The difference in one table
| Proforma invoice | Tax invoice | |
|---|---|---|
| When | Before the sale or delivery | At or after the sale |
| Purpose | Show the final price, ask for advance, apply for import licence or loan | Ask for payment and record the sale |
| Legal bill? | No | Yes |
| Tax claim (input tax credit) | Not allowed | Allowed for registered buyers |
| In your accounts | Not recorded as a sale | Recorded as a sale |
| Title on top | PROFORMA INVOICE | TAX INVOICE |
When to use a proforma invoice
- The buyer must pay an advance before you make or ship the goods.
- The buyer needs a document to get a loan, a letter of credit or an import licence.
- Exports, where customs or the buyer's bank want the final value in advance.
- Large orders, so both sides agree on the exact items, prices and terms first.
Proforma invoice vs quotation
A quotation is an early offer, often one of several the buyer compares. A proforma invoice comes later, when the buyer has decided and wants the final, detailed price. Both are not tax invoices.
Turning a proforma into a tax invoice
- Open the proforma invoice.
- Make a copy of it, so the proforma stays on record.
- Change the document type to Tax Invoice. It gets a new tax invoice number from your normal series.
- Check quantities and prices against what you actually delivered, then send it.