Zambia: Mandatory E-Invoicing for VAT-registered Taxpayers

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:

1. Mobile App,

2. Online invoicing,

3. Desktop and Tablet Application,

4. 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