Pro forma invoices play a key role in German businesses, including with exports to non-EU countries, B2B sales and customs clearance. They are used for advance communication in international payment and product transactions. Unlike traditional invoices, pro forma invoices are not relevant to a business' accounting.

Despite their widespread use, there is often uncertainty about when and how pro forma invoices should be used and their legal limitations. In this article, we explain how pro forma invoices work in Germany, including what they should contain and when and how to use them.

What's in this article?

• What are pro forma invoices?
  
• How are pro forma invoices used in Germany?
  
• What information must a pro forma invoice contain?
  
• How to create a pro forma invoice with a payment request
  
• How are pro forma invoices processed?
  
• How do pro forma invoices, quotes and advance invoices differ?
  
• Legal risks associated with the improper use of pro forma invoices
  
• Obligations and recommendations for German businesses
  

What are pro forma invoices?

Pro forma invoices are preliminary invoice documents created for informational purposes. They are not used for tax accounting or payment processing. Instead, they are used for the advance communication of prices and services. In contrast to regular invoices, they do not contain any tax-related claims to payment and do not entitle the customer to input tax deductions.

Pro forma invoices are often used for quotes, exports and internal business processes. This is especially true for international commerce, where pro forma invoices are required for payment requests before delivery or for customs clearance for non-commercial exports (e.g. sample shipments, gifts or guaranteed deliveries).

Is a pro forma invoice a real invoice?

No, a pro forma invoice is not a real invoice, according to the definition provided by Section 14 of the German Value-Added Tax (VAT) Act (UStG). Although pro forma invoices and regular invoices contain similar information – such as the customer address, product or service description and total amount – pro forma invoices lack tax relevance. Therefore, it is important for the pro forma invoice to clearly indicate that it is not a taxable invoice.

How are pro forma invoices used in Germany?

In Germany, pro forma invoices are used in several specific contexts:

Customs clearance for non-commercial exports

When a business ships products across borders free of charge – such as samples, warranty deliveries or gifts – there is no standard commercial invoice. In these cases, customs requires a pro forma invoice as documentation for valuation.

Providing a pro forma invoice can help ensure that the export declaration is completed correctly, which can help avoid delays and facilitate delivery to the recipient country. A missing or incomplete pro forma invoice could result in the product being held back by customs or subject to additional tax.

Requests for payment before delivery

In international business, it is common practice for customers to make payments before the business ships the goods. This is especially important for high-risk cases, longer supply chains and unstable currencies. In these situations, businesses use pro forma invoices to send the customer a non-binding payment request that contains all relevant price and delivery information.

This type of advance invoicing is a common means of securing and accelerating the payment process. This is especially true for transactions with countries where advance payment is a pre-requisite for the release of goods or the allocation of foreign currency.

Stripe Invoicing helps you easily integrate pro forma invoices into your ordering or payment process. With Invoicing, you can also accept payments worldwide and create and send invoices directly online in just a few clicks – efficiently, legally compliant and refined for international customers. In addition, Invoicing helps you simplify and automate your invoicing while accelerating your accounting processes.

Internal estimates and quotes

Pro forma invoices can also serve as preliminary cost estimates, draft offers or draft invoices in the sales process. They can help businesses communicate prices and services and structure and coordinate offers internally before creating a formal invoice. They can also serve as the basis for budget approvals and approval processes, especially for complex projects and extensive service descriptions.

New international customers

Trust is an important factor when establishing business relationships with new customers abroad. In this context, pro forma invoices can be used as transparent means of communication for clarifying payment terms, delivery conditions and price components at an early stage.

Pro forma invoices allow the business to present the planned service in a legally non-binding way and facilitate payment approval, especially in the case of advance payment. In addition, they can reduce the risk of misunderstandings at the start of a business relationship and contribute to a professional external image.

What information must a pro forma invoice contain?

Even though pro forma invoices are not legally binding, they should contain certain information to be accepted in business transactions:

• "Pro forma invoice" as a heading
  
• "Not a taxable invoice" specified on the document
  
• Name and address of sender and recipient
  
• Description of the products or services
  
• Quantity and unit prices
  
• Total amount (in the foreign currency, if applicable)
  
• Shipping costs, international commercial terms (Incoterms) and customs tariff numbers
  
• Bank details for payment requests (e.g. International Bank Account Number [IBAN], Bank Identifier Code [BIC])
  

This information makes it easier for the recipient to classify the goods and ensures that they are more readily accepted by customs or internal approval processes.

How to create a pro forma invoice with a payment request

In international commerce and transactions with advance payment agreements, pro forma invoices can serve as informal requests for payment.

In this case, such documents also contain:

• Due dates
  
• Payment methods
  
• Clear payment instructions (e. g. "Please transfer the total amount before delivery".)
  

Remember that it is not necessary to record pro forma invoices as they do not constitute accounting transactions.

How are pro forma invoices processed?

Since they are not accounting-relevant documents, pro forma invoices are not entered into a business' accounts. They are used for communication purposes only. Payments made from pro forma invoices are initially processed as advance payments in a clearing account. The actual accounting entry only takes place when the business creates the official invoice.

For internal documentation purposes, businesses should assign pro forma invoices their own number range and archive them separately without including them in invoicing records.

How do pro forma invoices, quotes and advance invoices differ?

In day-to-day business, terms such as "quote", "advance invoice" and "pro forma invoice" are often confused with each other. This happens even though they are very different documents, both legally and functionally. While quotes and advance invoices sometimes pursue binding or tax-relevant objectives, pro forma invoices primarily serve as preliminary information and have no legal relevance within VAT law.

Quotes

Quotes are legally non-binding price and service specifications that are part of the offer phase. They usually do not contain payment information and do not trigger accounting transactions. Quotes are also limited in time, subject to conditions and used to request purchase decisions or proposals. Unlike a pro forma invoice, a quote can be the basis for concluding a future contract but does not carry an automatic expectation of payment.

Advance invoices

Advance invoices are binding partial invoices for services that have not yet been fully provided. They are subject to VAT, must meet invoice requirements according to Section 14 of the UStG and are recorded in accounting records.

It is important to clearly differentiate between these document types to avoid misunderstandings with customers and problems with customs and tax authorities, especially in an international context.

Legal risks associated with the improper use of pro forma invoices

If a pro forma invoice is mistakenly used as a genuine Invoice (e.g. with VAT identification or as a basis for input tax deduction), this can have legal and tax consequences. This is especially true if the tax office recognises it as a taxable service or if the recipient claims input tax without justification. Therefore, companies should ensure that pro forma invoices are clearly worded, do not contain tax-relevant information and are checked in advance.

In cases of dispute, a misleading pro forma invoice can be interpreted as an indication of a delivery that has already been made. This can trigger tax liability according to Section 13 of the UStG. In the case of intra-community supply and exports to non-EU countries, legally compliant wording is especially important and is ideally used in consultation with tax advisors.

Obligations and recommendations for German businesses

Even though pro forma invoices have no tax implications, a structured approach is important. This particularly applies to cross-border business and export transactions. Companies should clearly label and archive pro forma invoices, as well as organise them separately from accounting-relevant documents. A separate number range can help avoid confusion during tax audits.

For exports, businesses should also coordinate with the Automated Tariff and Local Customs Clearance System (ATLAS). Relevant information should be consistently stated, such as the value of the goods, customs tariff numbers and Incoterms.

Businesses should also be consistent with the way they create, document and approve pro forma invoices. Digital workflows and clearly defined internal processes can ensure transparency and reduce the risk of misinterpretation (e.g. in the event of an audit or when forwarding information to business partners).

International features of pro forma invoices

Although pro forma invoices are used worldwide, their legal meaning and practical use vary considerably from country to country. In France, for example, the "facture pro forma" is used in public requests for proposals. In the US, these documents serve for customs clearance and as a form of contractual security for new business partners.

As a result, it is important for German companies with international business relations to carefully examine the requirements of the respective local authorities and partner companies when doing business abroad. Format, language, currency information and additional notes (e.g. "For customs purposes only" or "Not for payment") play a key role. Carefully adapting invoices according to national requirements can help avoid misunderstandings and delays in customs clearance and payment approval.

Pro forma invoices for your business

Digital payment processes and customer accounts are ideal places for a business to integrate pro forma invoices. Automation can enable the business to customise invoices for each location and include country-specific requirements. This is useful, for example, when choosing a currency, specifying delivery conditions or providing additional customs information. At the same time, it can increase transparency in the purchasing process, especially for international orders and advance payments.

For reliable implementation, having the right technology is important. Pro forma invoices should be rule-based, clearly labelled and customised for different target markets. Stripe makes these processes simple through custom application programming interfaces (APIs), Stripe Checkout and invoice-based workflows from Stripe Invoicing.