Performa Invoice and Commercial Invoice

Many foreign investors get confused by different invoices at their early stage in China market. The invoice, printed and issued by a company is the so called"Performa Invoice"while the official invoice printed by Chinese tax authorities is call"Fapiao"in China. Only the Fapiao is directly related with tax payment and could be used for bookkeeping, accounting, tax deduction, and tax rebate purposes.

In foreign trade, the seller usually provides two kinds of invoices to the buyer, Performa Invoice and Commercial Invoice. The Performa Invoice is equivalent to the contract between buyer and seller, which is mainly used for executing the respective rights and obligations of both parties. Commercial invoice is commonly related to the tax and customs clearance. These two invoices are opened separately for they have different roles and functions. The Performa invoice usually is issued earlier than the commercial invoice. This article will introduce the usage of these two invoices, so the companies or individuals who are recently engaged in international trade can get some references to the invoices involved in import and export.

1.Performa Invoice
Performa invoice is also called predict invoice (P/I). The buyer learns the general forms and contents of the future commercial invoice in advance after both sides reach a deal. On request of the importer, the exporter usually offers an informal invoice listing cargo name, specification, unit price, total price, delivery term, payment term and so on, which is used for applying for import license or foreign exchange from the domestic trade management administration or foreign exchange management administration. The Performa invoice is not formal, which cannot be used in Collection or Negotiation1 ,what's more, the price and total amount is estimated according to the temporal situation, which has no binding force to both sides. So, the Performa invoice is only a bill of estimation, and another formal commercial invoice must be followed. Generally, Performa invoice has the following three functions: 1. Quantifiable quotation, which is a general price reference of the cargo. 2. As sales confirmation, which means once the buyer confirms the Performa invoice, the contract is also established. 3. Allow the buyer to apply for: (1) Import admission, (2) Foreign exchange permit, (3) Open the L/C.

2.Commercial Invoice
Commercial Invoice refers to the evidential document of importing accounts, tax payment or customs declaration. The contents of commercial invoices generally includes: 1. the word: "INVOICE"; 2. Number and Date of Issuance; 3. Contract Number or Order Number; 4. Consignee's Name and Address; 5. Exporter's Name and Address; 6. Commodity, Specifications, Quantity, Gross Weight and Net Weight, etc; 7. Packing and Measurement; 8. Unit Price and Price Term; 9. Total Amount; 10.Signature of Maker. The roles of commercial invoice are as follows:

1.Check whether the seller performs in conformity with the contract. Invoice is a comprehensive account of the transaction, focusing on the price in the contract. Check the invoice contents and the contract terms item by item, the buyer can get information to the seller's delivery conditions.

2. Basis for bookkeeping and accounting. As the evidence of the transaction, commercial invoice is the basis for the seller's bookkeeping and accounting.

3.  Basis for customs declaration and calculation of the tax. Customs check and ratify the tax according to the price and the related description in the invoice, which is also one of the evidence for customs clearance in export place or delivery of goods in import place.

4. In addition, invoice can also be the value proof and the certification of supplementary details of the deal when used for customs statistics or insurance claims.

With regard to China's export, an invoice and a packing list must be submitted for export customs declaration. As for bookkeeping, accounting and tax rebate purpose, a special export invoice of export commodities would be required. This invoice is printed and issued by Tax Bureau.  

Seen from the above, Performa invoice and commercial invoice have the different functions; therefore, one has to distinguish the type of the invoice issued by the seller in international trade. Due to the differences between Chinese laws and laws in other countries, regulations of invoice contents and formalities are also different. To declare at customs, pay taxes and deal with negotiation or collection efficiently, a prior study or quick check with professional China consultant or China law firm would help you learn the details quickly.

1.Both collection and negotiation need formal invoice that is the commercial invoice in the following article.