What Is a Pro Forma Invoice?

Q: 2. Can pro forma invoices be used for VAT?

No. Tax authorities require commercial invoices for VAT/GST reporting in most jurisdictions.

Q: 3. How long is a pro forma valid?

Typically 30-90 days , depending on: Market volatility Supplier policies Buyer requirements

A pro forma invoice is a preliminary bill sent to buyers before shipment or delivery of goods. Unlike commercial invoices, these documents are not payment demands but provide:

Cost estimates for customs clearance
Payment terms and conditions
Detailed product/service descriptions
International trade documentation

Key Characteristics:

Legally non-binding (unless specified otherwise)
Required for international shipments
Often precedes formal contracts
Helps buyers secure financing

When to Use Pro Forma Invoices?

International Trade
- Required for customs clearance in 85% of countries
- Helps calculate import duties/taxes
Pre-Shipment Agreements
- Secures buyer approval before production
- Outlines payment expectations
Funding Applications
- Used to open letters of credit
- Supports loan applications
Temporary Shipments
- Trade show samples
- Equipment rentals

Pro Forma vs. Commercial Invoice

Feature	Pro Forma Invoice	Commercial Invoice
Legal Status	Preliminary estimate	Legal payment demand
Tax Purpose	Cannot be used for VAT	Official tax document
Payment Due	No payment expected	Payment required
Customs Use	Estimated values	Actual transaction values
Binding Nature	Non-binding (usually)	Binding contract

Essential Components of a Pro Forma Invoice

Header – “Pro Forma Invoice” clearly stated
Unique Number – PFI-2023-001 format
Issue Date – Creation date
Seller/Buyer Info – Full legal details
Product Details – SKUs, quantities, specs
Price Breakdown – Unit costs, discounts, totals
Shipping Terms – Incoterms (FOB, CIF, etc.)
Payment Terms – Net 30, 50% deposit, etc.
Validity Period – Typically 30-90 days

How to Create a Pro Forma Invoice?

Step-by-Step Process:

Use Professional Templates: Maintain brand consistency
Number Sequentially: PFI-2023-001, PFI-2023-002
Calculate Totals Accurately: Include all foreseeable costs
Specify Validity: “Valid for 60 days from date”
Send Electronically: PDF with tracking

Sample Validity Clause: “This pro forma invoice is valid for 30 days from the date of issue. Prices subject to change based on market conditions or order modifications.”