Article 7.2: Creating a Credit Note (Seller)

Overview

👤 For Sellers: A Credit Note is created to correct or refund an existing invoice. This article walks you through the process of creating a CN, from selecting the invoice to submitting it to ZATCA.

Before You Start

Make sure you have:

• ✅ An existing invoice that needs correction (status: Sent or Paid)
• ✅ ZATCA connection configured (see Article 8.1)
• ✅ Clear understanding of what needs to be credited (see Article 7.1)

How to Create a Credit Note

Step 1: Navigate to Credit Notes

1. Go to Credit Notes in the sidebar
2. Click + Create Credit Note

Step 2: Select the Invoice to Credit

1. In the Invoice Number field, enter or select the invoice you're crediting
2. The system displays:
   • Invoice date
   • Customer name
   • Invoice total
   • All line items from the invoice

Important: You can only select invoices that are in Sent or Paid status.

Step 3: Enter Credit Note Details

Fill in the following fields:

Field	Required?	Description	Example
CN Date	✅ Yes	Date you're issuing the credit note	2025-11-05
Reason for Credit	✅ Yes	Why you're issuing this CN	Customer returned 20 damaged units
Reference Number	No	Your internal reference	RMA-2025-089
Notes	No	Additional details	Units returned on Nov 4, inspection confirmed damage

Step 4: Select Items and Quantities to Credit

The system shows all items from the original invoice. For each item you want to credit:

1. Check the box next to the item
2. Enter the quantity to credit (must be ≤ invoiced quantity)
3. The system automatically calculates:
   • Unit price (from invoice)
   • VAT (from invoice)
   • Total credit amount

Example:

Original Invoice (INV-25-0187):

Item	Invoiced Qty	Unit Price	Total
Paper Boxes	500	25 SAR	12,500 SAR
Tape Rolls	100	15 SAR	1,500 SAR

Credit Note (CN-25-0033):

Item	Credit Qty	Unit Price	Total Credit
Paper Boxes	50	25 SAR	1,250 SAR
Tape Rolls	0	—	—

Result: CN total = 1,250 SAR

Step 5: Review Credit Amount

The system displays:

• Subtotal (before VAT)
• VAT amount
• Total credit amount

Important:

• You can credit some or all items
• You can credit partial quantities
• Total CN cannot exceed the original invoice amount

Step 6: Upload Supporting Files (Optional)

Attach files like:

• Return delivery notes
• Photos of damaged goods
• Customer emails requesting credit
• Quality inspection reports

To upload:

1. Scroll to the Attachments section
2. Click Upload Files
3. Select one or more files (PNG, JPG, PDF)

Step 7: Submit to ZATCA

1. Review all details carefully
2. Click Submit

What happens next:

• CN status changes to Pushed to ZATCA
• ZATCA validates the credit note
• You'll receive a notification when approved or rejected

Understanding CN Numbers

When you create a CN, the system generates two numbers:

1. Primary CN Number (System ID)

Format: CN-{Year}-{Number}

Example: CN-25-0033

• CN = Credit Note
• 25 = Created in 2025
• 0033 = 33rd CN in your company this year

What Happens After You Submit?

The CN goes through ZATCA validation (same process as invoices):

Status	Meaning	What to Do
Pushed to ZATCA	CN is being validated	Wait for ZATCA response
Open	ZATCA approved the CN	Share with customer or apply to their account
Rejected	ZATCA found errors	Fix errors and create a new CN (see Article 8.4)
Closed	CN has been applied/processed	No further action needed
Void	CN was canceled	Terminal status

For complete status details, see Article 7.3.

Creating Multiple CNs for One Invoice

You can issue multiple CNs for the same invoice:

Example:

Original Invoice (INV-25-0187): 500 units at 50 SAR = 25,000 SAR

CN-01 (Nov 5):

• Customer returns 30 damaged units = 1,500 SAR credit

CN-02 (Nov 15):

• Price adjustment agreed: 5% discount = 1,250 SAR credit

Total credited: 1,500 + 1,250 = 2,750 SAR
Customer net owes: 25,000 - 2,750 = 22,250 SAR

Common Scenarios

Scenario 1: Partial Return

Original Invoice:

• 100 units at 80 SAR/unit = 8,000 SAR

Customer returns 15 units:

1. Create CN
2. Select invoice INV-25-0187
3. Enter quantity to credit: 15 units
4. CN amount: 15 × 80 = 1,200 SAR
5. Submit to ZATCA

Scenario 2: Price Correction

Original Invoice:

• 200 units at 100 SAR/unit = 20,000 SAR (wrong price)
• Correct price should be 90 SAR/unit = 18,000 SAR

Create CN for the difference:

1. Select invoice INV-25-0191
2. Calculate difference: 200 × (100 - 90) = 2,000 SAR
3. Create CN for 2,000 SAR
4. In notes: "Price correction from 100 to 90 SAR/unit"
5. Submit

Alternative method: Credit the full 20,000 SAR and create a new invoice for 18,000 SAR

Scenario 3: Full Cancellation

Original Invoice:

• 50 units at 60 SAR/unit = 3,000 SAR

Customer cancels entire order before delivery:

1. Create CN for full amount
2. Select all items, full quantities
3. CN amount: 3,000 SAR (100% credit)
4. Reason: "Order canceled by customer"
5. Submit

Scenario 4: Multiple Items, Partial Credit

Original Invoice:

• Item A: 100 units at 50 SAR = 5,000 SAR
• Item B: 200 units at 30 SAR = 6,000 SAR
• Total: 11,000 SAR

Customer returns some of both items:

1. Create CN
2. Item A: Credit 20 units = 1,000 SAR
3. Item B: Credit 50 units = 1,500 SAR
4. CN total: 2,500 SAR
5. Submit

Common Validation Errors

Error Message	Arabic	Solution
Invoice is required	الفاتورة مطلوبة	Select an invoice from the dropdown
Invoice not found or invalid	الفاتورة غير موجودة أو غير صالحة	Ensure the invoice status is Sent or Paid
Credit quantity exceeds invoiced quantity	كمية الائتمان تتجاوز الكمية المفوترة	Reduce the credit quantity
Total CN amount exceeds invoice	إجمالي الإشعار الدائن يتجاوز الفاتورة	Check your calculations—CNs cannot be more than invoice
Reason for credit is required	سبب الائتمان مطلوب	Enter a reason in the required field
At least one item required	مطلوب عنصر واحد على الأقل	Select at least one item to credit

Important Rules

✅ You must select at least one item: CNs cannot be blank—you must credit something

✅ Credit quantity cannot exceed invoice quantity: The system prevents over-crediting

✅ CNs are automatically numbered: Sequential per invoice (CN-01, CN-02...)

✅ You cannot edit CNs after submission: Use Void + create new CN if needed

✅ CNs do not reopen invoices: The original invoice stays in its current status

Tips for Creating Credit Notes

✅ Be specific in the reason field: Clear explanations help with audits and customer relations

✅ Attach proof: Upload photos, return receipts, or emails to support the credit

✅ Double-check quantities: You can't edit after submission, so verify carefully

✅ Communicate with customers: Let them know a CN is coming before you issue it

✅ Track cumulative credits: Before issuing multiple CNs, check that total doesn't exceed invoice

✅ Use consistent references: If customer has a return/RMA number, include it

Common Questions

Q: Can I create a CN for an invoice that's still in Draft?
A: No. The invoice must be Sent or Paid. If it's still Draft, edit or delete the invoice instead.

Q: What if I need to credit an invoice that was created months ago?
A: You can issue CNs for any invoice regardless of age, as long as it's in Sent or Paid status.

Q: Can I credit only VAT, not the product amount?
A: No. CNs credit line items, which automatically include VAT based on the item's tax rate. You can't separate VAT from the product amount.

Q: What if the customer hasn't paid the original invoice yet?
A: You can still issue a CN. The CN reduces what they owe, even if they haven't paid yet.

Q: Do I need the buyer's approval to issue a CN?
A: Not in the system, but in practice, coordinate with the buyer so they know why they're receiving a credit.

Q: Can I delete a CN after creating it?
A: No. You can Void it if it's in Draft or Open status, but it remains in the system for audit purposes.

Next Steps

• Article 7.3: Understand CN statuses and ZATCA submission process
• Article 7.1: Review when to issue Credit Notes
• Article 8.4: Troubleshoot ZATCA rejections for CNs
• Article 3.3: See how CNs are used in the 3-way match

➡️ Need more help? Contact Qawafel Support.