Issue a VAT refund


You may sometimes need to issue VAT refunds. This could happen when a customer provides their VAT number after VAT is charged and the transaction is subject to a reverse charge.

A common mistake many companies make is issuing a VAT-only refund, which is technically not permitted in most VAT countries. In this scenario, a company makes a manual adjustment to reverse only the VAT amount on an invoice in their billing system, and the original transaction remains unchanged. Because a VAT only refund is not a technically permissible process in most VAT countries, these manual adjustments do not result in an update to Anrok since an invoice is not created or adjusted. This can lead to incorrect VAT returns, potential penalties, and reconciliation differences between your billing system and your Anrok instance.

The proper procedure to issue a VAT refund is:

  1. Issue a credit note (refund) for the entire transaction amount (sale + VAT) in your billing system. This refund transaction is sent to your Anrok instance and effectively reverses the original transaction with incorrect VAT. Anrok’s intelligent transaction association system allows you to see when new transactions are refunds of a prior transaction.
  2. Reissue a new invoice with the correct VAT amount in your billing system and this new transaction will be sent to your Anrok instance as normal. 

Credit for the VAT originally charged will be applied to the filing period in which the credit note is issued. If the credit relates to VAT that was remitted in a previous return period, you will receive credit on your current return.

These steps will ensure:

  • The VAT refund is processed in your billing system and in Anrok. 
  • Required tax documents (credit note + invoice) are created.
  • Tax data is correct for VAT filings.

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