What a proforma invoice is for
A proforma invoice is a preliminary bill: it looks like an invoice, describes exactly what you will supply and at what price, but it is not a demand for payment and it is not a tax document. Buyers use it to raise a purchase order, arrange prepayment, open a letter of credit, or apply for an import license. Customs authorities may accept it for valuation before the goods ship, though most countries require a commercial invoice with the shipment itself. Because it is not a tax invoice, it does not go into VAT returns and no VAT is “charged” on it – you can still show the expected VAT so the buyer knows the full landed cost.
How to fill it in
Enter the seller (you) and the buyer or consignee with full legal names and addresses – customs brokers will copy them verbatim. Set a Valid until date, choose the Incoterm that defines who pays freight and carries risk (EXW: buyer collects from your door; FOB: you deliver on board the vessel; DAP: you deliver to the buyer’s named place; DDP: you also pay import duty), and state the country of origin. Describe each product in plain words that match its HS code – the six-digit Harmonized System code that classifies goods for customs; importers use it to calculate duty. Put freight and insurance in Shipping & handling; it is added after tax as its own line. Finish with your bank details for the wire transfer.
US and UK notes
In the UK, HMRC does not treat a proforma as a VAT invoice; the tax point is created by the actual VAT invoice or by receipt of payment, so issue a proper VAT invoice once the buyer pays or the goods ship. Mark the proforma clearly – this generator prints “Proforma invoice — not a tax invoice” on the document. In the US, Customs and Border Protection may accept a proforma at entry when the commercial invoice is not yet available, but the importer must file the commercial invoice later. The proforma should therefore already contain everything the commercial invoice will: parties, description, quantity, unit and total value, currency, country of origin and terms of sale.
Common mistakes
- No Incoterm. Without it, nobody knows whether the price includes shipping. Pick one and, ideally, name the place (“FOB Hamburg”) in the notes.
- Vague descriptions. “Parts” will be stopped at customs. Use the product name, material and model.
- Missing validity. Exchange rates and freight change; a proforma without an expiry can lock you into a loss.
- Using it as the final invoice. Always issue a commercial (tax) invoice when the goods ship or the payment arrives.
Frequently asked questions
Is a proforma invoice a legal invoice?
No. It is a quotation in invoice form. It is not a request for payment and not a tax invoice; a final commercial or VAT invoice must follow when the goods are shipped or payment is received.
What is an HS code and do I have to include it?
The Harmonized System code is a six-digit international classification of goods used by customs to assess duty. It is not mandatory on a proforma, but including it speeds up the buyer’s import clearance and avoids surprises about duty rates.
Which Incoterm should I choose?
EXW if the buyer arranges everything from your premises; FOB or FCA if you deliver to the port or carrier; DAP if you deliver to the buyer’s address without paying import duty; DDP if you handle duty too. The Incoterm decides who pays freight and insurance and where risk passes.
Should I show VAT on a proforma?
You can show the VAT or sales tax that the final invoice will carry so the buyer sees the full amount, but no tax is actually charged or reportable until the real invoice is issued. For exports outside the UK/EU, the supply is usually zero-rated, so the rate is 0.
Can I use this for a letter of credit?
Yes. Banks typically ask for a proforma stating the parties, goods, quantities, unit prices, total, currency, Incoterm and delivery time. Make sure every detail matches what will later appear on the commercial invoice, or the bank may reject the documents.