Definition

A Proforma Invoice is a preliminary invoice issued before goods or services are delivered, often used for quotations or customs purposes. It is not a tax invoice and cannot be used for VAT recovery.

Key points

• Used for advance payments or import documentation.
• Must be followed by an official Tax Invoice once the transaction occurs.
• Common in export and B2B transactions.

Practical example

A supplier issues a proforma invoice to a UAE buyer for AED 25,000 before shipping the goods; the tax invoice follows upon delivery.

Why it matters

Understanding the difference between proforma and tax invoices prevents VAT reporting errors.