Credit notes and returns in Bahrain: three decimals and VAT on the credit

Why a credit note and not a rewrite

Once an invoice is issued, the customer has it, your accountant has it and it sits in your totals. If you quietly change it, those copies no longer agree. A credit note solves this: the original stays as it was and the credit note shows what changed and when.

It also gives a return a visible place in the story. Anyone reading the file later can see that goods came back on a certain day for a certain reason, instead of wondering why a total moved.

Link the credit note to the invoice

A credit note should carry its own sequential number and point to the number of the invoice it corrects. Commentary on VAT credit notes also mentions a reason for the credit. When the link is there, the customer can match the credit to the right invoice, and your own receivables show the invoice reduced rather than a stray negative amount.

• The number of the original invoice, printed on the credit note.
• The lines and quantities being credited, not just a lump sum.
• A short reason such as returned goods, wrong price or short delivery.
• The date of the credit note, kept in sequence with the others.

Three decimals: small fils, real differences

The Bahraini dinar is divided into one thousand fils, so amounts are written with three decimals, for example BHD 1.250. A system or spreadsheet set to two decimals will round every line, and on a credit note that rounding shows up as a few fils that do not match the invoice.

Keep three decimals everywhere: on lines, on the VAT amount and on the totals. Round in the same way on the credit note as on the invoice, so that crediting a whole invoice brings the balance back to exactly nothing.

VAT follows the credit

As commentary describes it, when you credit a sale on which 10% VAT was charged, the VAT on the credited amount is reduced as well, and the credit note shows the net amount, the VAT and the total being reversed. The customer then adjusts their own records the same way.

How a credit note is treated in your VAT return, and any time limits that apply to it, are for the National Bureau for Revenue to confirm. Ask the NBR or your accountant before you rely on this article for anything that affects a return.

Where TAQNIX ERP fits

TAQNIX ERP runs on a Mac and opens in the browser. You issue a credit note from the invoice it corrects, with its own sequential number, 10% VAT per line, amounts in dinars to three decimals, and a document in Arabic and English.

It does not file VAT returns and it is not an accredited e-invoicing provider. It keeps the invoice and the credit together so that your accountant has a clean trail.