Lesotho Personal Income Tax

Citizen residents and permanent residents are tax­able on Lesotho-source income and on income brought into Lesotho. Tax-resident expatriates are taxed on income from all sources. However, expatriates are not taxed on property income derived from foreign sources or on income derived from dispos­als of investment assets generating foreign-source income.

Income subject to tax

Employment income. All compensation from sources within or deemed to be within Lesotho is taxable. Compensation includes salaries, wages, overtime or leave pay, commissions, directors’ fees, bonuses, gratuities, benefits in cash or in kind, allowances, gifts, pensions and retirement benefits. Compensation does not include fringe benefits, but employers are subject to tax on them.

War and disability pension benefits and amounts received from agricultural activities are tax-exempt.

Self-employment and business income. Any individual who earns self-employment or business income from a source within Lesotho or a source deemed to be within Lesotho is subject to tax in the year the income is earned.

To be taxable, self-employment or business income must arise from a source in Lesotho or a source deemed to be within Lesotho. Business income is defined as all profits or gains aris­ing from a business, including capital gains. Business income is calculated by subtracting exempt income and allowable deduc­tions from gross income. If a taxpayer’s gross income is less than LSL150,000, the cash basis of accounting may be used to deter­mine business income.

Investment income. Resident shareholders are not subject to tax on dividends.

In general, interest is taxed with other income at the rates set forth in Rates. The following interest income is exempt:

  • Up to LSL500 received by a resident individual from a single savings account
  • Interest received by a resident individual on which a 10% with­holding tax is imposed

Other investment income, including the profit or loss on the sale of an investment asset, is taxed with other income at the rates described in Rates.

Capital gains and losses. Gains or losses derived from the sale of business and investment assets are included in the normal taxable income of an individual. Gains or losses derived from the sale of personal assets are not included in taxable income.

Deductions

Deductible expenses. Expenses directly related to employment are deductible, but personal expenses, including clothing and commuting, are not.

Personal deductions and allowances. A personal tax credit of LSL6,100 may be deducted from tax liability.

Business deductions. In general, expenses incurred in earning taxable income are deductible, except for expenses of a capital nature.

Rates. The tax rates for residents are set forth in the following table.

Taxable income

Exceeding     Not exceeding                                           Rate

LSL                      LSL                                                             %

0                          51,670                                                         20

51,670                   —                                                             30

The following categories of income derived by nonresidents are subject to withholding tax.

Withholding

Type of income                                                         tax rate (%)

Dividends, interest, royalties, natural

resource payments and management fees                          25

.

Payments for services                                                           10

.

Payments to resident contractors                                           5

.

Interest paid to residents                                                        10

.

Relief for losses. Losses may be carried forward indefinitely and offset against income of a similar nature in subsequent years.

Other taxes

Lesotho does not impose net worth, estate or gift taxes.

Social security

Lesotho does not impose any social security taxes.

Tax filing and payment procedures

The income tax year in Lesotho runs from 1 April to 31 March. Tax returns must be filed within three months after the end of the tax year or of the financial year if the financial year is different from the tax year. Nonresidents must file tax returns and pay tax on certain categories of income.

Employers are required by law to withhold taxes from remunera­tion paid to their employees on a monthly basis and to remit these taxes to the tax authorities.

Married persons are taxed separately, not jointly, on all types of income.

Double tax relief and tax treaties

Double tax relief in the form of a tax credit is available in the absence of an applicable double tax treaty.

Lesotho has entered into double tax treaties with Mauritius, South Africa and the United Kingdom.