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In the world of business, invoices are more than just bills—they’re documentation, communication, and compliance tools. But not all invoices serve the same purpose. Two commonly used types are the proforma invoice and the tax invoice.
So, what’s the difference between a proforma invoice and a tax invoice, and how do you know which one to use? This guide by EximPe breaks down the purpose, timing, legal weight, and usage scenarios for each.
A proforma invoice is a preliminary document that outlines the details of a transaction before it's finalized. Think of it as a formal quote—it shows what the customer can expect but isn’t a legally binding demand for payment.
Purpose: Communicate pricing, product details, shipping costs, and terms in advance to gain buyer approval or support trade processes like import permits or financing.
A tax invoice is the final billing document issued after a sale has taken place. It confirms that goods or services have been delivered and payment is due. It includes taxes such as VAT, GST, or sales tax, depending on the jurisdiction.
Purpose: To formally request payment and comply with government tax regulations.
Use a proforma invoice when:
Example: An exporter in India sends a proforma invoice to a buyer in Germany who needs it to arrange a letter of credit before confirming the order.
Use a tax invoice when:
Example: A seller completes a B2B software license sale and sends a tax invoice including GST to the client in the same country.
A proforma invoice should never be treated as a tax invoice. It holds no value for accounting or legal enforcement.
Governments don’t allow tax credits or deductions based on proforma invoices—they require proper tax invoices.
Always label invoices clearly as “Proforma Invoice” or “Tax Invoice” to avoid confusion for auditors, customs, or finance teams.
Once a deal is confirmed:
Understanding the difference between a proforma invoice and a tax invoice helps you avoid legal risks, streamline operations, and build trust with clients. If you're quoting prices or preparing for customs—use a proforma invoice. Once it’s time to bill—use a tax invoice with all legal requirements in place.
Having the right document at the right stage keeps your business professional, compliant, and smooth-running.
A proforma invoice is a preliminary quote sent before a transaction is finalized. A tax invoice is a legally binding document requesting payment after a sale.
No, a proforma invoice cannot be used to demand or process payment. It’s only informational.
No. Only a valid tax invoice qualifies for input tax credits.
Yes, if you're supplying taxable goods or services, a tax invoice is mandatory for compliance.
Before the sale is finalized, especially during negotiations, customs approval, or when a buyer requests an official estimate.
If the sale is finalized and you don't issue a tax invoice, you may face compliance issues and the buyer may not be able to claim tax credits.
Yes. Once the sale is confirmed, create a tax invoice using the same data but with proper tax details and legal formatting.
Yes. For international shipments, a commercial/tax invoice is required for customs and regulatory compliance.
No, EximPe does not offer a proforma invoice generator. However, you can use their regular invoice generator at to create comprehensive commercial or tax invoices for your business needs.
Yes, if the deal is finalized immediately. But for international sales or longer negotiations, a proforma invoice is often essential.
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