Lesotho has a residence-based tax system in terms of which residents are subject to tax on their world-wide income, whereas non-residents are subject to tax only on their Lesotho-sourced income.
A company is resident in Lesotho if it is incorporated in Lesotho, has its management and control in Lesotho or undertakes the majority of its operations in Lesotho.
corporate tax rate
Resident companies and permanent establishment of foreign companies are subject to corporate tax at the rate of 25%.
A concessional tax rate of 10% applies to income from manufacturing and commercial farming.
|capital gains tax (“CGT”)|
Capital gains are included in ordinary taxable income subject to the corporate income tax at the standard rate of 25%.
withholding tax (“WHT”) rates
WHT rate (%)
|branch profits|| N/A||25% on repatriated profits|
|dividends|| 7.5%||25% (0% for manufacturing companies)|
|interest|| 10%||25% (15% on loans used to earn manufacturing income)|
|royalties|| N/A||25% (15% on technology used to earn manufacturing income)|
|management, consulting and technical service fees|| 5% on payments to resident contractors|
25% on management fees
15% (on services used to earn manufacturing income)
10% (on Lesotho-source service contract income)
| || |
double tax agreements (“DTAs”)
DTAs are in force with Mauritius, South Africa and the United Kingdom.
|losses||Losses may be carried forward indefinitely.|
Broad general anti-avoidance rules exist in respect of transactions between associated taxpayers to prevent the evasion of tax in Lesotho.
An associate in relation to a person is any other person who acts or is likely to act in accordance with the directions, requests, suggestions, or wishes of the person whether or not the directions, requests, suggestions, or wishes are communicated to that other person.
|thin capitalisation||In terms of Lesotho’s thin capitalisation rules, the maximum accepted debt: equity ratio is 3:1.|
|employee taxes||The income tax rates applicable to resident individuals are:|
|annual chargeable income (LSL)||tax rate |
|first 61 080|| 20%|
|over 61 080|| 30%|
Lesotho does not have a social security system.
Employers may make contributions to complying superannuation funds for the provision of retirement benefits to employees or their dependants.
|payroll taxes||There is no payroll tax in Lesotho.|
|stamp duty |
Stamp duty is levied under the Stamp Duties Act on a wide range of instruments and documents at rates generally range from LSL0.08 to LSL40, depending on the nature of the instrument or document.
Transfer duty at the rate of 3% is levied on the transfer of immovable property with a value of less than LSL10 000 and 4% on other properties.
|taxable supplies ||VAT is levied on the supply of goods and services in Lesotho and on the importation of goods and services.|
A rate of 8% applies to utilities (such as electricity) and 9% in respect of telecommunications services.
A person who has an annual taxable turnover / expected annual taxable turnover exceeding LSL850 000 must register for VAT purposes.
Businesses whose turnover is below the registration threshold may apply for voluntary registration, provided any other registration requirements are met.
|reverse VAT on imported services|
To the extent that imported services will be utilised or consumed in Lesotho other than for making taxable supplies, the recipient of such services is required to declare and pay output VAT on the services in terms of a reverse-charge mechanism.
Such VAT is not available as an input credit.