Two documents can look almost identical. Both list a supplier name, a client name, line items, and a total amount. One creates a legal obligation, triggers VAT liability, and must follow strict formatting rules under EU law. The other is essentially a sophisticated quote with no legal weight until it is accepted and replaced by the real thing.
That distinction — proforma invoice versus tax invoice — has real consequences in VAT audits, customs clearance, and client payment processes.
What Is a Tax Invoice?
A tax invoice (often called a VAT invoice or simply an invoice in EU contexts) is a legally binding document that:
- Records a completed or agreed commercial transaction
- Creates a VAT liability for the supplier (they must remit the VAT shown)
- Gives the buyer the right to reclaim input VAT
- Must comply with the VAT Directive's mandatory fields (Article 226 of Directive 2006/112/EC)
- Must carry a sequential, unbroken invoice number from the supplier's invoice series
Under EU VAT rules, a tax invoice must be issued within 15 days of the end of the month in which the supply took place (the timing varies slightly by member state, but this is the EU-wide minimum). Once issued, it is a formal accounting document that must be kept for at least 10 years in most EU countries.
What Is a Proforma Invoice?
A proforma invoice is a preliminary document — a detailed pre-sale quotation or advance notification of what an invoice will look like. It:
- Does not create a VAT liability
- Does not give the buyer the right to reclaim input VAT
- Has no mandatory sequential numbering requirement
- Has no mandatory VAT number requirement (though including one is common)
- Is not legally binding on either party until accepted
- Must be clearly marked "PROFORMA INVOICE" to distinguish it from a tax invoice
The word "proforma" comes from Latin: "as a matter of form." It is a form-of-an-invoice, not the invoice itself.
Side-by-Side Comparison: 10 Key Criteria
| Criterion | Proforma Invoice | Tax Invoice |
|---|---|---|
| Legal status | Non-binding preliminary document | Legally binding accounting record |
| VAT liability | Does not create VAT liability | Creates VAT liability on issue (or delivery) |
| Input VAT reclaim | Cannot be used to reclaim input VAT | Required document for input VAT reclaim |
| Sequential numbering | Not required | Mandatory — must be sequential and unbroken |
| Supplier VAT number | Not required (good practice to include) | Mandatory in EU |
| Buyer VAT number | Not required | Required for B2B reverse charge invoices |
| VAT amount shown | Estimated/indicative only | Legally charged amount |
| Customs use | Suitable for sample/gift/temporary exports | Used for commercial goods sales |
| Accounting entry | No journal entry required | Must be entered in accounting records |
| Label requirement | Must read "PROFORMA INVOICE" | Must read "Invoice" or "Tax Invoice" |
When to Use a Proforma Invoice
Before delivery — client approval. Send a proforma before starting work or shipping goods so the client can approve the amount, review line items, and request amendments. Once approved, issue the tax invoice.
Advance payment requests. When you require a deposit before starting a project, a proforma can show the expected total and the advance amount due. Some businesses use proformas to request advance payments, though in many EU countries you must issue a proper tax invoice (a "prepayment invoice") if the advance payment is itself subject to VAT.
Customs for samples, gifts, and warranty replacements. Customs authorities require a document declaring goods' value even when no sale is taking place. A proforma is the appropriate document — it gives customs the declared value without implying a taxable sale.
Trade show and temporary imports. Goods imported temporarily for demonstration or display (e.g., samples to a trade fair in Germany) use a proforma, often alongside an ATA carnet, to clear customs without triggering import VAT and duties permanently.
Price estimates for clients. Proformas function as detailed quotes when you want to show a client the full cost breakdown — including expected VAT — before committing to the transaction.
When to Use a Tax Invoice
- After delivery of goods or services
- When requesting payment from a VAT-registered client who needs it for input VAT recovery
- For all domestic B2B transactions in the EU
- For cross-border EU B2B transactions (with reverse charge wording)
- As the commercial invoice accompanying physical goods shipments when a sale has occurred
- Any time a payment obligation is being formally created
A Real Scenario: Design Agency and New Client
A Berlin-based design agency quotes a Dutch e-commerce company for a brand identity project worth €12,000.
Stage 1 — Quote stage: The agency sends a proforma invoice marked "PROFORMA INVOICE — NOT A TAX DOCUMENT" for €12,000. It shows line items (logo design, brand guidelines, style guide). No VAT is shown as a legal charge. No invoice number from the sequential series. The Dutch client reviews and approves.
Stage 2 — Deposit: The client pays a 30% advance (€3,600). The agency issues a prepayment tax invoice (Invoice No. 2026-047) for €3,600 with reverse charge wording and the client's Dutch VAT number. This is now a real tax invoice.
Stage 3 — Delivery: Work is completed. The agency issues a final tax invoice (Invoice No. 2026-081) for €8,400 (balance), again with reverse charge wording. The Dutch client now has two tax invoices and can use both for their own accounting.
The proforma from Stage 1 is not entered into either party's accounting. It served its purpose as a formal quote and was superseded by the two tax invoices.
Credit Notes vs Proforma: A Common Confusion
When a transaction needs to be cancelled or adjusted after a tax invoice has been issued, you do not reissue a proforma. You issue a credit note — a formal accounting document that reverses all or part of a tax invoice and must reference the original invoice number.
A proforma cannot undo a tax invoice. Once a tax invoice is issued, VAT liability exists and can only be corrected through a proper credit note that both parties retain in their accounting records.
The VAT Audit Risk of Confusing the Two
A proforma invoice that looks like a tax invoice — same format, same numbering, VAT shown as a charged amount, no "PROFORMA" label — creates a serious audit risk. VAT auditors examining a supplier's records will treat any document that looks like a tax invoice as a tax invoice. If your proformas are indistinguishable from your invoices, you may face:
- Back-dated VAT liability on proformas issued without a matching tax invoice
- Gaps in your sequential invoice numbering (because proformas used numbers from your series)
- Rejected input VAT claims on your buyer's side if they submitted a proforma instead of a tax invoice
The fix is simple: clearly label proformas, use a separate numbering system (e.g., PRO-001), and never include VAT as a legally charged amount on a proforma.
Use our Invoice Generator to create both proforma documents and compliant EU tax invoices with the correct fields, reverse charge wording, and sequential numbering built in.