What is a proforma invoice? Definition and template
TL;DR, the essentials
- A proforma invoice is a preliminary sales document that sets out a priced offer before the sale is finalised.
- It has no accounting or tax value: no VAT is due, it is not entered in your books and it does not carry an official invoice number.
- It is mainly used for exports (customs) and financing requests. The actual sale is then billed with a commercial (final) invoice.
A customer asks you for a “proforma invoice” to release funding or place an international order, and you are not quite sure what that means. A proforma invoice is a preliminary commercial document: it looks like an invoice, but it carries neither its legal nor its accounting weight. Here is a clear definition, how it differs from a quote and a final invoice, when to use it, what to put on it, and an example structure you can reuse.
What is a proforma invoice, exactly?
A proforma invoice (from the Latin pro forma, “for the sake of form”) is a commercial document that describes an intended transaction, with a breakdown of the goods or services, quantities, prices and a total. It has the appearance of an invoice, but it is issued before the sale and does not request payment.
Its defining feature is that it has no accounting or tax value. In practice, a proforma invoice is not recorded in your accounts, does not sit within your official invoice numbering, does not make VAT due, and cannot serve as proof of payment. It is simply a tool for information and negotiation. Only the final (commercial) invoice, issued once the sale is agreed, has legal standing.
In one sentence
A proforma invoice borrows the layout of an invoice to price up an offer, but stays without accounting or tax value until the sale is actually completed.
Proforma invoice, quote or final invoice: what is the difference?
These three documents appear at different points in the sales cycle. A quote (estimate) is a pre-contractual document: once dated and accepted by the customer, it can bind both parties. A proforma invoice is a non-binding projection, closer to a preview of a future invoice in invoice form. The final invoice is the only document with legal, accounting and tax value.
| Criteria | Quote | Proforma invoice | Final invoice |
|---|---|---|---|
| Issued | Before the sale | Before the sale | After the sale |
| Accounting value | ✗ | ✗ | ✓ |
| VAT due | ✗ | ✗ | ✓ |
| Legally binding | Yes, once accepted | No | Yes |
| Official numbering | ✗ | ✗ | ✓ |
| Kept as a record | Recommended | Optional | ✓ required |
In practice, quotes and proforma invoices overlap. A quote is the most common format for everyday domestic deals; the proforma invoice comes into its own in an international or administrative context, where the other party expects a document that “looks like an invoice”.
When should you use a proforma invoice?
A quote is enough for most everyday commercial relationships. A proforma invoice becomes useful in three specific situations:
Exports and customs formalities
For cross-border trade, the proforma is used as a basis to calculate import duties and import VAT, and to let the buyer obtain an import licence or open a letter of credit.
Financing requests
A bank, a grant body or an investor may ask for a proforma to confirm the amount of a purchase (equipment, vehicle, machinery) before releasing a loan or funding.
Order preparation
It formalises the final offer and lets the customer secure internal sign-off (purchase order, spend approval) before real invoicing takes place.
In all these cases, the proforma locks in the terms (prices, quantities, lead times) without creating an immediate obligation to pay.
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What should a proforma invoice include?
A proforma invoice has no legally mandatory fields, since it has no tax value. To be useful and credible, especially for customs or a lender, it still mirrors the structure of a real invoice:
- The clear label “PROFORMA INVOICE” or “PRO FORMA”, prominently displayed, to avoid any confusion with a final invoice.
- The seller’s full details: business name, address, company registration number, and VAT number where applicable.
- The buyer’s details: name, address, and delivery address if different.
- The issue date and a validity period for the offer.
- The breakdown of goods or services: description, quantity, unit price excluding tax.
- The totals: net total, VAT rate and amount shown for information, gross total.
- The terms: payment and delivery conditions, and Incoterms for exports.
Watch the numbering
A proforma sits outside your accounting numbering, so never give it an official invoice number. Use a separate reference instead, for example “PF-2026-014”.
Should you put VAT on a proforma invoice?
VAT is not due on a proforma invoice: the tax point is the actual sale, evidenced by the final invoice. You can, however, show VAT for information only, which is even recommended for exports so the buyer can anticipate the total cost.
VAT rates and rules vary from one country to another, so always check the rate that applies in your jurisdiction. In the United Kingdom, for reference, the main rates are 20% (standard rate), 5% (reduced rate) and 0% (zero-rated goods). The maths is the same as on a normal invoice. At the standard 20% rate:
- To get the gross from the net: gross = net × 1.20. Example: £1,000 net becomes £1,200 gross.
- To find the VAT within a gross amount: VAT = gross / 1.20 × 0.20. Example: £1,200 gross contains £200 of VAT.
- To get the net from the gross: net = gross / 1.20. Example: £1,200 gross equals £1,000 net.
If you are not VAT registered
If your business is below the VAT registration threshold or is otherwise not VAT registered, the proforma shows no VAT at all, exactly like your normal invoices. Thresholds differ by country, so confirm the rule that applies where you trade.
What does a proforma invoice look like? (structure)
Here is the outline of a proforma invoice template, from the top of the document to the bottom:
Header
Logo and full seller details, the label “PROFORMA INVOICE” and its reference.
Buyer block
Buyer name and address, delivery address, issue date and offer validity.
Body
Line-item table: description, quantity, unit price (net), net amount per line.
Totals
Net total, VAT shown for information by rate, gross total.
Footer
Payment and delivery terms, Incoterms, and a reminder that the document is issued pro forma and is not a tax invoice.
Quick quiz
On a proforma invoice, is VAT due?
How do you create a proforma invoice quickly?
You can build one in a spreadsheet, but the risk is duplicating a number, forgetting a field, or having to re-key everything into the final invoice. An invoicing tool generates the proforma in one click, keeps it clearly separate from your official numbering, then converts it into a final invoice once the sale is agreed, with no re-typing and no numbering mistakes.
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The next step
To produce proformas, quotes and compliant invoices without the hassle, compare our pick of the best invoicing software 2026. For more background, browse the full invoicing hub.
Frequently asked questions
Is a proforma invoice legally binding?
No. A proforma invoice is a preliminary commercial document with no accounting or tax value. It is not recorded in your books, does not make VAT due, and cannot serve as proof of payment. Only the final invoice, issued after the sale, has legal standing.
What is the difference between a proforma invoice and a quote?
Both come before the sale, but a quote, once accepted, can bind both parties. A proforma invoice stays a non-binding projection, presented in the form of an invoice. Quotes are the most common format for domestic deals, while proformas are mainly used for exports and financing requests.
Should VAT be shown on a proforma invoice?
VAT is not due on a proforma, because the tax point is the actual sale. You can still display it for information, which is recommended for exports so the buyer sees the full cost. VAT rates vary by country: in the UK the main rates are 20% (standard), 5% (reduced) and 0% (zero-rated). If you are not VAT registered, no VAT is shown at all.
Can a customer pay against a proforma invoice?
A customer may transfer funds based on a proforma, for example to confirm an order, but the proforma itself is not a tax document. Once payment is made and the sale is agreed, you must issue a final invoice, which is the document that carries legal, accounting and VAT value.