If an invoice is not issued for payment reasons, and only for customs reasons, this is known as a pro forma invoice. You will encounter documents like these in in­ter­na­tion­al trade relations in par­tic­u­lar. We have sum­ma­rized when pro forma invoices are used and what purpose they serve when it comes to exporting goods.

What is a pro forma invoice?

The pro forma invoice is an invoice that does not require any payment on the recipient’s part. Instead, the document is created pro forma (Latin term meaning “for the sake of form”) to comply with legal re­quire­ments – for example when exporting goods to non-EU countries (e.g. China, Japan, or Switzer­land). Non-EU countries are also referred to as third countries.

De­f­i­n­i­tion

The pro forma invoice is an ex­clu­sive­ly in­for­ma­tive invoice that is primarily used in foreign trade. In par­tic­u­lar, the pro forma invoice is intended to inform customs au­thor­i­ties about the type, scope, and value of import or export goods. It’s not usual to ask the recipient for payment with a pro forma invoice.

Function of the pro forma invoice

The pro forma invoice is primarily used in foreign trade.

Com­mer­cial trans­ac­tions with third countries are subject to mandatory de­c­la­ra­tion. If you export goods to a third country, you must declare their value to customs. And this also applies if the goods are exported free of charge for the recipient – for example in the case of sample shipments, gifts, donations, or a free re­place­ment delivery as part of the guarantee or as a gesture of goodwill.

In such cases, a pro forma invoice is issued instead of a com­mer­cial invoice for customs purposes. This only declares the value of the exported goods and therefore has a purely in­for­ma­tive function.

In addition, the pro forma invoice is used as an advance copy of a com­mer­cial invoice. For example, if the recipient pays in advance. In this special case, the pro forma invoice serves as a payment request.

Pro forma invoices are also used for trans­ac­tions processed by letters of credit or as a pre­req­ui­site for issuing import licenses. The pro forma invoice is then similar to an offer.

Note

A com­mer­cial letter of credit (CLC) is a payment model where a bank is con­trac­tu­al­ly obliged by an account holder (letter of credit applicant) to make a payment to a third party (letter of credit ben­e­fi­cia­ry) upon receipt of certain documents. In foreign trans­ac­tions, letters of credit are sometimes ordered by importers in order to guarantee exporters payment for the receipt of goods.

In general, a pro forma invoice does not signify a booking neither at the sender’s end nor at the recipient’s end.

A pro forma invoice can also be used as a sub­sti­tute document for ac­count­ing if the actual invoice has not yet been received, but you already have to make a booking. If a service has been performed and you know what it will cost, but no invoice has been received yet, you can issue a pro forma invoice for the correct amount. As soon as the proper invoice is received, it replaces the pro forma invoice. Sup­port­ing documents or internal receipts are issued, for example, for accruals and deferrals at the end of the year.

Structure and content of a pro forma invoice

The pro forma invoice is es­sen­tial­ly the same as the com­mer­cial invoice, but must be iden­ti­fied ex­plic­it­ly as a pro forma invoice. We recommend that you use “pro forma invoice” for the subject line.

Note

There is no leg­is­la­tion to denote what belongs in a pro forma invoice. However, we recommend that you follow the guide­lines for creating com­mer­cial invoices.

If you issue a pro forma invoice within the scope of foreign trade, we recommend that you list all mandatory data for export invoices in order to suf­fi­cient­ly inform the importer and the relevant authority of the importing country about the details of the shipment.

Note

A com­mer­cial invoice is an invoice for foreign business. In order for imported goods to clear customs suc­cess­ful­ly, com­mer­cial invoices must contain, in addition to the mandatory details for domestic invoices, ad­di­tion­al details which enable customs employees to assess the goods under customs law. It’s also important to adhere to the import reg­u­la­tions of the des­ti­na­tion country.

Required details on com­mer­cial invoices usually consist of:

  1. The time and place where the products/services are sold
  2. The seller’s name, address, contact info, tax ID number (if ap­plic­a­ble)
  3. The buyer’s name, address, contact info, tax ID number (if ap­plic­a­ble)
  4. A detailed de­scrip­tion of the mer­chan­dise e.g. HS Number, name of each item, grade or quality, country of origin, currency, quantity, and price per unit, etc.
  5. The country of shipment
  6. The ap­pro­pri­ate trading term and location as­so­ci­at­ed with the term
  7. All goods and services provided by the buyer for producing the mer­chan­dise (e.g. materials and tools used)
  8. A signature, signor’s title, and date of signing
  9. Any ad­di­tion­al in­for­ma­tion required e.g. import license re­quire­ments, ad­di­tion­al cer­ti­fi­ca­tions required by the buyer’s country, U.S. gov­ern­ment-issued cer­ti­fi­ca­tions, U.S. export controls, etc.

The invoice should be signed by hand and, if necessary, stamped with a company stamp.

Pro forma invoice vs. com­mer­cial invoice

The pro forma invoice is dis­tin­guished from the com­mer­cial invoice by its name and function. On a recipient’s pro forma invoice, you clearly state that the invoice was created for formal reasons only and therefore does not contain a payment request. Unlike in the com­mer­cial invoice, you do not specify a payment amount in the pro forma invoice.

Click here for important legal dis­claimers.

Reviewer

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