Credit notes and debit notes in South Africa: section 21 explained

Sooner or later, a tax invoice you've sent turns out to be wrong. A client returns goods, you agree a discount, or you typed the wrong rate. In South Africa you can't simply cancel the invoice and send a new one: only one tax invoice may exist for each supply. Instead, section 21 of the VAT Act has you issue a credit note or a debit note that adjusts the original.

This guide covers when you need one, which one, what it must show, and how it affects your VAT201. The free invoice generator makes both, linked to the original invoice, with the VAT worked out for you.

When you need a note

Section 21(1) lists the situations. You need a credit or debit note when, after you've issued a tax invoice:

• the supply is cancelled;
• the nature of the supply is fundamentally changed;
• the price changes by agreement, including a discount;
• the goods, or part of them, are returned;
• the price was stated in error.

In each case the VAT on your original tax invoice is now wrong. That's what the note fixes, whether you account for VAT on the invoice basis or the payments basis.

Credit note or debit note?

SARS says "it is illegal to issue more than one tax invoice per taxable supply". A second invoice can't change the price, and it would leave two documents claiming VAT for one sale. Use one credit or debit note per adjustment.

What a credit or debit note must show

Section 21(3) sets out the details:

1. The words "credit note" or "debit note" in a prominent place.
2. Your name, address and VAT number.
3. Your client's name and address, and their VAT number if they're a vendor. These aren't needed if the original was an abridged tax invoice.
4. The date you issue the note.
5. The change in value and the VAT difference. If the original said "VAT included @ 15%", show the change in the amount and either the VAT difference or a statement that it includes VAT at 15%.
6. A brief explanation of the reason.
7. Details that identify the original transaction, such as the original invoice number and date.

The reason and the original invoice are the parts most often missing from home-made templates. In Invoice Native, both are required: pick the invoice you're correcting, and type the reason.

Worked example: a credit note

A furniture supplier issued tax invoice INV-0042 on 3 September 2026 for 10 chairs at R1,000.00 each: R10,000.00 plus R1,500.00 VAT, R11,500.00 in total. The client returns two damaged chairs.

For VAT-inclusive amounts, the VAT is 15/115 of the credit. SARS's own example: a R100.00 credit including VAT carries R13.04 VAT.

Worked example: a debit note

A consultant agreed R550 an hour but invoiced 10 hours at R500, so the invoice was R500 short before VAT. The debit note shows the original invoice, the reason "Rate agreed at R550 per hour, invoiced at R500 in error", R500.00, VAT of R75.00, and R575.00 in total.

When you don't need a note

• A settlement discount whose terms were on the original tax invoice. If the invoice said, for example, "2.5% discount if paid within 7 days", and your client takes it, no credit note is needed.
• Cash rounding to the nearest coin at the till, under SARS's Binding General Ruling 65, provided the invoice carries the statement the ruling requires.
• A copy of a lost invoice. Send a copy clearly marked "Copy". It isn't a second tax invoice.

Foreign currency

Credit and debit notes are in rand, using the exchange rate on the original invoice. For when an invoice may be in foreign currency in the first place, see zero-rated exports and non-residents.

Your VAT201: fields 12 and 18

South Africa doesn't net credit and debit notes off your sales. On the VAT201:

Your sales in field 1 still show the original invoices. Signed-in businesses get a VAT201 summary in Invoice Native, covering fields 1, 2, 2A, 3, 4, 12 and 18, with credit notes and debit notes in their own fields. It's a summary to help you fill in your return on eFiling; check the figures before you submit.

Checklist

• ✅ "Credit Note" or "Debit Note" as the title
• ✅ Your name, address and VAT number; your client's details and VAT number
• ✅ The date, the original invoice number and its date
• ✅ The change in value and the VAT difference
• ✅ A short, clear reason
• ✅ In rand, at the original invoice's exchange rate
• ✅ Credit notes in field 18, debit notes in field 12

For the original document, see what a tax invoice must show. Rules can change, so check SARS's guidance or ask a registered tax practitioner about your situation. Invoice Native does not provide tax advice.