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A proforma invoice is not a true / commercial invoice - it is simply a document that declares the seller's commitment to provide the goods or services specified to the buyer at certain prices. A proforma invoice is a common form used in both domestic and even more commonly in international trade to provide buyers as well as in the event of international trade the appropriate import/export authorities, where additional details may be required for customs, with required information about shipment. Proforma invoices are not recorded as an accounts receivable by the seller nor are they recorded as an accounts payable by the buyer. A pro forma invoice is very similar to a sales quote because it is used to formally define the value of a trade prior to shipping or the actual completion of the sale.
According to the HMRC proforma invoices are not VAT invoices, and therefore should be marked with the words 'This is not a VAT invoice'. If the recipient accepts the goods or services offered in the proforma invoice and you in turn supply them, then you must issue a proper VAT invoice within the appropriate time limit. A proforma invoice is a quote in an invoice format that may be required by the buyer to apply for an import license, contract for pre-shipment inspection, open a letter of credit or arrange for transfer of hard currency. A proforma may not be a required shipping document, but it can provide detailed information that buyers need in order to legally import the product.
Note: Incoterms© 2010 Rules - "Incoterms" is a trademark of the International Chamber of Commerce. Incoterms© rules are an internationally recognized standard and are used worldwide in international and domestic contracts for the sale of goods.