Employers have several tax responsibilities in Lesotho. One of these is the Pay-As-You-Earn (PAYE) system. Employers are responsible for withholding PAYE from employee salaries and remitting it to the Lesotho Revenue Authority (LRA) by the 15th of the following month. PAYE is a progressive tax system, meaning higher earners pay a higher percentage of their income in tax.

Skills Development Levy (SDL)

Employers with an annual payroll exceeding M500,000 are liable for the Skills Development Levy (SDL). The SDL is charged at 1% of the total payroll and must be remitted to the LRA monthly.

Fringe Benefits Tax (FBT)

Employers must calculate and withhold Fringe Benefits Tax on certain benefits provided to employees. These benefits can include the use of company vehicles, housing allowances, and more.

Employer Social Security Contributions

There are currently no mandatory social security contributions for employers in Lesotho. However, employers may choose to offer private pension or insurance options to their employees.

Record Keeping and Reporting

Employers are required to keep accurate records of employee salaries, deductions, and tax remittances.

Important Note

Tax laws are subject to change. For the most up-to-date information on employer tax obligations in Lesotho, it's essential to consult with the Lesotho Revenue Authority (LRA) or a qualified tax advisor.

In Lesotho, the Pay-As-You-Earn (PAYE) tax system is in operation. This means that your employer withholds income tax from your salary before you receive it. The PAYE rates are progressive, so higher earners pay a higher percentage.

National Pension Scheme (NPS)

All employees in Lesotho are required to contribute 10% of their gross salary to the National Pension Scheme. This contribution is aimed at providing retirement benefits.

National Health Insurance Fund (NHIF)

A 1% deduction of an employee's gross salary is made towards the National Health Insurance Fund (NHIF). This fund is designed to provide access to public healthcare services.

Fringe Benefits Tax (FBT)

If you receive certain benefits from your employer such as a company car, housing allowance, etc., you might be subject to Fringe Benefits Tax.

Additional Deductions

There are other deductions that may apply to your salary. For instance, if you belong to a union, your employer may deduct union dues from your salary. You may also make voluntary contributions to retirement funds or other savings plans, and these may be deducted from your salary.

VAT, or Value Added Tax, in Lesotho is a consumption tax that is levied on the supply of goods and services. The standard VAT rate in Lesotho is 15%, and it is charged at each stage of the supply chain, with businesses ultimately passing the cost on to the final consumer.

VAT Registration

Businesses with an annual turnover exceeding M850,000 are required to register for VAT with the Lesotho Revenue Authority (LRA). However, voluntary registration is also available for businesses with a lower turnover.

Taxable Services

Most services provided in Lesotho are subject to VAT. These include professional services such as accounting, legal, and consulting, telecommunication services, transportation services, hospitality and tourism services, and construction services.

Exempt Services

Certain services are exempt from VAT in Lesotho. These include financial services, educational services, medical and healthcare services, and basic food supplies, which are zero-rated.

Imported Services

VAT is also charged on imported services when they're used or consumed in Lesotho. The importer of the service is responsible for paying the VAT.

VAT Invoicing

VAT-registered businesses must issue tax invoices for all taxable supplies of services. The tax invoice must include specific information, such as the invoice date and number, the supplier's name, address, and VAT registration number, the customer's name and address, a description of services supplied, and the amount of VAT charged.

VAT Returns and Payments

VAT-registered businesses must file VAT returns with the LRA on a monthly basis. The VAT return must declare the business's output VAT (charged on sales) and input VAT (paid on purchases). If the output VAT exceeds the input VAT, the business must pay the difference to the LRA. Conversely, if the input VAT exceeds the output VAT, the business may be entitled to a VAT refund.

Manufacturing companies and businesses engaged in commercial farming in Lesotho enjoy a reduced Corporate Income Tax (CIT) rate of 10%, as opposed to the standard 25% rate. This significant tax advantage is one of many incentives designed to stimulate business growth and investment in these sectors.

Training Cost Deductions

Businesses can deduct 125% of expenditure incurred on the training or tertiary education of a Lesotho citizen employed by the business. This incentive encourages investment in skills development for the local workforce.

Amortisation Deduction of Start-Up Costs

Businesses are allowed to amortize start-up costs over a period of time, providing tax relief in the initial years of operation.

Duty-Free Importation of Raw Materials and Capital Goods

Manufacturing businesses can benefit from duty-free importation of raw materials and capital goods used in the production process. This reduces input costs and enhances competitiveness.

Export Incentives

Lesotho has various trade agreements that offer preferential market access to its exports. These include duty-free access to member countries of the Southern African Customs Union (SACU), duty-free access to Switzerland, Norway, Iceland, and Liechtenstein through the SACU-EFTA Free Trade Agreement, and duty-free access to the US market under the African Growth and Opportunity Act (AGOA).

Lesotho National Development Corporation (LNDC) Incentives

The LNDC offers additional incentives, including factory space at subsidized rates, financial assistance, unimpeded access to foreign exchange, and an export finance facility.

Important Notes

Tax incentives are subject to specific eligibility criteria and may require businesses to meet certain conditions. It's essential to consult with the Lesotho Revenue Authority (LRA) and the Lesotho National Development Corporation (LNDC) for the most up-to-date information on tax incentives and how to qualify for them.