An accounting note (debit note) is a document used in situations where a VAT invoice is not issued because the transaction does not constitute a supply of goods or services within the meaning of VAT regulations. In practice, it serves as a settlement and evidence document, and its correct use is also important for tax purposes, especially when there is a dispute as to whether a given payment is subject to VAT.
In this article, we discuss what a debit note is, when it should be issued, how to prepare it correctly, and how accounting notes and VAT relate to each other in typical settlement scenarios. We also explain how to understand the accounting of an accounting note in practice – both in the context of accounting books and specific accounting accounts. In addition, we address issues related to KSeF and the digitization of documents, because even though an accounting note is not an invoice, it should function in a consistent, electronic document flow within the company.
Table of Contents
- Debit Note – Definition and Documentation Basis
- When to Issue a Debit Note? The Most Common Cases
- Debit Note and VAT – When Is It Correct and When Is It Risky?
- Table 1. Debit Note or Invoice – Quick Decision Guide
- Re-invoicing vs. Debit Note – A Common Mistake
- Debit Note – Template: What Should It Contain?
- Table 2. Minimum “Checklist” for a Debit Note
- Debit Note Accounting – How Should a Debit Note Be Recorded in the Accounting Books?
- KSeF and Digitisation: Where Does a Debit Note Fit in E-Invoicing?
- Common Mistakes (And How to Avoid Them)
- Accounting Note – Summary
- FAQ About Accounting Note
Debit Note – Definition and Documentation Basis
Tax regulations do not contain a single statutory definition of a debit note. However, this does not mean that a debit note exists “outside the law.” In practice, a debit note is treated as an accounting document that records a business transaction, which:
- must be recognised in the accounting books, and
- is not documented by a VAT invoice (because it does not constitute a VAT sale).
In practice, a debit note most often concerns settlements between contracting parties. It is usually treated as an external accounting record (either received or issued to another party).
Accounting Records and Debit Notes (Accounting note)
From a bookkeeping perspective, the general requirements for accounting records apply. A document should be reliable, complete, and free of calculation errors. It should include details identifying the parties and the transaction.
When to Issue a Debit Note? The Most Common Cases
As a rule, a debit note is used where there are no grounds for issuing a VAT invoice. This means there is no reciprocal performance. There is no link between the payment and a supply or service, or the payment is strictly compensatory/penal in nature.
The most common situations include:
- Contractual penalties (e.g., for delay, improper performance, or withdrawal from a contract);
- Compensation. For example, for destruction of property or transport damage, provided it is not remuneration for a service.;
- Interest (e.g., statutory or contractual interest for late payment);
- Other penal or compensatory payments that do not constitute remuneration for a service.
In practice, the question “when to issue a debit note” requires careful analysis. It is necessary to determine the nature of the payment. One must assess whether it is remuneration for a VAT-taxable activity, e.g. a supply of goods or services or compensation/ sanction.
Contractual Penalties – Debit Note in Practice
A contractual penalty (within the meaning of the Civil Code) generally has a punitive function. Its goal is to encourage proper performance of an obligation. In its classic form, it is not payment for a service. Therefore, it is often considered outside the scope of VAT. In such cases, a debit note is typically used as the settlement document.
Note: The practice and case law emphasise that the absence of VAT is not determined only by the name (“penalty” or “compensation”). What matters is the substance of the payment. It must be assessed whether the recipient performs any service for the payer. This may include, e.g. tolerating a certain situation or refraining from taking action. It is also necessary to examine whether there is a direct link between the payment and that service.
Interest – Debit Note
Interest for late payment generally serves as compensation for delayed settlement. It is not a separate service. Therefore, in business practice, interest is often documented by a debit note. The note should describe the calculation basis, the period, and the interest rate applied.
Debit Note and VAT – When Is It Correct and When Is It Risky?
From a VAT perspective, the key issue is whether the payment:
- is linked to a VAT-taxable transaction (supply/service), or
- constitutes compensation or a penalty without reciprocal performance.
If a service is provided, the situation must be accordingly considered. For example, a “termination fee” may in practice constitute payment for consent to termination of the contract. It may also be remuneration for tolerating a specific situation. In such cases, a debit note alone may prove insufficient. The authority may require the transaction to be documented with a VAT invoice.
Table 1. Debit Note or Invoice – Quick Decision Guide
| Event | Is it usually subject to VAT? | Typical document | Practical risk |
| Contractual penalty for delay / improper performance | Usually no | Debit note | Risk of a “hidden service” – analysis of the contract and actual performance required |
| Compensation without reciprocal performance | Usually no | Debit note | Dispute over the link to a service (e.g. a “termination fee”) |
| Interest for late payment | Usually no | Debit note | Incorrect calculation/period, lack of contractual/statutory basis |
| Re-invoicing of costs (e.g. utilities) | Usually yes | VAT invoice (re-invoice) | Attempt to document a re-invoice with a debit note |
| Price adjustment for goods/services (in plus/in minus) | Yes (for VAT purposes) | Corrective invoice | Replacing a corrective invoice with a debit note |
Re-invoicing vs. Debit Note – A Common Mistake
Two mechanisms are often confused:
- re-invoicing (transferring the cost of a service or goods), and
- settlements outside VAT (e.g., penalties or compensations).
If an entity “passes on” the cost of a service, such as energy, rent, or transport, to another party, the situation must be carefully assessed. If the payment is, in fact, payment for a service within the meaning of VAT, the proper document is a VAT invoice. A debit note is usually not appropriate in this case. For this reason, the phrase “re-invoicing vs. debit note” should always trigger analysis. It is necessary to determine whether the transaction involves a service or compensation.
Debit Note – Template: What Should It Contain?
Although there is no single statutory template, good practice suggests that a debit note should include:
- document identification (type and number);
- identification of the parties (name, address, tax ID if applicable);
- description of the transaction and its basis (contract, order, report, event, date);
- value and currency;
- date of issue and date of the event (if different);
- payment deadline and bank account number;
- signature or approval in the adopted workflow (paper or electronic).
It is also advisable to include:
- a statement that the payment is not subject to VAT (if applicable);
- information about attachments (e.g., damage report, interest calculation, notice of violation).
Table 2. Minimum “Checklist” for a Debit Note
| Element | Why is it important? |
| Number and issue date | Document identification and continuity of numbering |
| Parties (entity details) | Evidence of settlement and possibility of debt recovery |
| Description of the event + legal/contractual basis | Minimises the risk of dispute (why and for what the charge is made) |
| Amount and currency | Clarity of settlement and avoidance of calculation errors |
| Date of the event (if different) | Important for interest, penalties, and contractual periods |
| Payment deadline and bank account | Practical enforceability and proof of payment request |
| Attachments (calculations, reports, minutes) | Strengthens the documentation of the basis for the charge |
Debit Note Accounting – How Should a Debit Note Be Recorded in the Accounting Books?
The method of recognition depends on the nature of the debit note. It must be determined whether the note documents an expense (received debit note) or revenue (issued debit note). It also depends on the nature of the underlying event. Contractual penalties and compensation are most often recorded under other operating expenses or other operating income accounts.
Example entries (typical approach):
- Contractual penalty charged to the entity (received debit note):
- Debit 76-1 “Other operating expenses”.
- Credit 24 “Other receivables and payables” or 21 “Payables to suppliers” (depending on the chart of accounts).
- Contractual penalty charged to a counterparty (issued debit note):
- Debit 21/24 “Receivables and payables”.
- Credit 76-0 “Other operating income”.
If there is a risk that the amount will not be paid, the company may recognise an impairment of a receivable. This is possible if certain conditions are met.
KSeF and Digitisation: Where Does a Debit Note Fit in E-Invoicing?
The introduction of the mandatory National e-Invoicing System (KSeF) changes how companies manage documents. Businesses now review not only invoices but also contracts, reports, debit notes, and payment demands.
There is a key distinction:
- National e-Invoicing System (KSeF) applies to structured VAT invoices only.
- A debit note is not a VAT invoice. Therefore, it usually stays outside KSeF. Companies handle it in their internal or contractual document workflow.
From a practical perspective, it is worth implementing a consistent model within the company.
- Use electronic circulation for debit notes (PDF plus digital signature or workflow approval).
- Link the debit note to source documents (contract, report, correspondence).
- Define archiving rules (storage period, audit, access for accounting).
- Map settlements. Keep VAT invoices in KSeF. Keep debit notes outside KSeF, but store them in the same case or contractor repository.
What to Include in an Internal Procedure?
A good internal policy should define:
- who can calculate penalties or interest and issue debit notes;
- what documents are required (minimum: contract, calculation, proof of violation);
- how you approve the debit note (e.g., lawyer, procurement, management);
- how you handle debt collection (deadlines, payment demand, set-off, lawsuit).
Common Mistakes (And How to Avoid Them)
- replacing a VAT invoice with a debit note when a service exists (e.g., re-invoicing);
- failing to indicate the legal or contractual basis for the charge;
- missing calculations, especially for interest, or using the wrong interest rate;
- unclear description of the event, which weakens enforcement in disputes;
- poor document circulation and archiving;
- ignoring tax consequences for the recipient (cost vs. income and timing of recognition).
Accounting Note – Summary
An accounting note is a useful settlement tool. However, you should use it only in the correct cases. It works best for events outside VAT, such as compensation, contractual penalties, or interest. In practice, two main issues are crucial. The first is correct VAT classification. Check whether the payment relates to a taxable service. The second is the proper documentation of the basis for the charge. It is also essential to ensure correct recognition in the accounting records.
In the era of e-invoicing and digitalisation, treat debit notes as part of a unified document system. Keep complience standard even if they remain outside the e-invoicing system.
Do You Need Help with a Debit Note?
Not sure whether to issue a debit note or a VAT invoice? Consult before you issue the document. A professional firm can review your contract and the events. We can assess VAT risk and prepare a compliant debit note template. We can also support debt recovery. Contact us for professional support.
FAQ About Accounting Note
Debit Note and VAT – Does a Debit Note Always Mean “Outside VAT”?
No. The real nature of the payment decides on VAT recognition. The document name does not matter. If the payment is remuneration for a service, VAT may apply.
When Should You Issue a Debit Note for a Contractual Penalty?
Issue it after the contractual condition occurs, for example, a delay. Calculate the penalty according to the contract. Document the violation, for example, with a report.
Re-Invoicing vs. Debit Note – Can You Re-Invoice with a Debit Note?
Usually not. Re-invoicing concerns goods or services. You should document it with a VAT invoice.
Debit Note Template – Does It Require a Signature?
There is no single statutory form of signature. However, you must be able to identify the issuer. The company should approve the note within its paper or electronic workflow.
Is a Debit Note Included in the National e-Invoicing System (KSeF)?
No, as a rule. KSeF applies to structured VAT invoices. A debit note is not an invoice. Companies usually handle it outside the e-Invoicing System, within internal and contractual documentation systems.