Taxes are paid primarily to raise revenue for the Government. The Government finances spending on public goods and services out of money collected from taxes. Examples of public goods and services include: construction of roads, hospitals, education, health, infrastructure development etc |
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What is the importance of a tax certificate (P16)? |
P16 is a tax certificate which provides a summary of an employee’s gross income, contribution to a superannuation fund by the employee, tax calculated, deducted and remitted by the employer to the LRA. A tax certificate (P16) is used by the employee to file a tax return with the aim of being assessed by the LRA to determine whether the employee was taxed correctly by the employer. |
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Why do I have to register for tax? |
| Every person that earns income or runs a business within the borders of Lesotho is required by law to register for tax purposes. |
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Who should register for Income Tax? |
| Every individual, trustee, partnership and company that has a business in Lesotho and has a chargeable income must register with Lesotho Revenue Authority for income tax purposes. |
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Who should register for VAT? |
- A person who makes taxable supply of goods/services, whose turnover exceeds or is expected to exceed the registration threshold of M500, 000.00 per annum, is obliged to register; thus registration for VAT is compulsory for such a person.
- A person may apply for voluntary registration even if the total value of taxable supplies is less than M500, 000.00 per annum. Registration in this regard may be authorised at the Commissioner General’s discretion. |
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What happens if I fail to register? |
- A person who fails to register commits an offence and is liable, on conviction, to a fine or imprisonment or both. |
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What is the difference between Value Added Tax (VAT) number and Taxpayer Identification Number (TIN)? |
The difference between VAT number and TIN (Taxpayer Identification Number) is that:
- TIN is allocated to every taxpayer who has registered with LRA for tax purposes. It is a unique number given to each registered taxpayer and holds all the information regarding all the tax types that a taxpayer is registered for (including VAT).
- VAT number however is only allocated to a taxpayer who is registered for VAT. |
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Can a person who is registered for TIN only charge VAT? |
- No. Only a person who is registered for VAT can charge VAT. |
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Why are terminal benefits subjected to tax, yet they do not form part of salary? |
- Terminal benefits although not part of the monthly salary form part of an individual’s taxable income or earnings.
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Does overtime payment attract tax? If yes, how is it taxed? |
- Yes, overtime payment attracts tax. Overtime payment is part of individual’s employment income; therefore it is subjected to tax at applicable rates. |
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Does LRA staff pay tax? If yes, are they taxed at the same tax rates as any other employees elsewhere? Where does that money go? |
- Yes, LRA staff members pay taxes at applicable rates just like any other employees elsewhere in Lesotho.
- All taxes are collected on behalf of, and remitted to the Government of Lesotho (see FAQ 1). |
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Why is it that the LRA does not delegate collection of tax on terminal benefits or pension funds like it does with tax on employees’ salaries? |
This is not the case at the moment but LRA plans to implement this method of collection in future. |
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If I am issued with a tax clearance certificate, does it mean that my tax liability is cancelled? |
No. A tax clearance certificate is a document issued by the LRA to a Taxpayer who is compliant with tax laws or obligations. If a Taxpayer has an outstanding debt with LRA a tax clearance can be issued if and only if proper arrangements are made between the Taxpayer and the LRA for the Taxpayer to clear the outstanding debt. The taxpayer is expected to honor the agreement reached towards payment of the outstanding debt. |
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If I have an Import VAT Credit Facility (IVCF), does it mean that I do not have to pay VAT? |
No, having IVCF only means that goods can be imported without having to pay VAT upfront at the port of entry. Payments for IVCF are expected on or before the 20th day of the month following the month in which goods were imported on credit. |
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What is company tax, how is it calculated and how does it differ from PAYE? |
Company tax is tax levied on company profits. It is calculated by taking into account all income (turnover) generated by a company and deducting business expenses that the company has incurred. Company tax is imposed at the following rates for the following categories of companies:
Manufacturing companies 0%
Selling outside SACU market
Manufacturing companies 10%
Selling within common SACU market
Non – Manufacturing companies 25%
As opposed to company tax, PAYE is tax on an individual’s salary / earnings. PAYE is imposed to the individual earnings using the following rates:
(1) Income from M1, 893.96 up to M3, 364.00 is taxable at 22%, and
(2) Income above M 3,364.00 is taxable at 35%,
(3) A non refundable tax credit amounting M 416.67 is to be deducted from the sum of (1) and (2) above, then the end product is PAYE.
Tax credit is granted under PAYE, but it is not granted under company tax. |
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