What a credit note is — and how to issue one correctly in Kenya
A credit note reduces what a customer owes you. You issue it when something already invoiced needs to be reversed or reduced — goods returned, an overcharge, a post-sale discount, a cancelled order, or damaged items. It is the opposite of an invoice: instead of adding to the customer’s balance, it takes away.
The golden rule is that a credit note always references the original invoice — “against invoice X, credit this amount.” That link keeps both your books and the customer’s straight, and it is what KRA expects: for VAT-registered businesses a credit note adjusts the output VAT you originally charged, so it must tie back to the invoice it corrects. Under eTIMS, credit notes are issued electronically against the original transaction.
Never fix an over-invoice by quietly deleting or editing the original invoice — especially once it is in eTIMS. Issue a credit note. It leaves a clean, auditable trail: the original stands, and the credit note formally reduces it.
What a proper credit note includes
- ◆Your business name, contacts and KRA PIN, clearly marked “Credit note”
- ◆A credit note number and the date
- ◆The original invoice number it is issued against
- ◆The customer’s name
- ◆The item(s) being credited, with quantity and value
- ◆The VAT adjustment (16% if applicable) and the total credited
- ◆The reason — return, overcharge, discount or cancellation
Common mistakes to avoid
- ✕Not referencing the original invoice — the single most important field
- ✕Editing or deleting the original invoice instead of issuing a credit note
- ✕Forgetting to reverse the VAT, so your VAT return overstates what you owe
- ✕No reason stated, leaving your books (and an auditor) guessing
Questions
When should I issue a credit note?
Whenever an already-issued invoice needs to be reduced: the customer returned goods, you overcharged, you agreed a discount after invoicing, the order was cancelled, or items were damaged. It formally lowers the customer’s balance without touching the original invoice.
Credit note vs debit note — what’s the difference?
A credit note (issued by the seller) reduces what the buyer owes. A debit note (usually issued by the buyer, or by a seller to raise a charge) increases the amount owed — for example when goods were under-invoiced. Same idea, opposite direction.
Does a credit note affect my VAT?
Yes, if you are VAT-registered. The credit note reverses the VAT you charged on the original invoice, reducing your output VAT for that period. That is why it must reference the original invoice and go through eTIMS as the invoice did.
Can I just cancel or edit the original invoice instead?
No — especially once it has been issued through eTIMS. The correct, auditable way to reduce an invoice is a credit note that references it. Editing or deleting the original breaks your trail and your VAT records.
Does a credit note mean I’m refunding cash?
Not necessarily. It reduces the customer’s balance. If they have already paid, you can refund the difference or leave it as a credit against their next purchase — the credit note documents either way.
The credit note generator is free to build and preview. Downloading a clean PDF without the small watermark is KES 100 in Kenya — a one-off, valid for a few hours so you can make several — and free everywhere else. No account needed; your business details are saved on your own device.