Proforma vs Commercial Invoice — When to Use Which (and Why It Matters in Freight)

If you've been in freight long enough, you've seen both documents misused in ways that caused real problems — customs clearance delays, rejected shipments, VAT disputes, and payment terms that weren't honoured because the wrong invoice was presented.

The difference between a proforma and a commercial invoice sounds like a technicality. In practice, it determines whether customs clears your shipment, whether your buyer can pay you, and whether your cargo insurance is valid.

What Is a Commercial Invoice?

A commercial invoice is the official financial and legal record of a completed sale between a seller and a buyer. It is the primary document used in international trade to:

• Declare the value of goods for customs purposes
• Trigger the buyer's obligation to pay
• Serve as the basis for import duties and VAT calculation
• Support cargo insurance claims (as proof of declared value)
• Satisfy export declaration requirements

A commercial invoice is issued after the sale has been agreed and the goods are ready to ship. It is a demand for payment.

What a commercial invoice must contain

• Seller's full name, address, VAT number, and contact details
• Buyer's full name, address, and VAT number (for intra-EU transactions)
• Invoice number and date of issue
• Incoterms (e.g., DAP Vilnius, EXW Warsaw, CIF Hamburg)
• Description of goods — specific enough for customs classification
• HS (Harmonised System) tariff codes
• Quantity, unit of measure, unit price, and total price
• Currency
• Country of origin of the goods
• Gross and net weight
• Payment terms (e.g., 30 days from invoice date)
• Bank details for payment

What Is a Proforma Invoice?

A proforma invoice is a preliminary, non-binding document that looks like a commercial invoice but is not a demand for payment and does not represent a completed transaction.

The word proforma comes from Latin — pro forma, meaning “as a matter of form.” It is issued before the actual transaction is finalised.

A proforma invoice is used to:

• Show a buyer what the final invoice will look like before dispatch
• Provide a value declaration for customs when no actual sale has occurred
• Support an import licence or letter of credit application
• Enable the buyer to arrange advance payment or internal purchase approval
• Serve as a quotation in a formal document format

A proforma invoice does not create a legal obligation to pay. It is not a VAT document. It cannot be used to reclaim VAT.

The Core Difference

When to Use a Commercial Invoice

1. Goods are sold and shipped to a buyer

The standard case. Seller sends goods, commercial invoice accompanies the shipment. Customs uses it to assess duties. The buyer uses it to pay.

2. Intra-EU shipments with VAT implications

For VAT-registered buyers in other EU member states, the commercial invoice allows zero-rating of VAT (reverse charge mechanism). A proforma cannot be used for this purpose.

3. Export outside the EU

Customs authorities in the destination country require a commercial invoice to calculate import duties. A proforma is not accepted as a substitute — unless no sale occurred.

4. Insurance claims

Cargo insurance pays out based on the declared value. The commercial invoice is the primary proof. If you present a proforma, the insurer may dispute the payout.

5. Letter of credit transactions

Banks operating letters of credit require a commercial invoice (not a proforma) to trigger payment.

When to Use a Proforma Invoice

1. Goods moving without a sale

The most common legitimate use. When goods cross a border but no commercial transaction is taking place:

• Sending product samples to a potential customer
• Returning repaired goods to the owner
• Shipping goods to an exhibition or trade fair
• Moving goods between company branches (intercompany transfers)
• Sending warranty replacement goods at no charge

2. Advance payment or deposit requests

When a seller asks for a deposit before dispatch, a proforma is appropriate — the final sale hasn't happened yet. The commercial invoice follows when goods ship.

3. Letter of credit or import licence applications

Buyers in some countries need to apply for import licences before goods can ship. A proforma provides the expected value, description, and terms.

4. Internal purchase approval

Large companies often require internal sign-off before committing. A proforma in invoice format gives finance or procurement something to approve.

Side-by-Side Comparison

The Most Common Mistakes

1. Sending a proforma when a commercial invoice is required — The shipment arrives at the border. Customs asks for the commercial invoice. The driver has a proforma. The customs agent rejects it. This happens regularly on shipments to the UK, Switzerland, Turkey, and non-EU destinations.
2. Using a proforma to undervalue goods — Declaring a low value to reduce duties is fraud — even on a “non-binding” document. Customs cross-reference against market prices.
3. Forgetting to follow up with a commercial invoice — A proforma triggers a deposit. Goods ship. The seller forgets the commercial invoice. Payment is delayed because the buyer has no document to book.
4. No proforma for samples or exhibition goods — Goods cross borders without any value declaration. A proforma with stated value protects the carrier and shipper.
5. Wrong Incoterms on the commercial invoice — If the invoice says EXW but the arrangement is DAP, customs calculates duties on the wrong base value.

Quick Decision Guide

Ask yourself: has a sale taken place?

• Yes, goods are sold → Commercial invoice. Always.
• No sale — samples, repairs, own goods, intercompany → Proforma invoice.
• Sale agreed but buyer needs to pay a deposit first → Proforma now, commercial invoice at dispatch.
• Buyer needs an import licence or letter of credit → Proforma now, commercial invoice when goods ship.
• Goods going to a trade fair and coming back → Proforma (or ATA Carnet).