Credit note in Estonia: example, rules and how to issue one correctly

What is a credit note?

A credit note is a document that reduces the amount of an earlier invoice or cancels it entirely. In Estonian business practice you may also see the term kreeditarve. The key point is that the document must be linked to a specific original invoice.

A credit note does not erase the original invoice. The original invoice and the related credit note remain in the records together, so the correction can be followed later by management, accountants and the Tax and Customs Board.

When should you issue a credit note?

• the customer returns goods;
• the order or service is cancelled;
• the price is reduced after the invoice was issued;
• the original invoice contains the wrong quantity, price or amount;
• a later discount is granted;
• part of the invoiced work was not completed;
• the original invoice needs to be cancelled in full.

In practice there are two common versions: a full credit note, which reverses the whole invoice, and a partial credit note, which reduces only the specific line, quantity or amount that needs correction.

What information should the document include?

1. the document title, for example Credit Note or Kreeditarve;
2. a unique document number and the issue date;
3. the seller’s name, address, registry code and, where relevant, VAT number;
4. the customer’s name and address;
5. the number of the original invoice and ideally its date;
6. the reason for the correction;
7. the description, quantity and price of the goods or services being reduced;
8. the taxable amount, VAT rate and VAT amount;
9. the total amount of the credit note.

Example credit note

If the original invoice has already been paid, the seller will usually need to refund the corresponding amount to the customer, unless both parties agree to keep it as an advance payment for a later invoice.

How to create a credit note in Arveteha

In Arveteha, the most logical way to create a credit note is from the original sales invoice. This keeps the relationship between the two documents intact and makes it clear in the PDF which earlier invoice is being corrected.

1. Open the Arveteha cabinet and go to Arved / Invoices in the left-hand menu.
2. Find the original invoice that needs to be reduced or cancelled.
3. Open the invoice view or edit page.
4. From the actions menu choose Create credit note.
5. The system should carry over the seller, customer, invoice lines and reference to the original invoice.
6. Decide whether you need a full credit note or a partial credit note.
7. If the whole invoice must be reversed, keep all lines negative or reduce the full total.
8. If only part of the invoice changes, adjust only the relevant line or amount.
9. Add a short explanation such as goods return, service reduction or price correction.
10. Save the document, review the figures, confirm it and download the PDF.

Which VAT rate should you use?

A credit note corrects the transaction shown on the original invoice. That is why the credit note should generally use the same VAT rate as the original invoice, rather than simply the rate in force on the date of the correction.

For example, if the original invoice used a 20%, 22% or 24% VAT rate, the credit note linked to that invoice should normally reflect the same rate for the corrected amount. Estonia’s standard VAT rate is 24% from 1 July 2025, but older invoices may still have been issued using earlier rates.

According to MTA guidance for the KMD INF form, credit note values are usually reported with a minus sign, and earlier VAT rates can still matter depending on the original transaction.

How is it reflected in accounting and VAT reporting?

If the VAT return for the original transaction period has already been filed, the seller and the buyer usually reflect the change connected to the cancelled transaction or reduced price in the tax period when the credit note is issued.

The document should always be tied to a specific original invoice. In VAT reporting, the numerical data of the credit note is typically shown with minus values.

Common mistakes when issuing a credit note

1. not referring to the original invoice;
2. reusing the original invoice number;
3. applying the wrong VAT rate;
4. failing to show the reduced amounts clearly as negative;
5. not stating the reason for the correction;
6. deleting the original invoice and losing the document trail.

Frequently asked questions

Below are the questions businesses ask most often when they need to correct an earlier invoice.

Official sources

• Estonian Tax and Customs Board (MTA): information included in invoices
• MTA: VAT accounting and invoices
• MTA: standard VAT rate
• Value-Added Tax Act (English translation)

This article is for general information. For a complex real-life correction, especially where returns, partial deliveries or filed VAT returns are involved, it is sensible to confirm the treatment with an accountant or tax adviser.