Correction of the taxable amount

What it means

Correction of the taxable amount is the VAT Act procedure for changing an amount and a tax already declared. It is triggered by a cancelled supply, returned goods or a returned advance, a discount given after the tax point, or a later price increase.

The original tax period is not rewritten. The difference is declared forward, in the period the corrective document belongs to, and the customer has to mirror it by adjusting the input VAT deduction.

A correction of the taxable amount responds to something that happened after the supply, not to a mistake in the original document. Where the tax was wrong from the start, for example at the wrong rate, it is not corrected forward but for the original period by an amended tax return, and the difference between the two routes changes when the tax is topped up and with how much interest.

How it works in practice

The supplier issues a corrective invoice referring to the original document and reports the difference in the return for the period it was issued. The customer adjusts in the period the document arrived, so the two sides land in different months.

Both of them also show it in the control statement, in the part reserved for corrections. An irrecoverable receivable has a regime of its own: on an unpaid supply the supplier may reduce the taxable amount once the statutory conditions are met.

A distributor grants customers an annual volume bonus. Instead of dozens of documents, one credit note is enough if it identifies unambiguously which supplies the discount relates to. For our clients we check that suppliers’ credit notes arrive with that reference, because without it the corrected deduction cannot be matched in the control statement.

What to watch out for

Customers book a credit note when it finally reaches the accounts department, although the deduction must be adjusted in the period the document reached them. If the correction slips into a later return, the deduction for the original period stays too high, matching the control statements exposes the gap, and late-payment interest is added to the assessment.

Instead of a corrective invoice the original is cancelled and a new one issued with a new number and a new date. The tax moves into a different VAT tax period, the control statement shows two documents for the same supply, and a customer who already deducted from the original invoice deducts a second time.