ones for the original invoice, with each debit and credit swapped. Our invoice guide shows the original S$2,180 entries, and the credit note brings the amount still owed down to S$1,635.
If the buyer isn’t GST-registered: The buyer never claimed the S$180 on the invoice, so the full S$545 reduces expense.
If you receive a credit note from a supplier: Match it to the original purchase invoice and record it against what you owe. If you claimed input tax on that invoice, IRAS says you must reduce your input tax claim based on the credit note received. If the supplier owes you money back, ask for the refund in writing or keep it as credit against your next bill.
If the credit is later refunded: The customer’s account shows a negative balance until you pay the refund, which means you owe them money. The bank payment then clears it. If the credit note is linked to the invoice in your accounting software, the software usually tracks this for you. Our bookkeeping guide walks through the monthly routine, and the accounting software comparison helps you choose a tool.
IRAS’s record-keeping rules list credit notes for returned goods among the records to keep. You must keep all records for at least 5 years from the end of the accounting period, so file credit notes with the invoices they relate to.
How to Issue a Credit Note
Issuing a credit note takes five steps, and starting from the original invoice in your accounting software can save you most of the typing.
- Check why the invoice needs changing.
Decide whether it’s a return, a cancellation, a price correction, a discount or a wrong GST treatment. The reason decides whether you need the F5 or F7 return.
- Find the original tax invoice.
Note its number, its date and the amounts charged. A GST credit note must show the number and date.
- Write the credit note.
Add the details from the table above: a unique credit note number, today’s date, both parties’ details, your GST registration number, a description of what’s credited, the amount, the 9% GST and the total.
- Send it to the customer.
Email it as a PDF, or through your accounting software. Ask the customer to record it against the invoice.
- Record it and adjust GST.
Reduce the customer’s balance in your books, and adjust output tax in the right GST return. If you’re refunding the money, pay it and match the payment to the credit note.
Accounting software usually lets you start a credit note from the original invoice, which keeps the link between the two. The exact steps differ by software, so check the help pages for yours.
FAQs
No. An invoice asks a customer for payment, and a credit note reduces what they owe. See how it differs from an invoice above for the full comparison.
Yes. The credit then becomes either a refund or a balance on the customer’s account. The credit note documents the reduction, and the payment back is a separate step.
IRAS requires the words “Credit Note” in a prominent place only for credit notes issued in relation to a GST rate change. For all others, the title isn’t on its list of particulars, but labelling the document clearly avoids confusion with an invoice.
Yes. IRAS lists a credit note identifying number among the required particulars. Many businesses use a separate sequence, so CN-0007 follows CN-0006, and keep it apart from the invoice numbers.
Yes, for GST-registered businesses. The seller reduces output tax and the buyer reduces input tax, usually in the return for the period the credit note was issued. The exception is the written-agreement case, where neither side adjusts.
Yes. A business that isn’t GST-registered can still reduce an invoice with a credit note. It has no GST to adjust, so the document carries no GST line and no GST registration number.
At least 5 years from the end of the accounting period, the same as your other GST records.
No. YouBiz is a business account and card, not an invoicing tool. It handles the payment side: you pay supplier invoices by card or overseas transfer, receive refunds and client payments into multi-currency accounts, and the account integrates with Xero.
Get Credit Notes Right and Handle Supplier Refunds Without FX Fees
A GST credit note needs the original tax invoice’s number and date, the GST amount credited and the right GST return. Once those are correct, what’s left is the money: paying the reduced balance or receiving the refund.
For overseas suppliers, that means receiving refunds in the right currency and paying balances without FX fees. YouBiz gives your company a multi-currency business account with S$0 monthly fees, unlimited 1% cashback on eligible spends and real 0% FX fees on card spend. That covers software subscriptions, overseas supplier invoices and contractor payouts.
Apply for a YouBiz account in under 5 minutes via Singpass. We review your application and email you within 1 to 2 business days. You can use a virtual card as soon as you create it, and the physical card follows in 5 to 7 business days. The full YouBiz guide covers what the account does in detail, and our multi-currency business card comparison shows how the cards line up.
A note on how this guide is kept accurate: This guide is written and maintained by the YouBiz content team and checked against IRAS’s published guidance on credit notes, GST returns and returned goods, linked throughout. We revise it whenever IRAS updates these rules; this version reflects IRAS’s guidance as of October 2026.
