Correcting VAT errors on issued invoices with void and regenerate

When already-issued invoices carry the wrong VAT (for example an organization rate applied instead of the customer's country rate, missing reverse-charge for EU B2B, or 0% applied to a domestic B2B customer), the correction pattern is to credit-note, void, and regenerate each invoice with the correct tax. The regenerated invoice is then covered by the credit from the voided one. At volume this is run as a batch by Lago, and a handful of invoice states need special handling rather than the standard flow.

The standard correction flow

For an invoice with the wrong tax, the sequence is: issue a credit note for the voidable amount (recorded as wallet credit), void the invoice, then regenerate it from the voided one so it is reissued with the customer's correct current tax. The regenerated invoice is offset by the credit, so the customer is not double-charged. Because correct tax depends on the customer's current tax configuration, the customer's tax setup must be right before regenerating, otherwise the regenerated invoice inherits the same error.

Edge cases that change the handling

Several situations should not just be run through the standard flow:

• Rounding-only differences: some invoices look wrong but are actually correct, off only by rounding artifacts. These need no action.

• Already refunded: if an invoice was already refunded outside this process, voiding and regenerating can produce a regenerated invoice with no credit note applied that then appears payable or refundable again. Hold these and confirm intent before processing, and reconcile any refund already done so the customer is not refunded twice.

• Already has a credit note: an invoice that already carries a credit note should be skipped by the batch, since re-crediting conflicts with the existing note.

• Old invoices whose plan price changed: regenerating an invoice from a prior year can produce a different (sometimes zero) total because the plan price has since changed. Decide deliberately how to treat historical invoices rather than auto-regenerating them.

• Progressive billing invoices: these historically failed to void and regenerate cleanly, and regeneration could miscompute tax on the credited amount. Both issues were fixed, but progressive billing invoices warrant an extra check that the regenerated total and tax are correct.

The credit-note-for-credit vs credit-note-for-refund constraint

If an invoice already received a credit note issued as credit (wallet credit), you cannot then issue a credit note for a refund on the same invoice. In that situation the regenerated invoice may need to be the one refunded instead. When a customer needs a refund credit note for their own accounting, confirm which invoice in the chain (original vs regenerated) actually carries the refundable balance before refunding, so the paperwork matches.

A note on undercharged invoices

Invoices that were undercharged (lost VAT) are a separate category. They are often left uncorrected and tracked only for accounting. If they are ever mass-corrected, take care not to email reissued invoices when the additional VAT will not actually be charged to the card, to avoid sending customers invoices for amounts they are not being billed.

This article reflects guidance drawn from customer case resolutions. It is not officially supported documentation and may not apply to all situations.