Reverse invoicing

Because of his very sophisticated admin-system, my customer doesn’t want me to send an invoice for services rendered. Instead he wants to send me a credit note which he will pay within 14 days.
Does anyone have an idea how to best handle this in Manager. I do want to properly appear this turnover on the VAT- report.
Thanks for your ideas.

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I am not sure why your customer wants you to send him a credit note instead of an invoice. To me it sounds like he is doing something fishy.

You only issue a credit note (I believe) when you have sold something and the customer has returned it for whatever reason - you can then issue him a credit note allowing him credit to that amount. You cannot send him a credit note in as a means of asking for payment. It is meant to be used as credit against money that the customer has already paid.

You need to send him an invoice. Personally I would refuse to send a credit note and just say that you have to send him an invoice, which you can date in 14 days time.

i am not sure this would be legal in any manner. i am not really good with accounts so this is just my opinion.

without an invoice you cannot contribute to your turnover. a credit note received will be considered only as a subsequent transaction related to a previously invoiced transaction.
also, i do not find any reason for a customer to issue a credit note. because they are at the receiving end. usually they would only issue debit notes for bad products received or non-receipt of actual billed quantity.

My bet is either he does not want to pay vat or unless I’m wrong. in Malaysia he have threshold limit where once the business’ sales reach RM 500,000.00 the business entity have to registered for gst in your terms called vat.

if not. then the customer you mentioned might be government agency?

This seems to be more of a legal question than an accouting one.

Your customer’s credit note could be entered in Manager as a debit note. Debit notes do not need to be allocated against specific invoices. They will just drive Accounts payable in the opposite direction from normal. But a negative Accounts payable balance is equivalent to a positive Accounts receivable balance. As long as you post to the correct accounts, I think your tax reporting should come out correctly. (But I did not test this.)

The problem I see is that you would be violating EU (and, I suspect, Netherlands) tax regulations. You are required by law to issue tax invoices assessing VAT. The law does not say you can receive credit notes that you enter as debit notes, causing everything to be backwards from accepted accounting practices, and justify it all to the auditors by explaining that things come out the same way in the end.

With all your experience in the field, @Hennie, if you have not seen this done before, there must be a reason. Just because your customer’s admin-system is sophisticated (to them) doesn’t mean it is correct. I would ask them for an explanation of how and why they believe the approach meets tax regulations and accounting standards.

Not sure where you are but it sounds a like you are talking along the lines of a ‘Recipient Created Tax Invoice’ which is an agreement I have with a couple of national companies I do warranty work for. Google may help if that is the case.

I don’t think so, @VACUUMDOG. Recipient created invoices are still invoices. They differ only because two companies have agreed the seller will consider an invoice created by the buyer as though it was one of their own. These are really matters of who can most conveniently keep track of deliveries and consumption of goods. While I suppose they could be used for services, I am not personally aware of any examples. Regardless, though, they don’t involve credit notes.

Create the invoice so Manager is correct and print it.
Replace the word Invoice with Credit Note and send it.

However, an invoice is a demand for payment, receiving a credit note is not a demand for payment.
Does sophisticated admin-system alternatively mean how to avoid a demand for payment.
I would be asking for payment first before sending the “credit note”.

Sending a credit note, regardless of whether it is just a relabeled sales invoice, would be wrong, in my opinion. No matter what the sophisticated admin-system customer believes, a credit note is well understood in accounting to record a reduction of the amount owed by a customer to a supplier. Circulating misnamed transaction forms will get you in trouble eventually.

Besides, @Hennie said the customer wanted to issue the credit note to him. But none of this makes sense anyway.

Hello everybody,

Some of you understood me wrong. My customer is sending me a creditnote instead of me sending him an invoice. In Australia they call it a “Recipient Created Tax Invoice”. I’m living in the Netherlands and this is what EU-law says about this phenomenon:

EU regulations concerning invoices

A. Obligation to issue invoice

Every taxable person shall ensure that an invoice, or other document serving as invoice, is issued, either by himself or by a third party, in his name and on his behalf, in respect of goods and services which he has supplied or rendered to another taxable person or to a non-taxable legal person.
_ _
Every taxable person shall likewise ensure that an invoice, or other document serving as invoice, is issued, either by himself or by a third party, in his name and on his behalf, in respect of any payment on account made to him before any supplies of goods and in respect of any payment on account made to him by another taxable person or by a non-taxable legal person before the provision of services is completed.
_ _
All credit and debit notes are to be treated as invoices and must comply with the same conditions.
_ _
Summary invoices may be drawn up, on condition that this is done at least once a month.
_ _
Invoices may be drawn up in the name of a taxable person by a third party or by his customer, on condition that there is at the outset an explicit agreement between the two parties, which may be referred to if the tax administration so requests, and on condition that an arrangement exists for the explicit or implicit acceptance of each invoice by the
taxable person performing the operation.

I will test your suggestion to test it with a debit-note and see if the tax-report comes out correctly. Your explanations sounds very logic. It is the first time in my very long career that I run against this phenomenon.

To all other repliers, thanks for your contributions

Thanks for the quotation, @Hennie. My interpretation would be that your customer’s issuance of a credit note would not meet the requirements because it would be issued in the name of your customer, not your name as the taxable person. The rule says “…in his name and on his behalf…” [emphasis added], not “…or on his behalf…”

So while a credit note could be considered an invoice under the rules, it still must meet the foregoing requirements. And I really think the tax authority would interpret the reference to credit notes in the traditional sense, that is, one generated by a supplier to reduce amounts owed by a customer, not as a reverse sales invoice.

The invoice drawn up by a customer referred to in the final paragraph still has to meet the requirements for invoices. That approach is, in fact, what @VACUUMDOG referred to as a recipient created tax invoice.

I repeat my advice to ask the customer how the credit note approach satisfies the rules. And I would ask for citations to court rulings or opinions from the tax authority, not hand-waving from someone in their organization looking for a shortcut.

“Recipient Created Tax Invoice” is widely used in the publishing and agriculture industries.
This is where the quantity and/or the value of a sale is unknown until a future date, in that, the Customer knows the quantity and/or the value sold before the Supplier does because of the consignment nature of the transaction.

@Hennie You may be able to adapt what I do.
First, I had to set up an agreement/contract with my supplier/customer.

I send in a warranty claim form which lists parts used and work performed etc. to the company. This is totally separate from Manager.
They then issue me with an itemised RCTI.
I then enter the details of the RCTI into an invoice in Manager and attach a copy of it to the invoice. This invoice is usually paid within 14 days of them issuing the RCTI.
This satisfies all my obligations to the Australian Tax Office.
Hope this helps.

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Thanks for your help.
When I create a debet-note, in the Dutch VAT report the VAT shows up as a negative VAT-paid amount. Neither does it show up in the sales section. So this doesn’t work. I think the best solution is to issue my own invoice and attach the received creditnote as proof to that invoice.

Kind regards,


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That was going to be my next suggestion. Similar situations apply when customers require submission of “invoice” information via their own web portals. If you want to be paid, you must submit via their systems. But if you want to keep your accounts, you must enter sales invoices that only reside inside your database.

I am a little confused as to why any customer would have a problem receiving an invoice from a supplier. They dont have to put your invoice on their system, just receive it in their email. They can issue you with a credit note - from them to you, but there is nothing to stop you from creating an invoice and sending it to them as well. Well at least ways, that’s the way that I understand it.

When they send you a credit note create an invoice using the credit note number as an ‘Order Number’. No need to email/send the invoice to the customer.
When they pay just ener it aginst the invoice you created.
That way you have a reference to each of the transactions and can create a statement for your own benefit that lets you know which Credit Notes are outstanding and which are paid.
Works for me.

Because under the above circumstances, the supplier doesn’t know what to invoice the customer until the customer tells them the sales.

EG: a magazine publisher prints 100,000 copies of an edition and gives them to the distributor who delivers them to the newsagents. Newsagents don’t get invoiced for the number they receive, they only pay for what they sell.

So the Newsagent (Customer) tell the Distributer (Supplier) how many have been sold and pays the Distributer, hence the “Recipient (Newsagent) Created Tax Invoice”. The Distributer (Customer) tells the Publisher (Supplier) how many have been sold and pays the Publisher, hence the “Recipient (Distributor) Created Tax Invoice”.

The Publisher doesn’t take up the print run of 100,000 as sales. The same sales process applies to the market garden produce, livestock and other consignment based industries.

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Please read in connection with my below topic.

Are you asking a question, @mustagab? There does not seem to be any connection between reverse invoicing and the other topic.