If you have a business focused on the sale of products, it is useful to understand what a pro forma invoice is.
This document is often confused with a quotation. Although there are similarities between the two, they are not the same.
To clarify this topic, below you will find the main information about this document.
Pro Forma Invoice: What is it and when should it be used?
A pro forma invoice is a document whose purpose is to inform customers or potential customers about the value of goods.
This is similar to a quotation, which serves the same purpose.
However, the two documents are generally used in different situations.
On the one hand, quotations are usually issued by companies that provide services.
On the other hand, pro forma invoices are generally associated with the supply of goods in international trade.
In other words, the document can be used to provide details about quantities of goods for customs purposes.
However, it is important to note that this distinction in the use of the two documents is not mandatory.
Therefore, each seller is free to issue whichever document is more appropriate, whether a quotation or a pro forma invoice.
What information should a pro forma invoice contain?
A pro forma invoice provides an exact description of the products or services involved in the commercial transaction.
Although it is essentially an informative document, it must be communicated to the Tax Authority.
In this regard, it is important to include the tax identification number (NIF), as this number establishes the connection with the Tax Authority.
The information that should appear on the pro forma invoice includes:
- Name and address of the seller and buyer;
- Transaction items;
- Unit and total price;
- Weight and dimensions of the goods;
- Transaction and payment terms;
- Transport, insurance and other costs;
- Expected delivery date;
- Validity date;
- Applicable VAT rate;
- Discounts, where applicable.
In addition to this information, the document should clearly state that it does not constitute an invoice.
What are the advantages and when should it be used?
This document offers several advantages, particularly in international commercial transactions. However, this is not the only situation in which it can be used.
As it follows a standardised format, it is easy to understand and complete.
Furthermore, the information included in the pro forma invoice is quite comprehensive.
To assist with customs procedures when goods are transferred abroad, pro forma invoices are widely used.
The document provides both the authorities and the buyer with information about the details of the goods.
When different currencies are involved in a transaction, it can also help with cost comparisons.
Pro forma invoices are also an excellent way of providing the buyer with a clear overview of both the seller and the product they intend to purchase.
As for when it can be used, it is commonly issued in connection with international transactions.
However, as mentioned above, it can also be used for transactions within Portugal.
This document can be issued whenever considered appropriate, as there is no need to charge VAT on these documents.
If the buyer agrees to the terms described in the pro forma invoice, the seller can subsequently issue an invoice-receipt containing the same information.
The invoice-receipt, in turn, is a document with fiscal value.
It is also important to note that each pro forma invoice does not necessarily need to have a corresponding commercial invoice.
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