A pro forma invoice is a billing document that does not require the recipient to make a payment. A pro forma invoice is issued for reporting purposes.
Overall, a pro forma invoice is primarily used for tax purposes. By definition, however, a pro forma invoice is not a genuine invoice. It does not require the recipient to make a payment. Its purpose is to indicate the value of a shipment of goods.
Pro forma invoices for export
Pro forma invoices are primarily used for export transactions with non-EU countries. By using them, it is possible to ship goods and products to business partners at no cost. A pro forma invoice serves as documentation for goods that have no commercial value. It is typically included with a shipment of goods, as it provides a detailed description of the goods and is therefore essential for customs clearance.
Generating Proforma Invoices in CATAMA Software
In CATAMA Software, pro forma invoices can be generated with a single click in the Billing section for regular orders and invoices, in order to document the value of a shipment of goods—for example, as required for tax purposes.
If a pro forma invoice is included, no flat-rate customs duty is charged on shipments of goods to other countries. For shipments accompanied by a pro forma invoice, customs authorities use the actual price paid as the basis for calculation.
Pro forma invoice as an advance invoice
Another use for pro forma invoices is as a preliminary copy of an invoice. In CATAMA Software, pro forma invoices can therefore also be generated to provide advance notice of an invoice to be sent at a later date. In this case, the pro forma invoice includes the supplier’s address and account information, the price of the goods and services, as well as the payment terms, delivery terms, and a description of the goods.
What value of goods must be declared?
When issuing a pro forma invoice for export, a so-called “declaration of value” must be provided for the shipment. If there are no realistic estimates or calculations regarding the shipment’s value, one should avoid understating the value in order to stay below certain thresholds. A declared value that does not reflect reality will be detected at the latest during the next tax audit. The following options are available:
- Declaration of the exact value of the goods at a later date, or
- Submission of a so-called incomplete customs declarationthat includes an indication of the customs value.
Pro forma invoices in your own accounting system
In invoicing and accounting, pro forma invoices are also used as prepaid and accrued expenses. A pro forma invoice can be generated in CATAMA Software with just a few clicks and can replace a “regular” invoice if the latter is not yet available as a document.
For example, if certain shipments of goods are scheduled for the end of the year or the beginning of the next year, a pro forma invoice can be issued to record the cost of the services in advance.
In this case, the pro forma invoice serves the same purpose as an internal document. However, it is replaced in the accounting system by the original invoice as soon as it is received. Here, we explain how to create pro forma invoices in the CATAMA Software Suite.
Applications of the pro forma invoice
- for import/export transactions as proof of the value of the goods for customs or tax assessment purposes
- Free replacement of goods, e.g., under warranty
- Declaration of Free Sample Shipments
- Deliveries and services paid in advance
- Spare Parts Deliveries
- Donations & Gifts
