Following the enactment of the Value Added Tax (amendment) Act No. 23 of 2023, and the gazetting of the Value Added Tax (Electronic Invoicing System) Regulations, Statutory Instrument (SI) No. 58 of 2023, the Zambia Revenue Authority now mandates all Value Added Tax (VAT) Registered Taxpayers to issue electronic invoices using the Smart Invoice system effective 1st July, 2024.
The Value Added Tax (electronic invoicing system) regulations, statutory instrument no. 58 of 2023, mandates the Commissioner-General to administer an electronic invoicing system in Zambia.
The regulations also specify statutory penalties on Taxpayers who fail to adhere to the stipulated processes and procedures for administering the Electronic smart invoicing system.
Below is a summary of the regulations, not limited to penalties and offences, that administer the system as per SI 58 of 2023.
REGULATION 1: ELECTRONIC INVOICING SYSTEM
This regulation grants the Commissioner-General the authority and responsibility to implement and oversee the electronic invoicing system for all VAT-registered taxpayers in Zambia.
The system, referred to as the Smart Invoice system, is designed to standardize and digitize the issuance of compliant invoices, ensuring accuracy, transparency, and compliance with tax regulations.
DigiTax offers comprehensive solutions that align with the requirements set forth by the regulations in the Statutory Instrument No. 58 of 2023. As an electronic invoicing provider, DigiTax ensures businesses adhere to the mandated processes and procedures thus avoiding penalties associated with non-compliance.
DigiTax supports VAT-registered taxpayers with seamless integration into existing systems, a user-friendly interface, real-time compliance monitoring, and robust data security, while also offering comprehensive training and support. This empowers businesses to effectively navigate electronic invoicing and minimize penalties for non-compliance.
REGULATION 2: ISSUANCE OF TAX INVOICES BY TAXABLE SUPPLIER
The regulation -
i. makes it mandatory for a taxable supplier to use the electronic invoicing system to issue a tax invoice in respect of each sale of goods or services;
ii. provides that where a transaction is business-to-business or business-to-government, the tax invoice issued from the electronic invoicing system must include the name, address and taxpayer identification number of the customer;
iii. makes it mandatory to issue a tax invoice whether the customer is present or not and whether the customer fails or refuses to receive the tax invoice; and
iv. requires a customer to report to the Zambia Revenue Authority, a taxable supplier that:
(a) does not issue the tax invoice; or
(b) issues an invoice that contains inaccurate information.
NOTE:
The tax invoice issued to a customer can either be in electronic form or printed from an
electronic invoicing system.
REGULATION 3: CLAIM OR DEDUCTION OF INPUT TAX
This regulation provides that to claim input tax, businesses must adhere to the stipulations outlined in Section 18 of the Principal Act. In cases where an invoice is generated under the electronic invoicing system during a system disruption, it is mandatory for that invoice to be uploaded to the system once it is restored.
DigiTax offers an offline option that allows businesses to continue invoicing during system outages. This feature ensures that users can generate and store invoices,which can later be seamlessly uploaded to the ZRA system once connectivity is reestablished. This dual capability enhances operational efficiency and compliance, ensuring businesses can manage their invoicing processes without interruption.
REGULATION 4: DISPLAY OF NOTICE
The regulation mandates that all taxable suppliers prominently display a notice regarding the use of electronic invoicing systems at their place of business. This notice serves to inform customers and ensure compliance with invoicing requirements. Failure to display the notice is considered an offense, and the taxable supplier may face penalties, including fines, upon conviction.
REGULATION 5: ISSUE LOG BOOK
The regulation requires all taxable suppliers to maintain an issue log book for each approved invoicing system.
Note: An issue log book is a record, maintained in either physical or electronic format, where all faults and notifications to the Commissioner-General are documented. This log book is essential for tracking issues, facilitating timely communication, and ensuring compliance with regulatory requirements.
DigiTax offers an innovative dashboard that simplifies this process, enabling users to easily track approved invoices and manage their issue log book efficiently. The dashboard not only facilitates real-time tracking of invoices but also provides comprehensive reporting features, allowing suppliers to maintain compliance and streamline their invoicing operations.
REGULATION 6: REPORTING OF FAULTS BY TAXABLE SUPPLIERS
This regulation requires a taxable supplier to notify the Commissioner General when the electronic system of any approved invoicing system has a fault, providing the following information:
(a) the description and time of the fault;
(b) period for which the system was not in use and when use was restored;
(c) reasons for an unreported fault, if any; and
(d) any other information relating to the fault as may be required by the Commissioner - General.
i. a requirement for a taxable supplier to notify the Commissioner General to deactivate the approved invoicing system within 30 days from the date of cessation of the business;
ii. for a penalty for failure to submit the written request to the Commissioner-General within the prescribed period;
iii. that a taxable supplier should keep and maintain records and accounts that were generated from the approved invoicing system that has been deactivated, for the period prescribed under the VAT Act.
iv. The VAT Act prescribes a minimum period of 6 years to maintain records and Accounts
DigiTax provides a credit note feature that allows suppliers to correct invoices easily without the need for extensive reprocessing. This feature ensures that all corrections are accurately recorded, maintaining compliance and simplifying record-keeping in accordance with VAT regulations.
REGULATION 7: PROHIBITION OF TRANSFER OF APPROVED INVOICING SYSTEM
The regulation prohibits a taxable supplier from transferring an approved invoicing system to a third party.
REGULATION 8: PENALTIES AND OFFENCES
(1) A taxable supplier commits an offence if that taxable supplier-
(a) modifies or attempts to modify an approved invoicing system without authorization from the Commissioner General;
(b) enters false data on the approved invoicing system; or
(c) tampers with, alters or falsified data recorded, analysed, formatted or stored by the approved invoicing system.
(2) A taxable supplier convicted of an offence under sub regulation (1) is liable, on conviction, in the case of a-
(a) First offence, to a penalty not exceeding one hundred thousand penalty units (ZMW 40,000.00);
(b) Second offence to a penalty not exceeding two hundred thousand penalty units (ZMW 80,000.00); and
(c) Third or subsequent offence, to a penalty not exceeding three hundred thousand penalty units (ZMW 120,000.00), or to imprisonment for a term not exceeding three years, or both.
The regulation provides that modifying or attempting to modify the approved invoicing system without authorization, the entry of false data into the approved invoicing system and the tampering of the data formatted or stored on the approved invoicing system, by a taxable supplier is an offence and prescribes penalties for the offence.
Further, the regulation provides for graduated penalties for the prescribed offences upon conviction.
NOTE:
A penalty Unit is ZMW 0.40
Conclusion
Maintaining tax compliance is crucial to avoiding hefty penalties and ensuring the uninterrupted growth of your business. Failing to comply with ZRA regulations can result in costly fines, damaged reputations, and operational disruptions. With DigiTax Zambia, you can stay ahead of compliance requirements, avoiding penalties and minimizing risk.
Our Smart Invoicing solutions are designed to simplify tax compliance, ensuring your business is fully aligned with ZRA regulations. From seamless integration, a seamless dashboard to ongoing support, DigiTax Zambia provides the tools and expertise to help you avoid penalties while optimizing your invoicing process.
Don't wait until it's too late—sign up today at zm.digitax.tech to get started and secure your compliance with ease. For personalized assistance, reach out to us at +260770295201 or via email at zambia@namiri.tech. We're here to help you navigate compliance and safeguard your business from penalties.
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