Lesotho Tax System

LESOTHO REVENUE AUTHORITY
Our Mandate:
The Lesotho Revenue Authority is a corporate body established under the Lesotho Revenue Authority Act no. 14 of 2001 to
be the main body responsible for the assessment and collection, on behalf of the Government, of specified revenue; for the
administration and enforcement of laws relating to such revenue and for related matters.
The LRA is responsible for the administration and enforcement of the following revenue legislation:
 The Customs and Excise Act (1982, as amended),

 The Income Tax Act (1993, as amended), and
 The Value Added Tax Act (2001, as amended).
LESOTHO TAX SYSTEM
Overview:
The Lesotho tax system consists of both direct and indirect taxes. The direct taxes are levies which are imposed on the
income of individuals or corporations for example corporate tax, personal income tax, fringe benefits tax and withholding
taxes. Conversely there are indirect taxes which are generally levied on consumption of goods and services. Examples of
indirect taxes include value added tax, excise tax and customs duties.
Fiscal or Budgetary Reasons - To provide the Government with a sustainable Source of Revenue:
Tax systems exist primarily to raise revenue to fund Government operations. Taxation is the only source of sustainable
revenue for the Government. Adequate tax collections are necessary to enable the Government to carry out its core
functions and to provide public goods and services. Lack of sufficient revenue often results in large budget deficit.
Economic Reasons – To pursue fairness and distributive Equity
Lesotho tax system avoids discrimination against economically similar entities. The tax system further recognizes the
ability to pay principle. That is, those with highest absolute income should pay the highest absolute tax while ensuring that
individuals and companies are not overly burdened.
Social Reasons – To discourage consumption of harmful goods
Taxes are imposed to discourage consumption of some goods which are generally considered health hazards to the
citizens. Some tax provisions discourage consumption of harmful commodities such as alcohol beverages and tobacco
products by imposing higher tax rates on them and prohibit illicit trade, all of which would pose threats to societal health.
Tax Incentives:
In addition to tax revenues directly contributing to actualization of national development plans/strategies, tax policies
enhance a nation’s economy and its stability. Use of tax incentives in attracting foreign direct investment is an apparent
contributor.
TYPES OF TAXES
Tax type
DIRECT TAXES
Corporate Income Tax Is a direct tax that is levied on taxable or chargeable income of corporate bodies
or companies.
Personal Income Tax It is a direct tax that is imposed on chargeable income of individuals.
Employees tax (PAYE) This is a tax imposed directly on employees’ income (employment income)
derived from employment. Employment income is the total earnings of an
employee that arise from an employment relationship. Total earnings refer to
all income received by or credited in favor of an employee arising from an
employment relationship.
Employment income wages, salaries, bonuses, allowances, overtime payments,

leave payments, commission, gratuity, supplementary pay, fees, severance pay
and other income of similar nature.
Fringe Benefits Tax A fringe benefit tax is a tax that is imposed on taxable fringe benefits. A fringe
benefit is any monetary or non-monetary benefit derived from employment
that does not form part of an employee’s normal salary or wage. Fringe benefits
are also referred to as benefits in kind. In summary, fringe or benefits in kind
refer to earnings, other than in cash, that are received or due to an employee by
virtue of an employment relationship with the employer.
Withholding tax It is an advance payment of tax imposed on income generated from the supply
of services. Withholding tax is imposed on Lesotho source income. The payer is
required to deduct from the gross amount due to the payee, a percentage
prescribed by the law. Thus, the payee receives payment on the invoice amount
less the withholding tax deduction.
INDIRECT TAXES
Value Added Tax (VAT) VAT is an indirect tax that is levied on taxable supplies of goods and services in
Lesotho. It is also levied on the value of imported goods and services.
Excise
Customs duty Customs Duty is a tax imposed on the value of imports and exports of goods.
TAX TYPE TAX APPLICATION DUE DATE

RATES
Corporate 10% Manufacturing income derived from a Annually (30th June) or per
Income Tax manufacturing activity or enterprise which substituted Accounting period.
(CIT) promotes industrial, scientific, educational or
other development within Lesotho.
25% A corporate tax rate of 25% is imposed on
profits of a resident non-manufacturing
company or branch profits of a non – resident
company.
Personal Income 20% For Resident individuals: Annually (30th June) or per
Tax (PIT)  1st M 61, 080.00 is taxable at 20% substituted Accounting period.
30%  Excess is taxable at 30%
 less tax credit of M 9,600.00 per annum
For Non – residents:
 Standard rate of 25% is applied.
Pay As You Earn 20% For Resident individuals: 15th of following month
(PAYE)  1st M 5,090.00 is taxable at 20%
30%  Excess is taxable at 30%
 less tax credit of M 800.00 per month
For Non – residents:
 Standard rate of 25% is applied.
Fringe Benefits 40% 40% is charged on taxable fringe benefit taxable Quarterly on the following
Tax (FBT) amount. dates:
 14 th July,
 14th January,
 14th April
Withholding tax 5% It is charged on income paid to resident 15th of following month
contractors for services provided.
Immediately
10% It is levied on income paid to non-residents for
services provided.
25% It is imposed on passive income paid to non- Immediately

resident otherwise lower Double taxation
agreement rate is applied on income due to
existing treaty partner.
INDIRECT
TAXES
Value Added Tax 0% It is charged on the value of basic commodities, 20th of Every month
Sanitary towels & exports. Electricity
8% Telecommunication services
12% Most commodities

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LESOTHO REVENUE AUTHORITY

 The Customs and Excise Act (1982, as amended),

LESOTHO TAX SYSTEM

Economic Reasons – To pursue fairness and distributive Equity

Social Reasons – To discourage consumption of harmful goods

Employment income wages, salaries, bonuses, allowances, overtime payments,

TAX TYPE TAX APPLICATION DUE DATE

25% It is imposed on passive income paid to non- Immediately

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