Understanding a Tax Invoice

I am compelled to write on what I term the gross misuse of source accounting documents by some small and medium Enterprises (SMEs).

It pains me to go in a business entity, make a cash purchase and the accounting source document you are given as proof of the purchase, is a document called tax invoice with a paid stamp on it.

This trend is common among businesses especially in the supply business. Sometimes I wonder if these businesses do engage well trained accountants who should be able to advise management the proper usage of accounting source documents such as a tax invoice.

Honestly speaking how can a tax invoice bear two names at the same time? On the far corner it is written a tax invoice while at the other end it bears a receipt name.

Although the Zambia Revenue Authority (ZRA) administration of value added tax (VAT) entails that its determination is based on the tax invoices especially to the supplying businesses, it has not changed the meaning of the definition of an invoice.

I say so because these problems of misuse of source documents are emanating from the misunderstanding of the use of the tax invoice as demanded by ZRA.

Let the entrepreneurs know that the description of an invoice remains the same whether it is disguised as a tax invoice by ZRA or not.

An invoice is a source accounting document that is issued by the supplier to a customer who obtains goods or services on credit and promises to settle a payment at a later date.

Therefore it is not in order for a supplier to issue an invoice to a customer who makes a prompt cash payment.

However in this article I want to trace why some suppliers are issuing tax invoices in place of a receipt because a source document which is issued for prompt payments, is a receipt.

The law pertaining to VAT which was passed in Parliament requires that all forms of registered businesses other than the retailers involved in the provision of goods or services should issue tax invoices to their customers even in case where their business are involved in cash transactions.
This is so because VAT is driven by invoices and its calculation is based on the issuance and retention of tax invoices when calculating it.

Therefore the law requires the retention of tax invoices and other tax records for the period of not less than six years from the time they are issued.

The tax invoice is an invoice which is designed by the tax office to suite its requirement for the benefit of collecting VAT by the Government and is enforced through the law.

The rate of collecting VAT in Zambia is 16 percent. Registered suppliers for VAT purposes are required by law to issue tax invoices to their customers, but this mostly applies to non-retail suppliers in this country.

A tax invoice has certain requirements on its face required by the tax office. The following are the tax invoice requirements demanded by the tax office on the face of a tax invoice:

1. The word tax invoice must be on the face.
2. The name and address must be on the face
3. The VAT registration number has been replaced by the tax payers identification number (TPIN) on the face.
4. The serial number of the invoice and the date of issue, a must.
5. The quantity or volume of goods or services supplied.
6. Description of the goods or services supplied.
7. The selling price excluding the VAT and any discount allowed.
8. The total amount of VAT charged.
9. The total amount of VAT inclusive.

However even the issuance of tax invoices by the businesses who are non-retailers is backed by the VAT law, the tax office has not replaced the receipt with the tax invoice.

Instead, as a matter of prudent accounting and practiced by accountants who know the implication of the invoice and a receipt in the books of accounts, will issue a tax invoice immediately followed by the receipt for the purpose of fulfilling of the VAT law.

The advice given to businesses that are issuing tax invoices to the customers who make prompt cash purchase to customers in order to fulfill the VAT law is that immediately they issue a tax invoice should issue cash purchase receipts to cancel the invoice.

ZRA Online Tax Filing-Reasons and Benefits

It is evident that many people in Zambia still choose to file their tax returns with pencil and paper. Many still don’t realize that those days are long gone. Filing your taxes online with ZRA Tax online is not only easier, but much convenient than filling them manually.

If you are still worrying about how realistic online tax filing is (or if colleagues and friends have raised fears about online tax filing) here is my take on it.
First, you only need to understand these step-by-step instructions on filing of your e-return using ZRA Online Tax to help you save time.

Secondly, bear in mind that you will need a computer with internet connectivity to successfully file return online. There are six steps to file e-returns. These Steps are:

1. Log into the portal
2. Download e-return form/s
3. Filling the details in the form/s
4. Validate the form/s
5. Uploading the form/s
6. Obtaining Acknowledgement Receipt

Thirdly, download this detailed Tax payer user guide for e-return filing to help you understand more about these steps for online tax filing. The guide has specifically been designed to give you a step-by-step guidance to online tax filling.

If you are still on the fence about joining the millions of taxpayers using ZRA Tax online facility to e-file their returns, here are some of the advantages.

File your return from anywhere.

Filling your tax returns online will not only save you time and money but will also give you the convenience of filling your taxes in the comfort of your home away from noise, the queues and traffic jam.

Save money.

There are millions of tax payers in the country spending valuable hours in queues at ZRA offices every day, burning fuel in their cars and enduring the hassle of the traffic in town. You can save money if you choose to e-file your returns using Online Tax.

There are many benefits and advantages of filing your tax returns online with ZRA Online tax. With these benefits in mind, you might want to consider switching to online tax filing.

How Professional Tax Software Can Benefit Even The Smallest Business

Professional tax software can be a powerful tool for many businesses and organizations. Since it can be challenging to navigate the murky world of taxes on one’s own, it’s important to have the resources to quickly and efficiently process tax information. The following guide explores how professional tax software can benefit even the smallest business.

Taxes can be a challenging requirement of everyday life. While taxes pay for roads, schools and other infrastructure, it can be challenging to pay a significant amount of one’s business income towards taxes.

In addition, it can be challenging to understand how tax regulations evolve over time. Since the government amends the tax code on an annual basis, it can be difficult to understand how new deductions and taxes loopholes can impact a business’s bottom line.

It’s also important to understand the expenses associated with a professional accountant. While an accountant can be a good choice for a larger business, it may not be practical for all smaller businesses and organizations. In many cases, a professional certified public accountant (CPA) can cost thousands of dollars a month in payroll. This may not be a cost that all businesses can afford.

In many cases, smaller businesses will hire budget accountants to manage their finances. While a part-time accountant is a lot cheaper than other options, they do have several significant disadvantages. In many cases, a part-time accountant doesn’t have the same training or experience as a full-time accountant. In addition, he or she may not know enough information about a business to make intelligent decisions. This may cause a business to pay higher tax rates than is necessary.

Deductions can also be a tricky issue for many businesses and organizations. The 2011 tax code contains over 832,083 words. This is longer than almost all books. Since one person can’t read this much information or his or her own, it may not be possible for a single individual to have a comprehensive understanding of the global tax code.

In addition, deductions have to be approved every year by the government. Since deductions usually expire after a certain amount of time, deductions that were valid one year may not be valid the next year. This can make it tricky to understand how deductions change and can make it difficult for businesses to maximize their potential deductions.

With professional tax software, it’s possible to quickly and easily manage the financial needs of a company. Since professional tax software is updated on an annual basis, there is no need to worry about missing deduction or unpaid taxes.

In addition, professional tax software comes with built-in auditing tools. Since it can be challenging to audit financial information on one’s own, it’s important to have tools that can do this automatically. By auditing tax information before it’s submitted, it’s possible to reduce the risk of an IRS audit in the future.

It’s also important to understand how professional tax software can help a business save money. In addition to reducing the risk of an audit, professional tax software can help a business save money on payroll. By avoiding additional payroll costs associated with an accountant, it’s possible for businesses and organizations of all sizes to save money.

About the Author: Tim Thomas has had 10 years of experience in tax accounting with TaxWorks. He could tell you that the industry has evolved and there are now things to help with efficiency, such as small business tax software. No matter how you prepare your personal taxes, as a business it is a good idea to have the best possible tax software in order to be as efficient and accurate as possible.

The Most Critical Tax Issues in 2011

The goal of this article is to outline critical tax matters that made headlines in 2010 and stirred up debate on a number of tax policy issues in 2011.

Great thinkers have given wise counsel on the need to periodically look back at issues, to re look at our achievements, our shortcomings and then move forward with confidence.

For me 2011 has been, on the whole, the year of Gods favour. However, there’s been a pretty good deal of very critical tax issues this year; Frankly, there is way too much burning tax issues that made and will continue to make headlines this year.

Obviously, there is the fact that a number of countries are still not on track with addressing many relevant tax policy issues, especially the mining tax regime and tax payers trying to brace themselves with any tax changes.

Of course, there was this allegation of Mopani Copper Mines dodging taxes in Zambia and not too long ago, there was this story on Zambia watchdog which read "ZRA Probes Multinational Cotton Company over Tax Evasion". These are just some of the tax issues I can quickly recall that made headlines on the web, and I’m not including other issues like president Obama’s proposed income tax changes for 2011 which some of his critics termed as the ‘largest tax hikes in US history’, rather am limiting it to the tax matters facing our beloved country Zambia.

To my knowledge, there has not been any other comprehensive report on tax issues in the region recently but am aware that Action Aid last November released this critical report 'called calling time on tax avoidance’ which stirred up a lot of debate on a number of accounting practices by multinational companies that conceal the true value of their operations. Though companies like the brewing giant SABMiller refuted these allegations of tax avoidance.

I am writing this article, not with the intention of agreeing or disagreeing with the tax issues raised in this report but merely to contribute to the debate.

Many onlookers however have come to a wild conclusion that some tax policies have failed to achieve the intended objectives. If issues of dodging taxes, closure and asset stripping of companies at the expiration of tax incentive periods are any thing to go by, then this author, unfortunately, comes to the same conclusion.

Do you want to know more about tax policy issues? Then, i would recommend you get this compilation of selected papers on Taxation And Tax Policy Issues. It is not free but it’s worthy.

Don’t Use a Tax Agent Until You Read This!

An accounting package is a useful tool but believe it or not, it won’t make you a tax Accountant. If you don’t have any bookkeeping background, you may decide you want to use a tax agent to prepare and lodge your tax return.

 Are you thinking of appointing a tax agent to deal with your tax matters? Just read on, you will learn about the pros and cons of tax agency.

Undoubtedly, tax authorities recognize the important role tax agents play in the tax system such as helping local businesses avoid accounting for reverse charge.

Local businesses importing services such as software installation and implementation are required to request their suppliers to appoint a tax agent that will act on their behalf in invoicing the recipient of the service in Zambia.

Of course, if you want to act as a tax agent you must first be registered and issued with a tax agency certificate. All non-resident suppliers who supply service to any taxable Zambian supplier can only appoint a registered supplier as a tax Agent and notify the commissioner-general about the appointment of the tax agent

Where the commissioner accepts the appointment of a tax agent, the tax agent shall handle any of your tax obligations until such time as the commissioner general accepts another tax agent.

This is what you must know before you use any tax agent. You are responsible for all the information on your tax return even if a tax agent completes it for you. You will be responsible for any extra tax if your agent makes a mistake.

I can not recommend any specific Tax agents; just make sure you ask the tax agent about their agency fees and their expertise with the type of tax you need help with before you decide which tax agent to use.

Nitram Management Consultants also act as Tax agents for non-resident suppliers of services whose clients in Zambia do not want to account for reverse charges. You can visit their website to find out more.

Tax Prep Tips to Avoid ZRA Problems

In this digital age, it’s now possible to prepare and file Tax Returns electronically; however, the physical filing continues to be popular among most Tax authorities including ZRA. Therefore to avoid Tax problems and disputes with ZRA, here are the Tax preparation tips you must keep in mind when preparing your Taxes.

Always use the correct Taxpayer Identification number (TPIN)

Tax payer identification number is a unique thirteen-digit computer generated number allocated to a taxpayer by ZRA. Some Tax filers fill wrong TPIN details and create complications as a result of their carelessness. It might sound simple but make sure you put the right TPIN details on your tax forms.

Avoid the last minute rush 30th September is the deadline.

You might be aware that every person who registers for TPIN is required to register for income tax because the income tax account is the one you use to remit income tax. Don’t wait until the 30th of September; file your ZRA Tax return on time. In fact, you can avoid stress and careless errors that may cause problems with ZRA. Closer to the dead line, ZRA offices are filled with cues of Tax payers waiting to file their returns, timely preparation can reduce the time you spend queuing at ZRA offices. Keep in mind these ZRA due dates

You don’t only have to be a genius to prepare ZRA returns.

ZRA provides detailed instructions on how to complete all official forms on ZRA home page including procedures for making electronic and cheque payments of Tax to ZRA. Therefore, you have an option to either go it alone or use an Accountant. But if the processes seem a little confusing from the start, I would advise hiring a consultant to avoid serious problems with ZRA.

Don’t try Tax avoidance schemes you don’t fully understand.

I know you must have heard of this term “Tax Avoidance”, this is simply tax planning to the extent that the affairs of your business are legally arranged in such a way as to minimize the tax liability. Although tax avoidance is “strictly legal” and with the letter of the law, it is in contrary to the spirit of the law.In short, tax avoidance schemes exploit loopholes in the legislation which every tax authority tries to close as soon as the loophole has been identified.Having a clear understanding of your taxes and how they work can save you time and frustration. Taking expert advice can help prepare you for any tax issues that may arise.

Pay your VAT Taxes to ZRA promptly.

In most countries, businesses are required by law to register for Vat if they deal in taxable goods and services and the turnover exceeds the threshold. Submit correct Vat returns and keep good Tax records to avoid problems with ZRA.

Don’t Invade Taxes.

Why invite trouble from ZRA by engaging in Tax invasion? Unlike tax avoidance, tax invasion is the illegal manipulation of the tax system to avoid paying taxes. It is the intentional disregard of legislation in order to escape paying taxes which include falsifying returns and claiming fictitious expenses. Don’t expose yourself by falsifying returns.

State the correct banking details.

ZRA has in the recent past undergone major changes from manual processes of making payments by cheques and cash to electronic payment mechanisms. You must always detail your correct name or business name, Taxpayer identification number (TPIN), tax type (e.g. Customs Duty, Vat, Asycuda, etc),tax period, tax district/port, tax payer ZRA account and the correct amount of tax being paid.

How to Keep Good Tax Records

Did you know that you can avoid panic during Tax preparation time when you Keep Good Records through out the year? In this article, I want to look at why Good record keeping is important in your Business and also show you how to Keep Good Tax Records.

Good record keeping is very important for future Tax reference. When your records are properly maintained, you will always be able to file the correct information when you prepare your Tax return.

In addition, your local tax authority such as IRS in America or ZRA may at a later stage select your return for further examinations or in case of disputes with your Tax authority, you will need your documents to prove that the amounts claimed in your return were based on facts.

In most cases, your tax authority will not require you to keep your records in a specific way but generally, these are the most important files you must maintain.

Sales Invoices

Open a file of all your sales invoices. If you use a cash register in your business, then at the end of the day, total up your sales and calculate your total daily sales and the tax due. You will find this information on the audit roll (copy till slip). Attach the audit role to your daily sales report and place on file.

Credit notes and refunds

Open another file for credit notes or cash refunds. For every refund you make, keep clear records on your file. Alternatively, design a form where your customers collecting any refund can sign clearly indicating their name, signature and contact as proof of getting the money. This will show that you are not just creating fictitious credit notes and refunds to reduce your sales.

Purchases

Open file for all your purchases and another file for all your payments supported with proof of payment including any other records and cancelled documents that support any tax deductions made in your return.

Though these records can be managed very well using accounting software, it is not enough to merely post all you documents into the accounting system and neglect the records. While all your posted business information can still be retrieved from your system at any time, the tax authorities would be interested in the source documents which support your figures.

Good record keeping can not only save your business from tax problems with revenue service, but it saves you time and effort when organising and completing your return. If you hire a professional to prepare your return, and your records are very straight, the professional can be done in no

Smart Way of Filing Your Income & Vat Tax Return

In an article on Starting a small business, I mentioned that registration for Vat and Income Tax with various Tax authorities is a requirement. In this article the focus is on what you need to know before Filing your first Income Tax and Vat tax Return to any of your Tax authorities.

If you successfully file your tax registration forms with the department of taxes, you are under obligation to submit your sales tax or Vat returns and make payments for any taxes due by specified dates. You are also required to maintain sufficient records and retain them for specified minimum period and allow Tax authorities access to your business premises to examine goods and records at any time.

This is a serious obligation, but there is always a smart way of doing things, these are some of the Tips to avoid Tax return problems with the authorities.

1. Take note of the Accounting date. Most Income tax authorities require that accounts are made by the end of a given specific date. This refers to a date on which the accounts are made up for Income tax purposes for example ZRA requires that accounts be made by 31st March.

2. Avoid late submission of returns and non payment of taxes as it may attract penalties and interest for the days a return is late. Carefully take note of the required closing dates of submitting Tax returns following the end of the charge year to avoid penalties for late submission of Tax Returns.

3. Get information about the correct Income tax and Vat rates including the correct procedures of calculating your Taxes to ensure you pay the correct tax amounts. Get details of any annual Tax adjustments in the national Budget. You can get this information from your tax authority.

Preparing your taxes from scratch with a pile of receipts and sales invoices for the whole period and a blank Tax Form on your table can be a frustrating experience. Ultimately, paying a professional Accountant to prepare your Taxes every time you need to prepare Returns can be expensive especially for a small business. But using Accounting software, you can easily build up your daily transactions on a daily basis and simply print a tax report at the end of the period when you need to prepare your Taxes.

In countries such as the US where you can e-file your federal tax returns, the use of free online tax software saves you time. But In countries where you need to download and print the Tax Forms and then complete the Forms manually, i would recommend you get accounting software.