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Global Mobility Services:


Taxation of International
Assignees - Lesotho

Taxation issues &


related matters for
employers &
employees 2018/19
Last Updated: June 2018
This document was not intended or written to be used, and it cannot be used, for the purpose Menu
of avoiding tax penalties that may be imposed on the taxpayer.
Country:
Lesotho

Introduction: International assignees working in Lesotho 4


Step 1: Understanding basic principles 5
Step 2: Understanding the Lesotho tax system 8
Step 3: What to do before you arrive in Lesotho 9
Step 4: What to do when you arrive in Lesotho 10
Step 5: What to do when you leave Lesotho 12
Appendix A: Rates of tax 13
Appendix B: Double-taxation agreements 14
Appendix C: Lesotho contacts and offices 15

Additional Country Folios can be located at the following website:


Global Mobility Country Guides

Global Mobility Country Guide (Folio) 3


Introduction:
International assignees
working in Lesotho
PwC is the world's leading provider of about tax, social security and before any specific decisions
professional services. The People and immigration issues in Lesotho. are made about these issues.
Organisation group works together
with its clients to find solutions for the This guide is not exhaustive and More information can be
challenges they encounter when cannot be regarded as a substitute for obtained from our Lesotho
transferring people from one country professional advice addressing office specializing in People
to another. individual circumstances. and Organisation, Global
Nevertheless, answers will be found to Mobility (see Appendix C).
This brochure is intended to inform most of the questions raised by an
foreign nationals and their employers expatriate or his/her employer. More
detailed advice should be sought

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Step 1:
Understanding basic principles
The scope of taxation in Capital gains tax for Lesotho on any income that the
Lesotho foreign nationals working spouse earns in Lesotho.
in Lesotho
1. A foreign national working in Short-term temporary
Lesotho will, in general, Residents and non-residents are employment
become liable to Lesotho tax liable to capital gains tax on assets.
on Lesotho income. The main In the case of resident taxpayers, Foreign nationals working in
taxes are: capital gains tax is charged Lesotho on a temporary basis may
regardless of where the assets are not be subject to Lesotho taxation
– Income tax; located. on their employment income
provided certain conditions are met.
– Wage tax; Non-resident taxpayers are taxed
only on Lesotho sourced capital The tax exemption is provided
– Dividend tax; under a DTA and would therefore
gain. Capital gain is treated as
– Capital gains tax. ordinary income and is subject to only apply where a DTA has been
income tax at the standard concluded between the foreign
The tax year progressive rates of 20% or 30%. country concerned and Lesotho.
Generally speaking, all of the
The tax year of assessment is for 12 Ceasing tax residence following conditions must be met
months and is ending on the 31st of before the exemption would apply:
March each year. The Lesotho Revenue Authority
should be informed in writing when  The employee remains treaty
Determination of residence an immigrant working in Lesotho resident in their home
stops being a resident in Lesotho. country, and
An individual will be considered
The immigrant should get
resident in Lesotho for tax purposes  The employee is not present
confirmation from the LRA that all
if they are present in Lesotho for in Lesotho for more than 182
his tax affairs are in order before
more than 182 days in any days in a twelve month
leaving the country.
consecutive 12 month period, or period beginning or ending
have a normal place of abode in The tax position of the during the fiscal year
Lesotho and are present in Lesotho spouse concerned,
for any part of the year of
assessment. Spouses are assessed separately for  The remuneration is paid by
tax in Lesotho. The Lesotho the non-resident employer,
legislation will apply equally to the and
assignee’s spouse, notwithstanding
the fact that the spouse may not be
employed or working in Lesotho. A
spouse will be taxed separately in

Global Mobility Country Guide (Folio) 5


 The remuneration is not In most circumstances the Taxation of residents
borne by a permanent employee is taxed on the value of
establishment that the non- the shares when the employee Tax residents are subject to tax on
resident employer has in exercises the options given. The tax their worldwide income and gains
Lesotho. will be deducted by the employer by (subject to certain exemptions);
means of PAYE. When the shares whereas non-residents are subject
The wording of each DTA does vary are sold at a later stage, the to tax on Lesotho actual or deemed
from country to country and individual will pay tax on the source income and gains arising on
professional advice should be difference between the value when assets situated in Lesotho.
obtained before relying on any such the option was exercised and the
exemption. The tax rate for individuals range
selling price. The taxable return will
from 20% to 30% and there is an
Employee stock option be added to other taxable income annual tax credit of M7 260. The
plans and long term received and will be taxed according first M61 080 is taxed at 20% and
deferred compensation to the tax tables. the thereafter the taxable
schemes We would recommend that percentage is 30%.

The cross-border income tax issues professional advice should be


arising from employee stock option sought prior to the exercise or
plans can be extremely complex. vesting of any share options and/or
the disposal of any shares acquired
under an employee share option
scheme. These provisions apply
equally to residents and non-
residents.

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The following income is exempt
from tax as per the Lesotho Income
Tax Order:

 The first M500 of interest


derived from one savings
account by a resident
individual who is not a
minor, bearing in mind that
the deposit is with a
institution in Lesotho
registered under the
Financial Institutions Act of
1973,

 War pensions and gratuities


paid by the Lesotho
Government in respect of
persons who retire before the
enactment of the Lesotho
Income Tax Order are exempt
from income tax,

 The first M1 500 of a


severance payment made
under section 79 of the Labor
Code Order 1992 is exempt
from income tax in Lesotho,

 A scholarship payable in
respect of tuition or fees for
full-time instruction at an
educational institution is
exempt from income tax,

 Property income of an
expatriate taxpayer is exempt
to the extent that it is not
Lesotho source income.

Global Mobility Country Guide (Folio) 7


Step 2:
Understanding the Lesotho tax system
Employment income into account the policies and be gross of the value of any fringe
procedures of the international benefits.
Fringe Benefit Tax
assignment policy of the employer
Fringe Benefit Tax (FBT) is paid by as well as the provisions of the Exchange controls
the employer on behalf of employment contract. Lesotho has exchange control
employees. The employer is regulations. The commercial banks
however allowed a deduction of the The following benefits and in Lesotho are agents of the Central
fringe benefit tax. Fringe benefit tax allowances may be considered in a Bank of Lesotho (CBL) for certain
is imposed on the following fringe remuneration package: foreign exchange purposes.
benefits:
 Relocation allowance; Retirement fund
 Car fringe benefit contributions and medical
 Cost of living allowance;
aid fund contributions
 Housing fringe benefit
 Provision of accommodation; Pension and retirement annuities
 Utilities fringe benefit are allowed as a deduction at the
 Tax equalisation;
time when the person is still making
 Domestic assistance fringe
 Home leave; contributions and the person gets
benefit
taxed at the time when payment is
 Meal or refreshment fringe  School fees; withdrawn/received from the fund.
benefit It is important whether the find is
 Travel allowance and
Lesotho based or not as it will have
 Medical fringe benefit company car.
tax implications. We advice that
Your PwC tax specialist may assist advice should be obtained should
 Loan fringe benefit this deduction being made.
you in the structuring of a tax
 Debt waiver fringe efficient remuneration package.
Medical expenses are not allowed as
 Excessive superannuation Tax rates on employment a deduction.
contributions income
The following table shows the
Structuring remuneration
annual tax table in United States
packages
Dollars, and is charged on taxable
Remuneration packages may, income after allowable deductions
subject to certain restrictions, be (such as payments to approved
structured in a tax efficient manner pension schemes, or a US$700
as well as potentially reducing the annual tax exemption granted on
cost of employment to the bonuses). The taxable income must
employer. The structure should take

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Step 3:
What to do before you arrive in Lesotho
Immigration formalities Citizens from certain countries Passport Services
in Lesotho can obtain business visas on located in the Ministry
A work permit or at least a arrival and others must apply for of Home Affairs in
notification to the Labor visas prior to arrival. For Maseru.
Commissioner is required for information, the Ministry of
Foreign Affairs can be contacted. Business people who regularly
non-residents. No visa is travel between Lesotho and
required if a South African In order to take up employment South Africa can apply for a six
resident is working in in Lesotho, foreigners are month border concession that
Lesotho. This is governed by required to be in possession of a will enable them to commute
the Labor Code 1992 section 165. valid work permit. In order to between the two countries
Should the provisions of obtain a work permit you without having to report to an
section 165 of the Labor Code
should: immigration officer. This will
not complied with, the employer only apply to land border posts
and employee will be guilty of an  Complete the relevant and not when the immigrant
offence and on conviction is application form flies to Lesotho. Currently this
liable to a fine or six months  Submit the application concession is suspended.
imprisonment or both. form to the Commissioner
of Labor in the Ministry of Timing of departure and
The following types of visa can arrival
Employment and Labor
be obtained for business visitors:  If the permit is approved, Although it is not always
 72 hour visa: If you do not the applicant should go in possible to plan the date of
have a valid visa to visit person the Central Police departure from the home
Lesotho (and you are from Station in Maseru and a country and arrival in Lesotho,
a country where you formal work permit will be and vice versa, the timing of
cannot automatically get a issued these events could have a
In certain instances the foreigner
visa to enter Lesotho) the significant impact on the tax
might have its primary residence
Lesotho National in Lesotho and a residence position of an international
Development Corporation permit should be obtained. In assignee in both Lesotho and the
can arrange for a 72 hour order to obtain a residency home country.
visa. (this visa is usually permit, the following should be
only available form certain done: From a Lesotho perspective, it is
manufacturing sectors). important to time the arrival and
 Complete the relevant departure to minimise the time
application form
 Single and multiple entry for a person to be considered tax
visas  Submit an application to resident (or avoid becoming tax
the Immigration and resident) as described above.

Global Mobility Country Guide (Folio) 9


Step 4:
What to do when you arrive in Lesotho
Registration as a taxpayer year. An income tax return should Withholding tax is applicable
A foreign national rendering be submitted by every individual to service income rendered
services in Lesotho is liable to registered for income tax in by:
register as a taxpayer with the local Lesotho. The income tax return is – Resident contractors
office of the LRA. This registration available from the LRA website and providing the following
should take place as soon as should be submitted three months services: transport,
possible after becoming liable for after year end, which is 30 June. construction, plant or
tax in Lesotho. The tax returns should be equipment. 5% of the
completed and submitted manually gross income is
Application forms are available and cannot be completed and withheld;
from the LRA website and should be submitted electronically.
completed together with a certified – Non resident
copy of the passport. The Notice of assessment contractors: The tax
application form is then submitted Lesotho is on a self assessment tax rate applicable is 10%
to the LRA Advice Centre where a system. Any outstanding amount of the gross amount;
Tax Identification Number (TIN) is should then be settled to the LRA – Other service income
immediately awarded to the when your return is issued. that can be outsourced
individual. by a client to
Objections may be lodged against
difference that might occur. consultants, lawyers,
Employees' tax doctors and technical
Employees' tax is income tax an Withholding tax experts. The rate
employer must deduct from The withholding tax rates could applicable is 5% for
remuneration paid to an employee, differ should there be a double tax residents of Lesotho
and pay over to the LRA. All agreement in place between the and 10% for non-
Lesotho employers paying country of the one party and residents;
remuneration have an obligation to Lesotho.
account for employees’ tax. The tax  Other payments where
deducted will be allowed as credit Withholding tax implications are as withholding tax is applicable
when the tax liability is calculated follows: are as follow:
after year end. – Interest: For Lesotho
 Withholding tax is governed
residents 10% is
What to do at the end of the in terms of section 107 of the
withheld with an
tax year Income tax Order.
exemption of M 500
Withholding tax is deductible
Tax returns from a savings account.
at source from payments
Individuals should collate all For non-residents 25%
made to independent
records necessary to complete the of gross is withheld
contractors, companies,
tax return including those forms and to a South African
organizations and any other
detailing remuneration for the tax resident 10% is
person not exempt from tax.

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withheld according to
the double tax
agreement;

– Management charge,
dividends, royalties
and natural resource
payments: The
withholding tax
applicable is 25% for
non-residents. For
South Africa it is 15%
on dividends and 10%
on management fees,
royalties and natural
resource payments
according to the double
tax agreement;

– International
transport: Withholding
tax is applicable if the
owner of the vehicle,
ship or aircraft is a
resident of Lesotho. 5%
is withheld and 10% if
it is a non-resident.

Social Security
Lesotho has no official conceptual
framework of social security but has
a number of social security
measures in place.

Global Mobility Country Guide (Folio) 11


Step 5:
What to do when you leave Lesotho
Ceasing tax residence It is advisable to discuss the date of be liable to tax in Lesotho under
The Lesotho Revenue Authority your departure with a tax adviser, certain conditions. Planning for
should be informed in writing when as the timing can alter your tax such payments, if any, should be
an immigrant working in Lesotho liability. Furthermore, all undertaken with care.
stops being a resident in Lesotho. reasonable steps should be taken to
The immigrant should get avoid the possibility of dual
confirmation from the LRA that all residence or double taxation after
his tax affairs are in order before your departure. Any payments or
leaving the country. bonuses received after departure in
respect of Lesotho employment may

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Appendix A:
Income tax rates
Personal income tax rates for 2018

Taxable income (M) Tax


More than But not exceeding
0 36 300 0%
36 301 61 080 20%
61 081 30%

Global Mobility Country Guide (Folio) 13


Appendix B:
Double-taxation agreements
Confirmed agreements Under negotiation
South Africa Australia Namibia
Mauritius China Swaziland
United Kingdom India The Netherlands
Malaysia USA

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Appendix C:
Lesotho contacts and offices
Contacts
Hennie Smit – Senior Manager
Tel: +27 51 503 4100
Email: hennie.smit@pwc.com

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