It has happened to everyone that an invoice was created that had an error. What should should you do with this invoice now? Do you have to cancel it? Does the customer need a new invoice or just an invoice correction?
Essentially, every customer has the right to receive a corrected invoice. However, how do you correct an incorrect invoice correctly?
Not every typing error must necessarily be corrected. However, if the error involves the required information on an invoice in accordance with §14 Paragraph 2 No. 2 of the German Value Added Tax Act (VATA), it is necessary to correct the incorrect document. However, do you have to create a credit memo, a cancellation invoice or an invoice correction?
For the purpose of correction, a cancellation invoice can be created that clears the full amount of the invoice. The cancellation invoice has the same invoice number and can therefore be clearly assigned when accounting.
Although the document has already been booked, the customer wants a correction. In this case, a credit memo would be created to refund any payment made to the customer. A new invoice would then be issued with a new invoice number.
A legislative change in 2013 has caused some confusion here, so it was unclear whether one of the terms used for the amending documents could lead to the invoices, or the corrected invoice, no longer being eligible for a tax deduction. However, there is a letter of implementation from the Federal Ministry of Finance dated 25.10.2013 on this issue, in which the following is written:
„(…) Die im allgemeinen Sprachgebrauch bezeichnete Stornierung oder Korrektur der ursprünglichen Rechnung als Gutschrift (sog. kaufmännische Gutschrift) ist keine Gutschrift im umsatzsteuerrechtlichen Sinne. Wird in einem solchen Dokument der Begriff „Gutschrift“ verwendet, obwohl keine Gutschrift im umsatzsteuerrechtlichen Sinne nach §14 Abs. 2 Satz 2 UStG vorliegt, ist dies weiterhin umsatzsteuerrechtlich unbeachtlich. Die Bezeichnung „Gutschrift“ führt allein nicht zur Anwendung des §14c UStG. (…)“
Therefore, the document type "credit memo" can also be renamed "invoice correction", "cancellation invoice" or even "invoice modification", but it is only a recommendation and not an obligation to comply with.
You also do not need to worry about the sign of the credit notes. In our opinion, the term "credit memo" is sufficient to indicate that the turnover is negative. There are no legal requirements here.