Credit notes in Germany: template, required details and VAT

If you refund a customer in Germany – as a goodwill gesture, for a return or a later discount – you write a separate document with its own sequential number that clearly refers to the original invoice. You do not change the original invoice. If the customer has already paid, your VAT is only reduced in the period in which the money actually flows back (section 17(1) of the German VAT Act, UStG).

A warning about the word: in German VAT law, „Gutschrift" (credit note) means something else entirely – an invoice written by your customer for you. Your goodwill document may still be called a credit note; the label alone has no tax consequences. The section The other kind of credit note explains when the difference really matters.

This article provides general information and does not replace tax advice.

Contents

1. Three cases, three different documents
2. Does it have to be a document at all?
3. What belongs on a credit note for your customer
4. Template: credit note for a goodwill refund
5. VAT: when it is actually reduced
6. When you do not need a credit note
7. Credit note or cancellation invoice?
8. Credit notes and the small business rule
9. The other kind of credit note: when your customer invoices you
10. Frequently asked questions

Three cases, three different documents

Before you write anything, answer one question: what actually happened? That decides which document you need.

The first case is by far the most common, and most of this article is about it. The second follows its own rules, because an error has to disappear rather than an amount. The third case never comes up for most self-employed people.

You create documents like these in an invoicing program for the self-employed straight from the original invoice, with its own number and a reference to the original – doing it by hand is exactly where mistakes creep in.

Does it have to be a document at all?

The obvious shortcut: transfer the 30 euros and be done. That fails, not because of VAT law, but because of bookkeeping.

For VAT purposes no particular document is prescribed. The tax is corrected because the taxable amount changes, not because a document exists (section 17.1(3a) of the German VAT Application Decree, UStAE). You also do not have to touch the original invoice.

Your bookkeeping needs the document anyway, because every business transaction has to be traceable. Without one, your bank statement shows a transfer of 30 euros that nobody can explain any more – including you, two years from now. What the tax office expects here is covered in the article on the GoBD-compliant invoice.

In short: no obligation under VAT law, no real alternative in practice.

What belongs on a credit note for your customer

Because there is no prescribed form, there is no list of mandatory details here as there is for invoices. This content has proven itself – it is enough for your bookkeeping and for a business customer to correct their input VAT deduction:

On the number: you may run a separate number range for credit notes, for example CN-2026-0042. How many number ranges you create is up to you; they do not even have to be free of gaps. What matters is that each number is issued only once and that it is clear which range it belongs to (section 14.5(11) UStAE). Simply continuing your normal invoice sequence is equally acceptable. What you must not do is issue a number twice. How to structure your number ranges overall, and what applies if a number was issued twice, is covered in the article on invoice numbers.

The label is up to you as well. „Credit note" is fine, „invoice correction" or „refund document" are clearer. If you regularly work with German business customers whose accounting departments know both meanings, the clearer wording saves you queries.

What a complete outgoing invoice looks like is covered in the article on writing an invoice. What the tax office actually looks at during an audit is covered in the article on the GoBD-compliant invoice.

Template: credit note for a goodwill refund

A customer paid 350 euros net and complains. You refund 30 euros as a goodwill gesture. The figures are invented, the structure is not.

Aylin Kaya Webdesign · Musterstraße 12 · 50667 Köln

To
Muster GmbH
Beispielweg 4
30159 Hannover

CREDIT NOTE

Credit note number: CN-2026-0042      (your own sequential number)
Date: 8 September 2026

We are crediting you the following amount.
Reference: invoice R-2026-0187 dated 21 August 2026

Item  Reason                                             Net
1     Goodwill refund for delayed delivery            30.00 €

                                    Net amount        30.00 €
                                    plus 19 % VAT      5.70 €
                                    Total             35.70 €

The amount will be transferred to your account by 15 September 2026.

Two details decide how good this document is. First, the reference line: without the invoice number and date, nobody will remember later what the 30 euros related to. Second, the stated tax amount: your customer needs it to reduce their input VAT deduction by exactly those 5.70 euros.

Whether the figures appear as positive numbers or with a minus sign is not a legal question but a question of clarity. What matters is that the document shows which way the money moves.

VAT: when it is actually reduced

This is where bookkeeping most often goes wrong. The principle is in section 17(1) sentence 8 UStG: the correction belongs in the period in which the change to the taxable amount occurs. When that is depends on whether the customer has already paid.

The customer has paid and gets money back

Then the taxable amount is only reduced to the extent that the consideration is actually repaid, and in the period in which the repayment happens (section 17.1(2) UStAE, most recently confirmed by the Federal Fiscal Court ruling of 13 November 2024, XI R 5/23). In practice:

• You write the credit note in August and transfer the money in September. The reduction belongs in the September return.
• You write the credit note but never pay out, because the customer never claims the balance. Then the taxable amount is not reduced. The VAT from the original invoice remains payable in full.
• You do not correct anything retrospectively. The return for the month of the original invoice stays untouched.

If you offset the amount against the next invoice instead of transferring it, when the repayment counts as made depends on the individual case. If you regularly work with customer balances, settle this point once with your tax adviser and then treat all cases the same way.

The customer has not paid yet and pays less

This is where your method of taxation matters for the first time:

• Cash accounting under section 20 UStG (consideration received). Your tax only arises when money comes in, and only on the amount that comes in (section 13(1) no. 1(b) UStG). If the customer pays the reduced amount after the credit note, that is what you pay tax on. There is nothing to correct.
• Accrual accounting (consideration agreed). Your tax arose when the service was performed, regardless of payment (section 13(1) no. 1(a) UStG). You therefore correct the reduction in the return period in which it occurs.

For the first case above – money has flowed and comes back – the method of taxation makes no difference. In both cases the tax has arisen, and in both cases the actual repayment is what counts.

Mirroring this, a business customer has to correct their input VAT deduction in the same period (section 17(1) sentence 2 UStG). That is why the stated tax amount on the document is not decoration.

And if the customer is a private individual?

Nothing changes on your side. Your VAT is reduced in the same way, under the same rules and at the same time – the obligation to correct falls on you as the supplier, regardless of who your customer is (section 17(1) sentence 1 UStG).

The difference is on the other side: a private customer has no input VAT deduction to correct. For them the document is simply confirmation that they are getting money back. You write the credit note primarily for your own bookkeeping – and because a customer receiving 30 euros likes to read in black and white what it is for.

When you do not need a credit note

Not every reduction needs its own document. Where the taxable amount changes, no invoice correction is required (section 14.11(4) UStAE). This applies expressly to:

• Early payment discounts. If the customer deducts the agreed 2 per cent, you do not write a credit note. You post the discount and correct the tax. The invoice stays as it is.
• Reductions after a complaint about defects, as long as the service invoiced does not change.
• Reversal of a supply under section 17(2) no. 3 UStG, for example a return.

It is different when the scope of the service changes, for example a corrected measurement in a construction invoice. Then the description of the service no longer fits and the invoice has to be corrected.

So a refund document is a matter of bookkeeping and clarity towards the customer, not an obligation under VAT law. Anyone who produces a document for every discount taken is creating unnecessary work.

Credit note or cancellation invoice?

Both documents take money out of an invoice. The difference lies in whether the original invoice was correct.

• The invoice was correct and the business relationship changes afterwards. Return, goodwill, bonus, complaint about defects: that is a reduction in consideration. The invoice stands, and a document recording the reduction makes sense.
• The invoice was wrong. Wrong amount, wrong recipient, wrong tax rate, issued twice: here the error has to go. You cancel the invoice completely and write a new one if needed.

The practical difference: after a reduction in consideration, two valid documents sit side by side and together give the right amount. After a cancellation, the first invoice is economically dead. How cancellation works and what applies when VAT was stated incorrectly is covered in the article on correcting an invoice.

A common borderline case: the customer returns half the order. That is not a wrong invoice but a partial reversal of the supply – so it is the credit note case (section 17(2) no. 3 UStG).

Credit notes and the small business rule

As a small business under section 19 UStG you do not state VAT on your invoices. The same applies to the credit note: net amount only, no tax amount, no tax rate. The question of when VAT is reduced does not arise for you, because none has arisen.

The other way round: if a client settles with a small business by credit note, no VAT may appear there either. If the client states VAT anyway and the small business does not object, the small business owes the stated amount to the tax office (section 14c UStG). If you receive settlements like this as a small business, check them immediately.

What a settlement without VAT looks like is shown in the article on the invoice without VAT for small businesses.

The other kind of credit note: when your customer invoices you

Now for the case German VAT law actually means by „Gutschrift": the seller does not issue the invoice, the customer does (section 14(2) sentence 5 UStG). The reason is practical – sometimes only the buyer knows what to bill. A commission depends on turnover held in the client's system; a purchase quantity is only fixed after weighing.

You notice when this affects you: if you take part in partner programmes, receive commissions or supply collecting societies, settlements often come from that direction. If you sell workshop services or trade goods, practically never.

Three rules if you receive or issue such a document:

• Agree in advance. Both sides have to agree before the settlement is made. The agreement is not bound to any form and can follow from a contract (section 14.3(2) UStAE).
• Label it. The document has to carry the word „Gutschrift"; this is a mandatory detail (section 14(4) sentence 1 no. 10 UStG). Wordings used in other official languages, such as „self-billing", are recognised as well. The tax number in the document is that of the supplier, not of the issuer, and the sequential number comes from the issuer's range.
• Check it and object if necessary. An objection means the credit note loses its effect as an invoice (section 14(2) sentence 6 UStG). If it states VAT you are not entitled to charge, you have to object without delay, otherwise you owe the amount (section 14c(2) UStG).

And the reason this section appears in an article about goodwill refunds at all: the labelling requirement has caused uncertainty ever since it was introduced. The tax authorities have therefore clarified that calling a commercial credit note „Gutschrift" does not by itself trigger section 14c UStG (section 14c.1(3) UStAE). Your goodwill credit note may keep the name it always had.

Frequently asked questions

What has to be on a credit note? For a document recording a later refund, the law prescribes no fixed form. Sensible content: both addresses, its own sequential number, the date, the reference to the original invoice, the reason and the amount split into net and tax.

Credit note or cancellation invoice – what is the difference? If the invoice was correct and you refund money later, it is a credit note. If the invoice was wrong, it has to be cancelled. In the first case both documents stay valid, in the second the cancellation removes the invoice.

When may I reduce the VAT from a credit note? If the customer has already paid, in the period in which you actually repay the money – not in the period in which you write the credit note. If you never pay out, the VAT remains payable in full.

Does it matter whether I use accrual or cash accounting? For a refund to a customer who has already paid, no. It is different when the invoice is still open: under cash accounting, tax only arises on the amount that comes in. Under accrual accounting it has already arisen and is corrected.

Do I have to change the original invoice? No. Correcting the tax does not depend on changing the tax amount in the old invoice.

May I call the document a credit note at all? Yes. In German VAT law the word describes settlement by the recipient of a service, but simply calling a commercial credit note „Gutschrift" has no tax consequences.

Does the credit note need its own number? Yes. You may run a separate number range for it, for example CN-2026-0042, or continue your normal invoice sequence. Both are acceptable. The number of the original invoice must not be issued a second time.

Does the credit note have to be an e-invoice? For a document that merely records a refund, no – no invoice is prescribed for that at all. It is different for a genuine invoice correction: if the transaction was subject to the e-invoicing obligation, the correction has to take the same form, using the appropriate invoice type.

How long do I have to keep the credit note? Treat it like an invoice: eight years, counted from the end of the calendar year in which you issued it (section 14b(1) UStG).

Does all this apply to private customers too? For you, yes. Your VAT is reduced under the same rules. Only your customer has nothing to correct, because they have no input VAT deduction.

Credit notes without the numbering chaos

The effort in credit notes is not the text but the bookkeeping around it: its own number, the reference to the original, a clean allocation of the tax. In office1.cloud you create the document straight from the existing invoice, with a sequential number and a reference to the original, plus XRechnung and ZUGFeRD from the same transaction.

What the program does not decide: whether your case calls for a credit note or a cancellation. That question is answered in the section Credit note or cancellation invoice – and if in doubt, by your tax adviser. Try Easy Invoice for free.

Sources

• Section 14 German VAT Act – issuing invoices
• Section 14c German VAT Act – incorrect or unauthorised statement of tax
• Section 17 German VAT Act – change to the taxable amount
• Section 19 German VAT Act – small business taxation
• Section 31 UStDV – details in the invoice
• German VAT Application Decree, sections 14.3, 14.5, 14c.1 and 17.1 (Federal Ministry of Finance) An invoicing software writes invoices with every mandatory detail in minutes.