Proforma invoice
You receive a proforma invoice and are unsure whether you need to pay it, or a client asks for one while you have not delivered anything yet. The document looks like an invoice but does not behave like one, and in practice that causes confusion for both the sender and the recipient.
Below you can read exactly what it is, when to use it, how it differs from an invoice and a quote, and what to do with it in your bookkeeping.
What is a proforma invoice?
A proforma invoice is a provisional overview of what you are going to deliver and what it costs, drawn up in the form of an invoice but without any payment obligation. You send it before you deliver, so your client knows where they stand or has the details they need.
Legally and for tax purposes, it is not an invoice. No payment obligation arises, no payment term starts running and the document does not count in anyone's records. Only the final invoice is a real payment request, and that is also the document that counts once you pay incoming invoices and process them in your bookkeeping.
What does pro forma mean?
Pro forma is Latin and means ‘for the sake of form’. A document drawn up pro forma looks like the real thing, but does not have the status of the real thing.
That expression explains exactly why the document exists. It gives your client the form and content of an invoice at a time when a real invoice is not yet relevant.
Proforma invoice or pro forma invoice?
In Dutch, proforma factuur, pro forma factuur and proformafactuur are all in use and mean the same thing. The separate spelling follows the Latin original, the compound spelling fits Dutch spelling rules.
You will also come across the same document as a pro forma nota, and in international correspondence as a proforma invoice. Choose one spelling and use it consistently in your own documents.
When do you use a proforma invoice?
You use a proforma invoice when your client needs certainty or information in advance, while nothing has been delivered yet. The document bridges the period between the agreement and the delivery.
After a quote has been accepted
After accepting a quote, a client sometimes asks for a proforma invoice. The quote convinced the client, but their accounts department now needs your company and payment details to set you up as a supplier in the system.
The proforma contains those details in a recognisable format, without a payment obligation arising yet. It is an intermediate step, not a second quote.
For an advance payment
For an advance payment, a proforma invoice shows which amount your client transfers before you start work. This comes into play with large assignments, with new clients and with international transactions, where delivering on credit carries a greater risk.
Important here: the payment that follows is an agreement between you, not a payment on an official invoice. You only send that invoice after delivery.
For exports outside the EU
For exports outside the EU, customs often asks for a proforma invoice in order to assess the value and nature of the shipment. This also applies to shipments for which no payment is made, such as product samples, warranty deliveries and returns.
Your client uses the document to apply for permits or customs clearance documents. Because such shipments are often settled in a different currency, the costs of international payments are factored into the price you put on the document.
What is the difference between a proforma invoice and an invoice?
The difference between a proforma invoice and an invoice lies in the legal status, not in the appearance. An invoice is an official payment request that must meet the requirements of the Dutch Tax Administration (Belastingdienst) and that places a payment obligation on your client. A proforma does neither.
That carries through into your bookkeeping. You record an invoice under accounts receivable or accounts payable and include it in your VAT return. A proforma invoice does not belong in either set of records, neither for the sender nor for the recipient.
The order also differs. The proforma precedes the delivery, the invoice follows it. In practice, the final invoice completely replaces the proforma.
What is the difference between a pro forma note and a quote?
A pro forma note and a quote serve a different purpose, even though neither is binding on the client. A quote is an offer: you try to convince the client, often with an explanation of the approach and the scope.
A pro forma note usually comes after that acceptance. The client has already said yes and now needs figures and details in invoice form, for example to pay or to submit an application. A ‘pro forma quote’ therefore does not exist.
Do you have to pay a proforma invoice?
You do not have to pay a proforma invoice, because no official payment obligation arises from it. It carries no statutory payment term and your supplier cannot base a debt collection process on it.
In practice, payments are made on it, namely when you have agreed that delivery only starts after advance payment. That payment is then based on your agreement, not on the document. Once delivery has taken place, you should still receive a final invoice for your own records.
If you receive a proforma without any prior agreement, there is no reason to pay. In that case, ask for a regular invoice or for an explanation.
How do you create a proforma invoice?
You create a proforma invoice like a regular invoice, with one difference that determines everything: you state in large, clear letters that it is a proforma. Every accounting package that creates invoices can handle this, and otherwise a document in Word or Excel will do.
What do you put on a pro forma invoice?
On a pro forma invoice you include the same information your client expects on a regular invoice, supplemented with whatever the situation calls for. The statutory invoice requirements do not apply here, but an incomplete document will still cost you time.
The word proforma: visible at the top, so nobody mistakes the document for a payment request.
Your company and payment details: including your Chamber of Commerce (KVK) number, VAT number and IBAN, because that is often exactly why the document was requested.
A specification per line: description, quantity, unit price and total amount, and for exports also model number, colour and dimensions.
Shipping details for exports: mode of transport, number of packages and gross weight, plus whether it concerns a sale, a sample, a repair or a return.
The more specifically you describe the shipment, the smaller the chance that customs will reject the document.
Why a proforma invoice does not get an invoice number
A proforma invoice does not get a number from your continuous invoice series. The Dutch Tax Administration requires sequential numbering for official invoices, and if you use up a number from that series for a document that never becomes an invoice, a gap appears in the series.
So use no number, or a clearly different designation such as PF followed by its own sequence number. If the document ends up in your bookkeeping automatically, remove it again.
How does VAT work on a proforma invoice?
The VAT on a proforma invoice is for information only: you state the rate and the amount so your client knows the total price, but you do not pay that VAT yet and your client cannot reclaim it yet. VAT only becomes due on the final invoice.
There is a catch, though, that is rarely mentioned. Article 37 of the Dutch VAT Act (Wet op de omzetbelasting) states that anyone who shows VAT on an invoice owes that VAT at the moment of issue, even if no delivery has taken place. In case law, the deciding factor is whether the document has all the characteristics of an invoice.
A proforma that is not recognisable as such and otherwise looks identical to an invoice can therefore still be classified as an invoice. That is exactly why the note at the top is so important. If you are unsure about your own situation, consult your accountant or the Dutch Tax Administration.
How do you record a proforma invoice you have received?
You do not record a proforma invoice you have received. The document is not an invoice, so it does not belong in your accounts payable and does not count towards your VAT return. You cannot reclaim the VAT on it.
Keep it as an attachment to the assignment or order, so you know what was agreed. If you pay in advance on the basis of the proforma, record that payment as an advance payment and wait for the final invoice before processing the costs and the VAT.
If that invoice does not arrive, ask for it. Without an official invoice you miss out on the VAT deduction and a document is missing from your records.
Paying and tracking invoices with GoDutch
Once the proforma has been converted into a final invoice, the work that does count in your bookkeeping begins. GoDutch is not a bank but an all-in-one business account, with which you forward and pay incoming invoices without typing over any details.
If you pay a supplier outside the EU, you see in advance what the transfer costs, so the amount you pay does not differ from what was on the invoice. You connect your accounting package to your account, so the final invoice and the payment come together.
FAQ
Frequently asked questions about the proforma invoice
What is a proforma invoice?
Proforma invoice is the English term for a proforma factuur and means exactly the same: a provisional overview of goods, quantities and prices without a payment obligation. You mainly come across the term with international shipments, where customs uses the document to assess the value of the cargo.
Can you reclaim VAT on a proforma invoice?
You cannot reclaim VAT on a proforma invoice. The right to deduct only arises with an invoice that meets the requirements of the Dutch Tax Administration, and a proforma by definition does not. So wait for the final invoice before including the VAT in your return.
Is a proforma invoice legally valid?
A proforma invoice is not legally valid as an invoice. You cannot use it to enforce payment or base a payment reminder or debt collection on it. What can be binding is the agreement you made around it, for example that you only deliver after advance payment.
How long is a proforma invoice valid?
There is no statutory period of validity for a proforma invoice, because it is not an official document. If you do not want the prices to remain open indefinitely, add a term yourself, for example thirty days, just as you would with a quote.
Can you convert a proforma invoice into a final invoice?
You convert a proforma invoice into a final invoice once you have delivered. You then create a new invoice with the same lines and amounts, this time with a number from your continuous series, an invoice date and a payment term. The proforma lapses at that moment.
Does a proforma invoice need a Chamber of Commerce (KVK) number?
A Chamber of Commerce (KVK) number is not mandatory on a proforma invoice, because the statutory invoice requirements do not apply here. In practice you do include it, because your client often uses the document precisely to set you up as a supplier. For the final invoice it is a different story, as you can see in the overview of what must be on an invoice.
