Accounting glossary

Proforma invoice

What a proforma invoice is, when bookkeepers use it, and the per-jurisdiction rules on whether it can be treated as a tax invoice in 2026.

By ExpenseFlow team
· 18 May 2026

Definition

A proforma invoice is a preliminary document issued by a seller to a buyer before a transaction is finalised. It shows the goods or services being proposed, the expected total, and typically a validity date or commitment expiry. It is used as a formal quote or commitment to supply but carries no payment obligation on the buyer and no input tax recovery rights. A proper invoice or tax invoice must follow once the supply happens.

What a proforma invoice means in practice

For a bookkeeper, a proforma is a document that looks like an invoice but is not one. It does not post to AR. It does not appear on the VAT or GST return. It does not move the books at all. Its sole purpose is to give the customer something formal-looking to act on (typically to arrange payment, a letter of credit, or import paperwork) before the supply happens.

The most common proforma scenario is international trade. A UK exporter shipping to a buyer in Singapore sends a proforma so the SG buyer can apply for an import licence, arrange foreign-exchange, or get the funds approved by their treasury. Once the goods are shipped, the exporter issues a proper invoice that replaces the proforma. The proper invoice is the document that posts to AR on the supplier side and to AP on the buyer side.

A practical example: a UK consultancy lands a large project with an SG client. The client requires a 30% upfront deposit. The consultancy issues a proforma invoice for the full 50,000 project value with a note that 30% (15,000) is payable as a deposit before work starts. The client pays the 15,000. On the supplier side, this is treated as deferred revenue (no proper invoice has been issued yet), not as cleared AR. As project milestones are delivered, the consultancy issues proper tax invoices that draw down the deferred revenue and create AR balances that the deposit is applied against.

How proforma invoices work by country

United Kingdom

HMRC explicitly excludes proforma invoices from valid VAT invoice status under VAT Notice 700/21. A proforma cannot support input VAT recovery. A valid tax invoice must be issued before the customer can claim input VAT, even if the proforma was paid in advance. The HMRC convention is to mark the proforma clearly as “Proforma Invoice” or “This is not a VAT invoice” so neither party mistakes it for the real document.

Australia

The ATO does not treat a proforma invoice as a tax invoice. Input tax credits require a proper tax invoice with the supplier’s ABN and the “Tax Invoice” label prominently displayed. A proforma can be issued for the quote stage but a separate tax invoice must follow once the supply happens. The ATO has been clear in multiple rulings that a document labelled “Proforma” cannot satisfy the tax invoice rules under section 29-70 of the GST Act.

Canada

The CRA does not accept a proforma invoice as supporting documentation for an Input Tax Credit. The Input Tax Credit Information Regulations require the supplier’s GST/HST registration number on the invoice that supports the ITC claim; a proforma typically omits this and is not intended to satisfy the regulations. CRA audit teams will disallow ITCs supported only by a proforma.

New Zealand

Inland Revenue treats a proforma invoice as a quote document. It does not satisfy the “taxable supply information” rules introduced in April 2023 and cannot support an input tax claim. A proper tax invoice (or taxable supply information document) must follow.

Singapore

IRAS treats a proforma invoice as a pre-sale document only. It cannot support an input tax claim under the GST General Guide. A valid tax invoice meeting section 7.1.4 requirements must be issued separately before the customer can claim input GST. The proforma is typically marked clearly to avoid confusion with the eventual tax invoice.

The proforma sits at the front of the sales cycle:

  • An invoice is the proper post-supply document that replaces the proforma.
  • A tax invoice is the version a VAT or GST registered supplier issues to support input tax recovery.
  • A sales invoice is a synonym for invoice in many UK contexts.
  • A proforma does not create accounts receivable; only a proper invoice does.

See also

For the proper invoice that replaces a proforma at the supply stage, see the invoice and tax invoice entries.

FAQ

See the answered questions above for when to issue a proforma, deposit treatment, and the VAT or GST tax-point implications.

Questions, answered

Common questions

When do I issue a proforma invoice?

Typically for an upfront-payment business model where the seller wants the customer to commit funds before the supply happens. Common examples: international trade (the buyer needs the proforma to arrange a letter of credit), bespoke product orders, and large project deposits. Once the work is done, a proper invoice replaces it.

Can my customer pay against a proforma invoice?

Yes, but the payment is treated as a deposit, not as settlement of an invoice. From the supplier side, the receipt is deferred revenue (the supply has not yet occurred); from the buyer side, it is a prepayment (the benefit has not yet been received). A proper invoice must follow once the supply happens to allow the buyer to claim the input tax.

Does a proforma invoice trigger VAT or GST?

Generally no. The VAT or GST tax point is the earlier of invoice date, payment date, or date of supply (with country-specific variations). A proforma is not a 'tax invoice' for tax point purposes, but if the customer pays against it, the payment date itself can trigger the tax point and create an output VAT or GST liability for the supplier.

Keep exploring

Invoice

A commercial document issued by a seller to a buyer that itemises a transaction (goods or services supplied), the amount due, and the paymen

Tax invoice

A formal invoice issued by a GST or VAT registered supplier that contains the specific information the tax authority requires to support an

Sales invoice

An invoice issued by a business to a customer for goods or services supplied, in everyday UK and AU bookkeeping practice often used as a syn

Accounts receivable

A current asset on the balance sheet representing money customers owe to the business for goods or services delivered but not yet paid for,

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