diff --git a/Gemfile b/Gemfile
index a8fd978add9..e28aeedbf28 100644
--- a/Gemfile
+++ b/Gemfile
@@ -95,7 +95,7 @@ end
 group :development, :test do
   gem 'byebug'
   gem 'clockwork-test'
-  gem 'debug', platforms: %i[mri mingw x64_mingw]
+  gem 'debug', platforms: %i[mri mingw x64_mingw], require: false
   gem 'dotenv'
   gem 'i18n-tasks', git: 'https://github.com/glebm/i18n-tasks.git'
   gem 'rspec-rails'
diff --git a/Gemfile.lock b/Gemfile.lock
index ed791046735..e39970b58a3 100644
--- a/Gemfile.lock
+++ b/Gemfile.lock
@@ -179,9 +179,9 @@ GEM
       database_cleaner-core (~> 2.0.0)
     database_cleaner-core (2.0.1)
     date (3.3.4)
-    debug (1.6.3)
-      irb (>= 1.3.6)
-      reline (>= 0.3.1)
+    debug (1.9.2)
+      irb (~> 1.10)
+      reline (>= 0.3.8)
     declarative (0.0.20)
     diff-lcs (1.5.0)
     digest-crc (0.6.4)
@@ -295,9 +295,10 @@ GEM
     httpclient (2.8.3)
     i18n (1.14.5)
       concurrent-ruby (~> 1.0)
-    io-console (0.5.11)
-    irb (1.4.1)
-      reline (>= 0.3.0)
+    io-console (0.7.2)
+    irb (1.14.0)
+      rdoc (>= 4.0.0)
+      reline (>= 0.4.2)
     jmespath (1.6.1)
     json (2.7.1)
     jwt (2.7.0)
@@ -607,6 +608,8 @@ GEM
     pry (0.14.2)
       coderay (~> 1.1)
       method_source (~> 1.0)
+    psych (5.1.2)
+      stringio
     public_suffix (5.0.1)
     puma (6.4.2)
       nio4r (~> 2.0)
@@ -662,6 +665,8 @@ GEM
     rb-fsevent (0.11.2)
     rb-inotify (0.10.1)
       ffi (~> 1.0)
+    rdoc (6.7.0)
+      psych (>= 4.0.0)
     redis (5.1.0)
       redis-client (>= 0.17.0)
     redis-client (0.17.0)
@@ -669,7 +674,7 @@ GEM
     redlock (2.0.6)
       redis-client (>= 0.14.1, < 1.0.0)
     regexp_parser (2.9.0)
-    reline (0.3.1)
+    reline (0.5.9)
       io-console (~> 0.5)
     representable (3.2.0)
       declarative (< 0.1.0)
@@ -826,6 +831,7 @@ GEM
     standard-performance (1.3.1)
       lint_roller (~> 1.1)
       rubocop-performance (~> 1.20.2)
+    stringio (3.1.1)
     stripe (6.5.0)
     strong_migrations (2.0.0)
       activerecord (>= 6.1)
diff --git a/app/models/invoice.rb b/app/models/invoice.rb
index a55d654b443..4429f99ebba 100644
--- a/app/models/invoice.rb
+++ b/app/models/invoice.rb
@@ -1,6 +1,8 @@
 # frozen_string_literal: true
 
 class Invoice < ApplicationRecord
+  self.ignored_columns += [:negative_amount_cents] # TODO: remove when negative_amount_cents is removed from the database
+
   include AASM
   include PaperTrailTraceable
   include Sequenced
diff --git a/app/services/credit_notes/create_from_progressive_billing_invoice.rb b/app/services/credit_notes/create_from_progressive_billing_invoice.rb
new file mode 100644
index 00000000000..fcc6dcd13dc
--- /dev/null
+++ b/app/services/credit_notes/create_from_progressive_billing_invoice.rb
@@ -0,0 +1,74 @@
+# frozen_string_literal: true
+
+module CreditNotes
+  class CreateFromProgressiveBillingInvoice < BaseService
+    def initialize(progressive_billing_invoice:, amount:, reason: :other)
+      @progressive_billing_invoice = progressive_billing_invoice
+      @amount = amount
+      @reason = reason
+
+      super
+    end
+
+    def call
+      return result unless amount.positive?
+      return result.forbidden_failure! unless progressive_billing_invoice.progressive_billing?
+
+      # Important to call this method as it modifies @amount if needed
+      items = calculate_items!
+
+      CreditNotes::CreateService.new(
+        invoice: progressive_billing_invoice,
+        credit_amount_cents: creditable_amount_cents(amount, items),
+        items:,
+        reason:,
+        automatic: true
+      ).call.raise_if_error!
+    end
+
+    private
+
+    attr_reader :progressive_billing_invoice, :amount, :reason
+
+    def calculate_items!
+      items = []
+      remaining = amount
+
+      # The amount can be greater than a single fee amount. We'll keep on deducting until we've credited enough
+      progressive_billing_invoice.fees.order(amount_cents: :desc).each do |fee|
+        # no further credit remaining
+        break if remaining.zero?
+
+        # take the lower value of remaining or maximum creditable for this fee. (whichever is the lowest)
+        fee_credit_amount = [remaining, fee.creditable_amount_cents].min
+        items << {
+          fee_id: fee.id,
+          amount_cents: fee_credit_amount.truncate(CreditNote::DB_PRECISION_SCALE)
+        }
+
+        remaining -= fee_credit_amount
+      end
+
+      # it could be that we have some amount remaining
+      # TODO(ProgressiveBilling): verify and check in v2
+      if remaining.positive?
+        @amount -= remaining
+      end
+
+      items
+    end
+
+    def creditable_amount_cents(amount, items)
+      taxes_result = CreditNotes::ApplyTaxesService.call(
+        invoice: progressive_billing_invoice,
+        items: items.map { |item| CreditNoteItem.new(fee_id: item[:fee_id], precise_amount_cents: item[:amount_cents]) }
+      )
+
+      (
+        amount.truncate(CreditNote::DB_PRECISION_SCALE) -
+        taxes_result.coupons_adjustment_amount_cents +
+        taxes_result.taxes_amount_cents
+      ).round
+    end
+  end
+end
diff --git a/app/services/credits/progressive_billing_service.rb b/app/services/credits/progressive_billing_service.rb
index e5b5a9f94fe..553d2a302d7 100644
--- a/app/services/credits/progressive_billing_service.rb
+++ b/app/services/credits/progressive_billing_service.rb
@@ -28,8 +28,10 @@ def call
           amount_to_credit = progressive_billing_invoice.fees_amount_cents
 
           if amount_to_credit > remaining_to_credit
-            # TODO: create credit note for (amount_to_credit - remaining_credit)
-            invoice.negative_amount_cents -= (amount_to_credit - remaining_to_credit)
+            CreditNotes::CreateFromProgressiveBillingInvoice.call(
+              progressive_billing_invoice:, amount: amount_to_credit - remaining_to_credit
+            ).raise_if_error!
+
             amount_to_credit = remaining_to_credit
           end
 
diff --git a/spec/services/credit_notes/create_from_progressive_billing_invoice_spec.rb b/spec/services/credit_notes/create_from_progressive_billing_invoice_spec.rb
new file mode 100644
index 00000000000..07de9883cd6
--- /dev/null
+++ b/spec/services/credit_notes/create_from_progressive_billing_invoice_spec.rb
@@ -0,0 +1,89 @@
+# frozen_string_literal: true
+
+require 'rails_helper'
+
+RSpec.describe CreditNotes::CreateFromProgressiveBillingInvoice, type: :service do
+  subject(:credit_service) { described_class.new(progressive_billing_invoice:, amount:, reason:) }
+
+  let(:reason) { :other }
+  let(:amount) { 0 }
+  let(:invoice_type) { :progressive_billing }
+  let(:customer) { create(:customer) }
+  let(:organization) { customer.organization }
+  let(:tax) { create(:tax, organization:, rate: 20) }
+
+  let(:progressive_billing_invoice) do
+    create(
+      :invoice,
+      customer:,
+      organization:,
+      currency: 'EUR',
+      fees_amount_cents: 120,
+      total_amount_cents: 120,
+      invoice_type:
+    )
+  end
+
+  let(:fee1) do
+    create(
+      :fee,
+      invoice: progressive_billing_invoice,
+      amount_cents: 80,
+      taxes_amount_cents: 16,
+      taxes_rate: 20
+    )
+  end
+
+  let(:fee2) do
+    create(
+      :fee,
+      invoice: progressive_billing_invoice,
+      amount_cents: 40,
+      taxes_amount_cents: 8,
+      taxes_rate: 20
+    )
+  end
+
+  let(:fee1_applied_tax) { create(:fee_applied_tax, tax:, fee: fee1) }
+  let(:fee2_applied_tax) { create(:fee_applied_tax, tax:, fee: fee2) }
+
+  before do
+    progressive_billing_invoice
+    fee1
+    fee2
+    fee1_applied_tax
+    fee2_applied_tax
+  end
+
+  describe "#call" do
+    it "does nothing when amount is zero" do
+      expect { credit_service.call }.not_to change(CreditNote, :count)
+    end
+
+    context "with amount greater than zero" do
+      let(:amount) { 100 }
+
+      context 'when called with a subscription invoice' do
+        let(:invoice_type) { :subscription }
+
+        it "fails when the passed in invoice is not a progressive billing invoice" do
+          result = credit_service.call
+          expect(result).not_to be_success
+        end
+      end
+
+      it "creates a credit note for all required fees" do
+        result = credit_service.call
+        credit_note = result.credit_note
+
+        expect(credit_note.credit_amount_cents).to eq(120)
+        expect(credit_note.items.size).to eq(2)
+
+        credit_fee1 = credit_note.items.find { |i| i.fee == fee1 }
+        expect(credit_fee1.amount_cents).to eq(80)
+        credit_fee2 = credit_note.items.find { |i| i.fee == fee2 }
+        expect(credit_fee2.amount_cents).to eq(20)
+      end
+    end
+  end
+end
diff --git a/spec/services/credits/progressive_billing_service_spec.rb b/spec/services/credits/progressive_billing_service_spec.rb
index 731213b87a2..1ad45691dfa 100644
--- a/spec/services/credits/progressive_billing_service_spec.rb
+++ b/spec/services/credits/progressive_billing_service_spec.rb
@@ -175,7 +175,7 @@
     end
 
     describe "#call" do
-      it "applies one credit to the invoice" do
+      it "applies all the credits to the invoice" do
         result = credit_service.call
         expect(result.credits.size).to eq(2)
         first_credit = result.credits.find { |credit| credit.progressive_billing_invoice == progressive_billing_invoice }
@@ -185,7 +185,20 @@
         expect(first_credit.amount_cents).to eq(980)
 
         expect(invoice.progressive_billing_credit_amount_cents).to eq(1000)
-        expect(invoice.negative_amount_cents).to eq(-220)
+      end
+
+      it "creates credit notes for the remainder of the progressive billed invoices" do
+        expect { credit_service.call }.to change(CreditNote, :count).by(2)
+        # we were able to credit 1000 from the invoice, this means we've got 20 and 200 remaining respectively
+        aggregate_failures do
+          expect(progressive_billing_invoice2.credit_notes.size).to eq(1)
+          expect(progressive_billing_invoice3.credit_notes.size).to eq(1)
+
+          first = progressive_billing_invoice2.credit_notes.sole
+          expect(first.credit_amount_cents).to eq(20)
+          last = progressive_billing_invoice3.credit_notes.sole
+          expect(last.credit_amount_cents).to eq(200)
+        end
       end
     end
   end
diff --git a/spec/services/invoices/calculate_fees_service_spec.rb b/spec/services/invoices/calculate_fees_service_spec.rb
index 31e6a6bdab8..684ecdbf635 100644
--- a/spec/services/invoices/calculate_fees_service_spec.rb
+++ b/spec/services/invoices/calculate_fees_service_spec.rb
@@ -120,6 +120,34 @@
         expect(Credits::ProgressiveBillingService).to have_received(:call).with(invoice:)
       end
 
+      context "when a progressive_billing invoice is present" do
+        let(:progressive_invoice) do
+          create(:invoice,
+            customer:,
+            status: 'finalized',
+            invoice_type: :progressive_billing,
+            subscriptions: [subscription],
+            fees_amount_cents: 50,
+            issuing_date: timestamp - 5.days)
+        end
+
+        let(:progressive_fee) do
+          create(:charge_fee, amount_cents: 50, invoice: progressive_invoice)
+        end
+
+        before do
+          progressive_invoice
+          progressive_fee
+        end
+
+        it "creates a credit note for the amount that was billed too much" do
+          expect { invoice_service.call }.to change(CreditNote, :count).by(1)
+
+          credit_note = progressive_invoice.reload.credit_notes.sole
+          expect(credit_note.credit_amount_cents).to eq(50)
+        end
+      end
+
       context 'when charge is pay_in_advance, not recurring and invoiceable' do
         let(:charge) do
           create(
diff --git a/spec/spec_helper.rb b/spec/spec_helper.rb
index 51a5959a1e1..fb95ca558cc 100644
--- a/spec/spec_helper.rb
+++ b/spec/spec_helper.rb
@@ -2,6 +2,13 @@
 
 require 'webmock/rspec'
 
+# Allow remote debugging when RUBY_DEBUG_PORT is set
+if ENV['RUBY_DEBUG_PORT']
+  require 'debug/open_nonstop'
+else
+  require 'debug'
+end
+
 RSpec.configure do |config|
   config.expect_with :rspec do |expectations|
     expectations.include_chain_clauses_in_custom_matcher_descriptions = true