Concept Definition
What is a proforma invoice?
A proforma invoice is a preliminary document issued before a sale is finalized, showing expected quantities, prices, and payment terms. It is not a demand for payment and does not create a VAT obligation or accounting entry. It is commonly used for import/export customs declarations and buyer approval processes.
How does a proforma invoice differ from a tax invoice?
A proforma invoice is not a tax invoice and must not be treated as one. Key differences:
- Proforma: No VAT obligation. Cannot be used to reclaim input VAT.
- Tax invoice: Creates VAT obligation. Required for input VAT recovery.
- Proforma: Must be clearly labeled 'Proforma Invoice' to avoid confusion.
- Tax invoice: Must meet all mandatory content requirements under applicable VAT law.
Frequently Asked Questions
- Can a buyer use a proforma invoice to reclaim VAT?
- No. A proforma invoice is not a valid VAT document. Input VAT can only be reclaimed against a valid tax invoice that meets all mandatory content requirements. Using a proforma invoice to claim input VAT is a compliance error.
- Is a proforma invoice used in customs?
- Yes. Proforma invoices are widely used in international trade to provide customs authorities with advance details of a shipment when a final commercial invoice is not yet available. They assist with import classification and duty estimation.