What is a VAT invoice?
It is a basic accounting document, confirming the conclusion of a transaction between the parties mentioned in its content. The VAT invoice is binding on both the buyer of goods or services and the seller (service provider). The former is required to pay the fee in the amount indicated on the invoice, while the latter is required to pay the tax due.
VAT invoice – information in the content
A correctly drafted VAT invoice must contain the following data:
- data of the issuer of the invoice and the purchaser of goods (services), i.e. Name or company name, address of residence or registered office, Tax ID;
- invoice number;
- the name of the goods (service), the quantity or number of goods sold (description of the scope of the service provided);
- The net price, gross price, as well as the rate and amount of VAT (if applicable);
- date of issuance of the document or delivery of goods (performance of services);
Important!
The VAT invoice shall be issued in two counterparts – one for each party. There is no need to mark either of them as original or copy – both are equivalent.
Important!
According to current regulations, there is no need to label a VAT invoice with the title “VAT invoice”, the word “Invoice” alone is sufficient. However, nothing prevents you from using the old way (for example, to avoid possible misunderstandings).
Pro forma invoice vs. VAT invoice
On the surface, you won’t find too many differences between the two types of documents – the set of data on a pro forma invoice is exactly the same as on a VAT invoice.
Proper designation
The key element to distinguish the two types of documents at first glance is the title – “Pro forma invoice.” Marking an invoice in this way ensures that it will not be treated as a VAT invoice under any circumstances.
Pro forma invoice vs. VAT
A VAT invoice is an accounting document, while a pro forma, on the other hand, is a commercial or informational document. Therefore, it is not treated by the tax authorities as an invoice, and therefore does not create a tax liability or oblige the buyer to pay.
Purpose of the pro forma invoice
In view of the above-mentioned differences between a VAT invoice and a pro forma invoice, you may ask yourself: what exactly is the purpose of issuing the latter?
In some cases, a pro forma invoice is treated as a concretized commercial offer. In such a situation, the seller issues a pro forma document to present the scope of services or value of goods to the potential buyer.
If the contractor, after receiving a pro forma invoice, makes payment of part or all of the amount shown on the invoice, he thereby expresses his willingness to conclude a commercial agreement (payment will be treated as acceptance of the offer).
Important!
A pro forma invoice can be treated as a commercial offer only after the customer pays the amount due according to the amount shown on the invoice – this can be an advance or the full amount.
Issuing a pro forma invoice can also be a way to include all the most important information about a potential transaction in one place. The customer, upon receiving such an invoice, will be able to evaluate the scope of the service or list of products, check the method and rates of taxation, and compare the costs with those of competitors.
However, if it were to happen that the contractor backs out, no one suffers the consequences, and the only real loss is… the loss of time spent preparing the offer in the form of a pro forma invoice. In comparison: if a counterparty withdraws after the VAT invoice has already been issued, it is necessary to correct the document – which is why it is so important to issue the VAT invoice only after the receivable has been received, or to also use advance invoices. This will not eliminate the problem, but can significantly reduce its occurrence.
