Debit Note Singapore:When & How to Issue a Debit Note in Singapore

A debit note is a financial document used to adjust or correct the amount charged in an original invoice. It is mainly used in accounting for the return of goods, price mistakes, or added charges. Further, proper issuance of debit notes in Singapore has become imperative for all organisations to comply with IRAS regulations and follow accurate accounting policies and procedures. 

This guide provides a comprehensive overview of debit notes in Singapore, including their definition, common use cases, key components, issuance steps, and Goods and Services Tax (GST) implications. Additionally, you can download an editable debit note template that you can customize according to your needs.

What is a Debit Note?

A debit note is a financial and tax-related document used to adjust or correct an original invoice for goods or services. It is issued when buyers want to adjust amounts payable due to a return of goods, incorrect charges, or errors in accounting entries. 

It can also be used by sellers to increase the amount or tax charged on a previous transaction. Debit notes also work as supporting documents for purchase returns. 

Debit Note Common Use Cases

Here are a few examples to understand the concept of debit note better: 

Example 1 – Return of defective goods

A company LMN purchases 100 office desks worth SGD 50,000 from XYZ Suppliers. On delivery, LMN found that 10 desks which cost SGD 5,000 were damaged. Since LMN is not obliged to pay for the goods that are damaged, they prepare a debit note for SGD 5,000 to XYZ Suppliers. This reduces LMN's outstanding liability in their books by the amount of SGD 5,000.

Example 2 – Price discrepancy in an invoice

ABC Electronics sold 50 laptops to DEF Enterprises for SGD 1,200 each, for a total of SGD 60,000. However, because of a billing error, the invoice was raised only for 45 laptops, totalling SGD 54,000. To recover the remaining balance of SGD 6,000 relating to the extra 5 laptops, a debit note of the price difference was issued to DEF Enterprises.

When to Issue a Debit Note in Singapore?

There are two types of IRAS debit notes. These include the ones issued by the buyer and the supplier under the following situations. Further, it may be noted that a debit note is maintained by the buyer in its books. 

• Vendor to buyer: To inform the buyer regarding a payment due or an adjustment in the amount billed
• Buyer to vendor:  To request a change on the invoice, usually for damaged goods or overcharges.

A debit note is issued for various reasons, including:

• Price adjustment: If the price of goods or services increases after the original invoice, a debit note serves to recover the additional amount.
• Return of goods: When the buyer receives faulty or incorrect goods, he issues a debit note to the seller for adjustment in payment.
• Tax adjustments: When there is a mistake in tax rates or calculations, a debit note is used for the rectification of the amount charged.

Components of a Debit Note in Singapore

As per the IRAS guidelines, businesses issuing debit notes and credit notes both should properly mention the following details in a debit note:

• Supplier details: Name, address, contact details, and the Tax Identification Number (TIN).
• Reason for adjustment: It's mandatory to clearly state the reason for adjustment. Be it pricing, return of goods, or any other adjustments.
• Debit note number: A unique identification number for record-keeping.
• Issue date: The date on which the debit note is issued.
• Recipient details: Name, address, contact details, and TIN of the buyer.
• Invoice reference: Reference of the original invoice number and date to which the debit note corresponds.
• Details of Goods/services: Quantity, unit price and total amount excluding tax.
• Tax details: Applicable tax rate and tax amount
• Signature : Authorized signature to authenticate the same.

Debit Note Excel Template Download

This customizable debit note template makes it easy to create, edit, and issue debit notes accurately, following Singapore’s accounting standards. 

Download this editable Debit Note Excel format here.

Debit Note Sample

Invoice Vs Debit Note vs Credit Note

Understanding the differences between invoices, debit notes, and credit notes is crucial to ensure proper accounting and compliance with IRAS guidelines.

How to Issue a Debit Note in Singapore? 

Issuing a debit note involves four key steps:

1. Clarify the Clearly state the reason for the adjustment. Some of the common reasons include: Price correction, Return of damaged goods and Tax calculation errors.
2. Ensure you have all relevant records, including: Original invoice, Purchase order (if applicable), Proof of return of goods (if any.)
3. Create the Debit Note using a software or manually  with the following details

• Unique debit note number and date
• Reason for adjustment
• Supplier and recipient details
• Reference to the original invoice
• Description of goods/services and price adjustments
• Corrected amount of tax (if any)

4. Send the debit note to the buyer/ seller via email or a hard copy. 
5. Retain a copy as an accounting and taxation record and adjust financial statements (if required). 

GST Considerations for Debit Notes in Singapore 

Businesses should properly account for and report their debit notes in the accounting period they pertain to. Here are the considerations that buyers/suppliers need to keep in mind while filing their GST-F5 returns: 

Debit Notes in Singapore with E-Invoicing Mandate

In Singapore's transition to the InvoiceNow e-invoicing system, debit notes—documents issued to request additional payment or correct undercharges—are encompassed within the definition of invoices. As such, GST-registered businesses are required to transmit debit note data to the Inland Revenue Authority of Singapore (IRAS) using InvoiceNow solutions via the InvoiceNow network. This integration ensures that all adjustments to original invoices are accurately captured and reported, maintaining compliance with GST regulations.

Conclusion

Debit notes are a critical component for businesses to account for faulty purchases, changes in amount or tax rates, or purchase returns. Therefore businesses need to properly account for them as it not just impacts the accounting records but also tax compliances. As discussed, IRAS has laid down specific guidelines for debit notes and penalties too, for failure to adhere to them. 

Proper accounting of the debit note in the GST filings ensures that both the seller and buyer fulfil their GST obligations, hence avoiding errors in the GST returns. Moreover, proper issuance and proper management of the debit notes will not only smoothen your business operations but also reduce the chances of GST-related problems.