A credit note is a document issued by a seller/supplier to a buyer/customer indicating that he has received goods or received intimation of goods returned by the buyer (sales return). The relevance occurs as there is a change in taxable supply which further leads to deduction in output vat, a tax credit note should be issued. The following are some scenarios:-
1) A supply already made has been returned, rejected, or cancelled by the customer/client.
2) Under bad debts relief provision as per Bahrain VAT law, an adjustment has been made by the supplier on output VAT.
3) The value of supply is amended in any other case (Ex:- additional discount after-sales).
A debit note is a document issued by a buyer/customer to a seller/supplier specifying the details of goods returned by him (purchase returns). If there is a change in supply thereby effects in an increased output VAT liability, a debit note must be issued (Ex:- variation in contract works).
An important point to be noted is that a credit/debit note must be issued no later than by the 15th day of the month following the month during which the adjustment was done.
Another point is that retention will become taxable only when a tax invoice has been raised for the same.
A tax invoice that has been issued previously may need to be revised due to changes in the value of the supply due to various reasons. In that case, the VAT due on such tax invoice may be overstated or understated and a requirement arises that it should be amended, the taxable person must make adjustments by issuing a valid credit note or debit note to rectify the transaction.
Below are the requirements for issuing a valid credit/debit note as per Bahrain VAT law
1) The label “Credit Note” or “Debit Note”, clearly displayed on the document.
2) The name, full address as per the VAT registration certificate (Note:- P.O Box is not considered as full address) and Tax Registration Number (TRN) of the supplier.
3) The name and address of the customer. as per VAT registration certificate (Note:- P.O Box is not considered as full address)
4) The date of issue of the debit note or credit note.
5) The sequential number of the credit note or debit note.
6) The sequential number of the original tax invoice which is being adjusted.
7) The adjusted value of the supply and the adjusted amount of VAT in Bahraini Dinars.
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