Key Takeaways
- Debit, credit and refund notes are no longer informal accounting adjustments in Malaysia
- Under e-Invoicing, they are formal correction e-Invoice types with validation and audit impact
- Using the wrong note type can break compliance even if the amount is correct
- Timing matters, especially after e-Invoice validation and the 72-hour window in MyInvois
- Knowing which document to issue and when is now a business-critical skill
Debit, credit and refund notes are accounting documents used to correct invoicing errors under Malaysia’s e-Invoicing framework:
- A debit note increases the amount payable on an issued invoice
- A credit note reduces the amount payable
- A refund note documents an actual repayment of money to the buyer
Under IRBM’s MyInvois system, these are no longer “nice-to-have” adjustments. Once an e-Invoice has been validated and assigned an IRBM Unique Identifier Number (UUID), any value changes generally must be made via these correction e-Invoices rather than by editing the original document.
Today, the seasoned accounting firm in Malaysia will explain when to issue a debit note, credit note or refund note, how e-Invoicing changes the rules, and what businesses must do to stay audit-safe.
What Is a Debit Note and When Should Malaysian Businesses Use It?
A debit note is a document used to increase the amount payable on an invoice that has already been issued.
It exists to correct situations where the original invoice understated what the buyer should have been charged.
In practical terms, issuing a debit note means:
- The seller is formally recording that the original invoice value was too low
- The buyer now owes the additional amount.
Important: This correction does not replace the original invoice. Instead, it amends it while preserving the transaction history.
Common situations where a debit note is used in Malaysia
A debit note is typically issued when the issue increases the value of the original transaction, for example:
- The invoice was issued with an incorrect price or quantity
- Additional charges were agreed after the invoice was sent
- A pricing or calculation error resulted in an undercharge
- Contract variations increased the final billable amount
What Is a Credit Note and When Is It Mandatory?
A credit note is issued to reduce the value of a previously issued invoice.
As one can expect, it’s the opposite of a debit note.
It is not optional documentation. In many scenarios, issuing a credit note is the only acceptable correction method.
Common scenarios requiring a credit note
- Overcharging a customer
- Issuing post-invoice discounts or rebates
- Goods returned or services cancelled
- Pricing or quantity errors that reduce value
Why refunds alone are not enough anymore
Under e-Invoicing, returning money without issuing a credit note or refund note creates a documentation gap.
IRBM expects the e-Invoice record (including any debit, credit or refund note e-Invoices) to match the financial reality, not just the cash movement through your bank account.
Debit Note vs Credit Note Under Malaysia’s e-Invoicing Rules
The confusion in Malaysia usually comes from one question: Who issues what, and when?
The correct answer is not “buyer vs seller.”
The correct answer is based on the correction outcome.
Simple rule to remember:
- If the amount payable increases, issue a debit note
- If the amount payable decreases, issue a credit note
Scenario | Debit Note | Credit Note | Effect |
Undercharged customer | Yes | No | Amount payable increases |
Overcharged customer | No | Yes | Amount payable decreases |
Discount after invoice | No | Yes | Value adjusted down |
Goods returned | No | Yes | Revenue reversed |
Additional agreed charges | Yes | No | Value adjusted up |
This logic holds even under e-Invoicing. The system validates the document type, not your intention.
What Changes After e-Invoice Validation and the 72-Hour Window?
Validation is the point where an e-Invoice is officially accepted by the MyInvois system, assigned an IRBM (UUID), and stored in IRBM’s database.
Once this happens, the invoice becomes part of the formal transaction record, you can no longer freely edit it in your accounting system and expect IRBM to follow.
Instead, IRBM gives you a structured path:
- A 72-hour window after validation where the buyer can request rejection and the supplier can cancel the e-Invoice via MyInvois
- After 72 hours, any changes must be made using debit, credit or refund note e-Invoices that reference the original invoice’s UUID
How correction rules change after validation
Invoice Stage | What You Can Do | What You Cannot Do | What This Means |
Before validation | Cancel and reissue the invoice | None, provided it has not been validated | The invoice is still editable, and errors can be fixed without issuing debit or credit notes |
After validation, within the correction window | Make limited corrections with full traceability | Edit or overwrite the original invoice | Changes must be documented, and informal fixes are no longer acceptable |
After the correction window closes | Issue debit or credit notes to correct values | Cancel or replace the original invoice | Debit and credit notes become mandatory compliance documents |
At this stage, debit and credit notes are not accounting preferences. They are mandatory compliance instruments used to preserve audit integrity.
Common Debit and Credit Note Mistakes Businesses Make
Mistake 1: Issuing the wrong document type
Using a debit note when value decreases, or a credit note when value increases, breaks transaction logic even if amounts net out correctly.
Mistake 2: Missing reference to the original invoice
Under e-Invoicing, correction documents must reference the validated invoice, including its unique identifier.
Mistake 3: Treating notes as informal adjustments
Debit and credit notes are part of the official transaction record, not internal memos.
Mistake 4: Fixing cash but not documents
Refunding money without issuing a credit note leaves an audit gap.
How Debit and Credit Notes Affect Your Accounting Records
Debit and credit notes are not just compliance documents. They directly change how your income, expenses, and balances are recorded in your accounts.
If they are issued incorrectly, your books may still “balance,” but the transaction history will no longer reflect what actually happened.
Seller-side impact
For the seller, these documents affect revenue and money owed:
- A debit note increases revenue and accounts receivable, because the customer now owes more than originally invoiced
- A credit note reduces revenue and accounts receivable, because part of the original charge is being reversed or adjusted
In simple terms, debit notes push your sales figure up, while credit notes bring it down.
Buyer-side impact
For the buyer, the impact is the opposite side of the same transaction:
- A debit note increases expenses or liabilities, because the buyer must pay more
- A credit note reduces expenses or payables, because the buyer is no longer required to pay the full original amount
Even if no money has changed hands yet, the obligation on the books still changes.
Why auditors and regulators care
Auditors do not only look at the final numbers. They look at how those numbers came to be.
Debit and credit notes preserve transaction chronology. They show what changed, when it changed, and why the change was necessary.
This makes the financial trail defensible during audits and reviews.
“LHDN and auditors are increasingly getting strict on financial transactions, businesses should be prepared for a list of questions from their auditors.” Mrs Lim, Senior Accountant from Accounting.my.
For example:
Let’s say Cynthia runs a small florist shop in Semenyih. She invoiced a corporate client RM2,000 for an event, but later agreed to a RM300 post-event discount due to changes in flower arrangements.
If she simply refunds RM300 without issuing a credit note, her cash balance may be correct, but her revenue record is not.
Issuing a credit note formally explains the reduction, aligns her books with reality, and keeps her transaction record clean and auditable.
That clarity is what auditors, and increasingly IRBM, expect to see even from SMEs!
Conclusion: Getting This Right Matters for Businesses
Debit and credit notes are no longer routine paperwork. Under Malaysia’s e-Invoicing framework, they are compliance-critical correction instruments that shape your audit trail, accounting accuracy, and regulatory standing.
At accounting.my, our accounting services help businesses handle this properly. We work with you to:
- Keep your bookkeeping clean
- Your corrections are compliant
- Your audit trail defensible
So you do not have to second-guess if a debit note, credit note, or adjustment was handled the right way.
If dealing with e-Invoicing corrections, audits, or day-to-day bookkeeping feels like a hassle, we help take that burden off your team, so you can focus on running the business instead of fixing paperwork after the fact!
Important: This article is for general information only and does not constitute tax, legal or accounting advice. For specific decisions, always refer to the latest e-Invoice Guideline and Specific Guideline issued by IRBM and consult with our tax advisors.
Source:
- Inland Revenue Board of Malaysia (LHDNM) – Official e-Invoice Portal
“e-Invoice” main page (overview, scope, B2B/B2C/B2G, MyInvois links). - LHDNM – e-Invoice Guideline (Version 4.6) – English
Official guideline explaining concepts, workflow, validation, IRBM Unique Identifier - LHDNM – e-Invoice Specific Guideline (latest version)
Detailed rules, data fields, and examples for each e-Invoice type (invoice, debit note, - MyInvois SDK – Frequently Asked Questions (Technical)
Confirms how credit, debit and refund note e-Invoices must reference the original e-Invoice UUID(s) and how integrations should handle validation and cancellation. - Income Tax Act 1967 – Section 120(1)(d)
Statutory provision under which failure to issue e-Invoices when required is an offence, with fines between RM200 and RM20,000 and/or imprisonment up to 6 months per offence. - Dewan Ekonomi / DBP – “Rangka Kerja Semakan Pematuhan e-Invois Kini Tersedia di Portal Rasmi HASiL” Media coverage explaining that RKe is now available, and where to find it on the HASiL portal.
Frequently Asked Questions About Credit Note and Debit Note
Yes. Once an invoice is validated, corrections must be done using the appropriate note type rather than editing the original invoice.
Only before validation or within specific conditions. After validation, credit notes are typically required.
In most cases, the seller issues them, but the determining factor is the transaction outcome, not the party role.
Yes. They adjust taxable amounts and must be properly recorded to maintain accurate tax records.
You risk non-compliance even if the final amount is correct, as the document logic no longer matches the transaction reality.
Yes. They are essential for showing how and why a transaction changed over time.
