How do you cancel or change a tax invoice?
Issuing an invoice to a customer who just handed us a bag or cash is an easy and routine operation for most freelancers, but what should we do when the deal blows up an hour after we handed the customer the invoice?
Or alternatively when the customer regrets and decides to reduce the order or service that was agreed upon in advance?
In this article we will try to briefly review the possible actions in these situations, with the aim of reducing the “tax accidents” that can happen to us due to ignorance of the law.
introduction:
A tax invoice is a legal document that should give us details of a transaction between a buyer and a seller and between a service provider and its recipient, such as: the agreed quantity and price of the product or service that was provided during a single transaction or several transactions.
When it comes to a tax invoice for a business expense, it is a reference based on which you can get an input tax refund from VAT.
When it is produced by us as income, it obligates us, the authorized VAT dealers, to pay and therefore any change in it must be made in accordance with certain rules that we will detail here.
And for practice:
First, a distinction must be made between 3 possible cases for canceling / correcting a tax invoice that was issued:
1. When the original tax invoice has not yet been given to the customer. (the white copy).
2. When the original invoice is already with the customer and it is not possible to demand it back.
3. When the original invoice has already been reported to VAT.
1. When the original has not yet been delivered to the customer:
A. When it comes to a manual invoice, there is no problem making a correction provided that it is done on both invoices both in the original (white) and in the copy that remains with the dealer, usually a pink copy. It is of course important to sign next to each change so that we understand that it was made with consent.
2. If you want to cancel the invoice, write “cancelled” on the original and the copy, staple them together and send them to the tax / CPA consultant with the monthly material.
3. On the other hand, if it is a computerized invoice \ with a “digital signature”, the invoice can be completely canceled or the amount of the original invoice corrected only by a credit invoice / credit notice in the case of reducing the amount of the transaction.
It is important to note in the details of the credit invoice which tax invoice it refers to, and of course the reason for the reduction in the invoice. For example, depositing cash / changing the order, etc.
A change can be made in a tax invoice that was produced by issuing a new tax invoice in the event of an increase in the amount of the original transaction.
It is important to note that when increasing a transaction amount, a tax invoice must be issued only for the increase made, and not a new invoice issued for the new amount, similar to the detail in the credit notice, it must also be specified here why the increase was made. For example, order increase / change, etc.
2. When the original invoice has been forwarded to the customer but has not yet been reported to VAT:
A. It is possible to ask the customer to send the original invoice, attach it to the copy invoice and write “cancelled” on both.
B. It is possible to ask the customer to write down a signed declaration letter saying that he will not make any use of the invoice, it is very important to write down the details of the invoice in question, for example: number \ date \ amount of the invoice \ in whose name it was registered.
This is the place to point out that this is a solution born from the field, and will not necessarily be acceptable to the tax authorities, but in a situation where there is no choice, this solution is “the least bad”.
third. You can issue a credit invoice for the same amount if you want to cancel the issued invoice, and if you want to change the amount to a lower one, then issue a credit for the difference only, with both options specifying the invoice number to which the credit refers and the reason for the credit.
3. When the original invoice has already been reported to VAT:
It is not possible to change or cancel the credit in any other way except for a credit credit.
comments:
This is the place to point out that if the lost original receipt has not yet been reported to VAT, a copy of the receipt with the stamp “faithful to the source” and an original signature of the dealer can be transferred.
Pay attention and fill out the invoice as required so as not to create the problem of canceling or correcting the invoice and therefore make sure that the details are filled in as required such as: date, customer’s name, amounts, customer’s dealer number, etc… before closing the invoice.
It is important to emphasize that each register in accounting can be used as only one type of document, for example a “tax invoice / receipt” register, can never be used as a “receipt only” or as an “invoice” only – even if we have circled the desired option by us , or alternatively we erased the “receipt” with a pen, therefore a tax invoice with a minus, cannot in principle be used as a credit invoice / credit notice.
Successfully!!!