A proforma invoice is a preliminary document that shows what the final invoice will contain (items, quantities, prices and terms) before anything has been supplied. It is not a tax invoice. Under the EU VAT Directive, VAT becomes chargeable when the supply takes place or when a payment on account is received (Articles 63 and 65), and a business can only deduct VAT if it holds a proper invoice (Article 178), so a proforma creates no VAT for either side. It's used to request payment up front, or to give the buyer a document to approve internally before ordering. Head it “Proforma invoice”, give it a reference outside your invoice series, and state that it is not a VAT invoice. Example: PF-004 lists 50 units at €40, €2,000 excluding VAT, payable before dispatch. Common mistakes: taking the advance and issuing nothing else, when in the EU a payment on account from a business customer needs its own invoice (Article 220), and recording the proforma as a sale in your books.
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