What is a debit note? Is a debit note considered an invoice or record under the law in Vietnam?

Hello, The Editorial Board would like to answer as follows:

1. What is a debit note?

Debit note is a type of document used by the manufacturer (seller) to notify of its obligation to pay invoices that have not been paid in full. The buyer can also create a debit note to send to the manufacturer when he wants to return the goods.

Debit notes can also be used to remind you of amounts due or provide information regarding upcoming bills.

In addition, a debit note can be used as a debit memo (adjustment invoice) when there are errors in the invoice process or when you want to adjust the invoice value.

What information does the debit note contain?

Debit notes usually include the following information:

- Date: Date the debit note was created.

- Name and address of the business: The business that issues the debit note.

- Name and address of the receiving party: The party receiving the debit amount.

- Transaction description: Reason the debit note was issued.

- Amount: Amount to be paid.

- Written or digital signature of the supplier/authorized representative.

2. How many types of debit notes are there currently?

Currently, there are two main types of debit notes:

(1) Debit note notice: This type of debit note is used to notify the recipient of an amount of money they will owe in the future.

For example:

- Prepayment: When a customer pays in advance for a product or service, a debit note is used to record the prepayment.

- Deposit: When a customer places a deposit for a product or service, a debit note is used to record the deposit.

(2) Adjustment debit note: This type of debit note is used to adjust the value of a transaction that has taken place.

For example:

- Discount: When a business offers a discount to a customer after a sale, an adjusting debit note is used to record the discounted amount.

- Refund: When a customer returns goods and receives a refund, an adjusted debit note is used to record the refund.

- Error correction: When an error occurs during the payment process, the adjustment debit note is used to adjust the paid amount.

In addition to these two main types of debit notes, there are also some other less common types of debit notes, such as offset debit notes and cancellation debit notes. Depending on each specific case, businesses (sellers) use the appropriate type of debit note.

3. In what cases should debit notes be used?

Currently, debit notes are commonly used in the following cases:

- Sell:

+ When the seller discovers that there has been a shortage of money or an incorrect price in the previous sales invoice, the debit note will notify the missing or erroneous amount so that the buyer can make additional payment.

+ Debit notes can be used to record refunds to customers when they return purchased goods or services.

- Selling price adjustment: When the buyer receives a discount or promotion after the invoice has been issued. Debit note will notify the discount or promotion amount so that the buyer can adjust the payable amount.

- Error correction: Debit note can be used to readjust the paid amount in case an error occurs.

- Incurred costs: When there are additional costs, transportation, loading, unloading, and installation that must be borne by the seller, the debit note notifies the additional fees for the buyer to pay.

Example of using debit note:

Company A sells a product to company B for 500 million VND. Later, company A discovered that the product was defective and agreed to reduce the price for company B to 400 million VND. In this case, company A can use a debit note to record a discount of 100 million VND for company B.

Thus, the purpose of a debit note is to agree on the debt and value of goods between the seller and the buyer during the transaction process. Using debit notes helps businesses track debts effectively and accurately.

4. Is a debit note considered an invoice or record under the law in Vietnam?

According to Clause 1 and Clause 4, Article 3 of Decree 123/2020/ND-CP, regulations on invoices and documents are as follows:

- “invoice” means an accounting record which is created by a goods seller or service provider to record information about the sale of goods or service provision. Invoices are represented in the electronic form or are printed according to orders placed by tax authorities.

- “record” means a document used for recording information on tax deductions, taxes, fees or charges payable to state budget in accordance with regulations of the Law on tax administration. Records prescribed in Decree 123/2020/ND-CP include certificate of personal income tax withholding and receipts of taxes, fees and charges which are represented in the electronic form, or internally- or externally printed.

Thus, according to the above regulations, debit notes are not considered invoices or records because a debit note is only a written notification between the seller and the buyer about the payment obligation and the adjustment of the value of a previously issued invoice.