Zambia: Mandatory E-Invoicing for VAT-registered Taxpayers

July 19, 2024

As part of its 2024 National Budget program, announced on September 29, 2023, the government of Zambia introduced amendments to the Value Added Tax (VAT) Law. One of the most significant changes was the introduction of electronic invoicing (e-invoicing).

Following this announcement, Practice Note No. 2/2024 regarding the amendments to the VAT Law was issued, with an effective date of January 1, 2024. The previously established Tax Invoice Management System (TIMS), which mandated Electronic Fiscal Devices (EFD), was removed, and an electronic invoicing system was introduced.

On January 24, 2024, the Zambian Revenue Authority (ZRA) informed the public that starting from July 1, 2024, all VAT-registered taxpayers must issue e-invoices using the Smart Invoice.

Impact on Taxpayers

The EFD system, which existed before the implementation of the Smart Invoice system, recorded all commercial transactions. EFDs were physical devices that sent real-time invoice and receipt information to the tax authority. However, they were limited to covering only VAT and Insurance Premium Levy (IPL).

The new Smart Invoice system covers more types of taxes or levies, such as VAT, Turnover Tax, Rental Income, IPL, Tourism Levy, and Local Excise Duties on Electric Energy. To comply with the requirements to use Smart Invoice, all taxpayers must use one of the invoicing solutions provided by the ZRA:

Mobile App,
Online invoicing,
Desktop and Tablet Application,
Certified invoicing system (suitable for taxpayers with Accounting Packages or Enterprise Resource Planning Systems)

Taxpayers must register and validate their use of the Smart Invoice system with ZRA through the Smart Invoice Taxpayer Portal. Furthermore, to send and receive transaction data to adn from the SMart Invoice server, they must download the Virtual Sales Data Controller (VSCD) communication module. Once this step is completed, all electronic documents must be sent to the VSCD for real-time transmission to the ZRA. When ZRA receives the data, it validates it using a unique identifier code (Mark ID) and a QR code.

Conclusion

Tax evasion, improved compliance, cost savings, reduced accounting errors, faster invoice processing, improved accuracy of financial data, reliability of invoice information, and ability to pre-fill tax returns are the main benefits of this more modern and efficient system.

Source: National Assembly of Zambia, Practice Note No. 2/2024, Smart Invoice Update, Smart Invoice FAQs, Zambia Revenue Authority

What is the Smart Invoice system introduced by the Zambian Revenue Authority (ZRA)?

The Smart Invoice system is an electronic invoicing platform implemented by the ZRA to enhance tax compliance and streamline the invoicing process for VAT-registered taxpayers. It replaces the previous Tax Invoice Management System (TIMS) and covers various taxes, including VAT, Turnover Tax, Rental Income, Insurance Premium Levy (IPL), Tourism Levy, and Local Excise Duties on Electric Energy.

When did the mandatory e-invoicing requirement come into effect for VAT-registered taxpayers in Zambia?

The mandatory e-invoicing requirement for all VAT-registered taxpayers in Zambia came into effect on July 1, 2024. Taxpayers are required to issue e-invoices using the Smart Invoice system from this date onwards.

What steps must taxpayers take to comply with the Smart Invoice system requirements?

Taxpayers must register and validate their use of the Smart Invoice system through the Smart Invoice Taxpayer Portal provided by the ZRA. They need to select an appropriate invoicing solution, such as a mobile app, online invoicing platform, desktop or tablet application, or a certified invoicing system compatible with their accounting packages or enterprise resource planning systems. Additionally, taxpayers must download the Virtual Sales Data Controller (VSCD) communication module to facilitate real-time transmission of electronic documents to the ZRA.

How does the Smart Invoice system validate electronic invoices?

Once an electronic document is transmitted to the ZRA via the VSCD, the system validates it by assigning a unique identifier code (Mark ID) and a QR code. This process ensures the authenticity and integrity of the invoice data.

What are the benefits of implementing the Smart Invoice system for taxpayers and the Zambian government?

The Smart Invoice system offers several benefits, including reducing tax evasion, improving compliance, achieving cost savings, minimizing accounting errors, accelerating invoice processing, enhancing the accuracy of financial data, ensuring the reliability of invoice information, and enabling the pre-filling of tax returns.

What types of taxes and levies are covered under the Smart Invoice system?

The Smart Invoice system encompasses a range of taxes and levies, including Value Added Tax (VAT), Turnover Tax, Rental Income, Insurance Premium Levy (IPL), Tourism Levy, and Local Excise Duties on Electric Energy.

Zambia

Africa

E-Invoicing

VAT Compliance and Reporting

VAT

Retail

E-Commerce