Credit notes & refunds

A credit note (in Estonian, kreeditarve) corrects an invoice you have already finalised — goods came back, the price was reduced, part of a job was dropped. It is a document of its own, with its own number, that reduces what the original invoice charged. When the customer had already paid, a credit note leaves them owed money back, and the refund is recorded against the same invoice.

Credit notes are issued from the invoice they correct, under Sales → Invoices.

Credit note or cancellation?

Both undo an invoice, but they are not interchangeable.

Cancelling is the quick fix for an invoice sent in error and not yet paid or reported. Once money has changed hands, only part of the invoice needs correcting, or the month's KMD (the Estonian VAT return) has been filed, a credit note is the tool.

Issuing a credit note

The customer, currency and exchange rate always follow the invoice and cannot be changed on the credit note. A credit note for a foreign-currency invoice uses the invoice's own exchange rate. Crediting it in full reverses exactly the euro amount the invoice booked, and when an invoice is settled partly by payments and partly by credit notes, together they clear exactly that amount too — no stray cent is left on the receivable. If you finalise a credit note while a bank payment on the same foreign-currency invoice is still being recorded, Arvello asks you to wait a minute and finalise again: the credit note's euro amount is worked out after that payment, so it waits until the payment is booked.

What a credit note does

• It takes the next number in the same sequence as your invoices (INV-000124 after INV-000123 with the default prefix), so your numbering has no gaps and no separate series to manage.
• The PDF is titled "Credit note" in the contact's invoice language and names the invoice it credits, with that invoice's date, in place of a due date — nothing is payable on a credit note.
• The books are reversed. Finalising posts the mirror image of the invoice's entries for the credited amount: revenue, output VAT and the amount receivable all go down.
• The invoice is updated. A partly credited invoice shows Partly credited and a lower outstanding balance; once credit notes cover its whole total it shows Credited. The credit notes are listed on the invoice, and each credit note links back to it.

Limits Arvello enforces

A credit note can only give back what the invoice charged. It must be a reduction on every line, it cannot exceed what is left of the invoice after earlier credit notes, and the same applies at each VAT rate separately — so a sale invoiced without VAT can never be credited with VAT. The rates are the invoice's own: an invoice issued at 22% before the rate changed to 24% in July 2025 is still credited at 22%. See VAT rates & tax codes.

If your company has since left the VAT register, a credit note cannot reverse VAT the invoice charged while you were registered. The VAT Act doesn't set out how a deregistered company reflects such a credit note, so Arvello stops and points you to EMTA (the Tax and Customs Board) to confirm how to handle it. Invoices with no VAT on them (0% or exempt) can still be credited.

A finalised credit note cannot be cancelled or edited, and neither can an invoice that has credit notes against it. If a credit note was issued by mistake, the fix is a new invoice for the amount.

Credit notes on the VAT return

Which month's VAT return a credit note lands on follows the VAT Act (KMS § 29 lg 7), and Arvello decides it when you finalise the note:

• The invoice's month has not been filed yet — the credit note goes on that month's return, which then simply shows the reduced sales. A January invoice credited on 5 February, with January's KMD still open (its deadline is 20 February), reduces January's figures; nothing about it is reported in February.
• The invoice's month has already been filed (its return is submitted) — the credit note is reported in the month it is dated, and the filed return stays as it was. No amendment is needed. The same applies to months Arvello does not file for you — months before your KMD filing start month, or all months if you file KMD outside Arvello.
• The invoice's month is approved but not yet submitted — the credit note still belongs to that month, and because an approved month is locked, Arvello will not finalise the note until you either reopen that return (the note is then included in it) or submit it (the note is then reported in its own month).

Either way its amounts reduce that month's taxable sales at the rate of the credited invoice. The decision is made once, when the note is finalised, and does not change if you later reopen or amend the invoice's return. The credit note's own accounting entries are always dated the credit note.

On the KMD INF annex (the invoice-level list of sales to Estonian businesses), the credit note appears as its own row — on the same return as its KMD figures — with its figures shown with a minus sign. The EUR 1,000 threshold per customer is counted separately for invoices and for credit notes: a customer is listed when either their invoices or their credit notes in the month reach it, and then all of that month's documents for them are listed. More in Preparing a KMD return.

Refunds

When a customer has paid and a credit note is issued afterwards — or they paid more than the invoice — the invoice shows the difference as Owed to customer. Paying it back is recorded as a refund against that invoice, which lowers its paid amount and posts the cash entry. A refund can't be dated before the payment or credit note it pays back: on its date, the customer must already have been owed that much.

Refunding by bank transfer

A refund paid from your bank account shows up in Banking as an outgoing transaction. On the reconciliation screen, choose Client Refund for that transaction and pick the invoice it refunds — Arvello lists every invoice that owes a customer money back, with the amount. The refund is booked against the bank account the money left, in one step.

Refunding in cash

For a cash refund, open the invoice's Payments tab and choose Record refund. Enter the amount (pre-filled with what is owed back) and the date. Refunds recorded here are posted to the cash account; a bank refund is recorded from Banking instead, so it is never booked twice. If you entered opening balances, the refund's date must fall after their date: they already include everything up to it.

Refunds appear on the invoice's Payments tab and on Sales → Client Payments, marked as refunds with a negative amount.

Reversing a refund

A refund recorded by mistake is reversed from the invoice's Payments tab with Reverse refund, which puts the amount back on the invoice's paid total. A bank refund is undone with Undo Match on its transaction. A payment a refund depends on cannot be reversed until the refund is — otherwise the invoice would record giving back money it no longer shows receiving by the refund's date. This holds even when the invoice has other payments: a refund paid out of an early overpayment still depends on that payment, though a later one would cover the total.

Common questions

Can I credit an invoice that is already paid?

Yes. Credit it as usual; the invoice keeps its Paid status and shows how much is owed back to the customer, which you then refund. If the credit note covers the whole invoice, its status becomes Credited.

Can I credit part of an invoice more than once?

Yes. Each credit note is limited to what is left, so you can credit an invoice in several steps — for example as goods come back in batches.

The customer is paying the reduced amount — what happens?

Arvello treats the credited part as settled, so a payment of the reduced amount clears the invoice. Bank matching recognises the reduced amount as the outstanding balance.

Can I refund a foreign-currency invoice?

Credit notes work for any currency. Refunds on foreign-currency invoices cannot be recorded in Arvello yet — both the cash and the bank route are for euro invoices.