Introduction. This guide explains tax registration, tax reporting and filing requirements for the newly established businesses. This section discusses who is required to be registered, and when to file tax returns. It serves as a basic brief guide for newly established businesses.
Objective The Objective is to empower such entities with knowledge to kick start their businesses and get their tax affairs right the first time. One of the first things that should happen once a business is established is to apply to be registered with Lesotho Revenue Authority (LRA). The next crucial step is to manage records in such a way that one is able to comply with the requirements from LRA. In order to fulfill their tax obligation it is also important to observe the filing periods as provided for by LRA
Registration
Who Should Register?
Basically any business registered in Lesotho either as a company, partnership or sole trader should apply to be registered with the Lesotho Revenue Authority. Any such business should contact the officers of the Authority operating in the Advice Centres for assistance.
What Types of Taxes Do I Register For?
A person who is registered or is obliged to register is referred to as a Vendor. The term person includes the following:
Individual Income Tax (IIT)- An individual carrying on a business in own name or under a trade name; such person will register for Individual Tax (IIT)
. Company Income Tax (CIT) – An entity registered as a company should register for Company Tax (CIT).
Pay As You Earn - If the business has employees then it should also register for Pay As You Earn (PAYE).
Fringe benefit Tax - If the business provides any benefits such as car allowances, medical aid, electricity, telephone then it should also register for Fringe Benefit Tax (FBT).
VAT - Another type of tax that a business should apply for is Value Added Tax (VAT). If your business is making a taxable turnover of M500,000 or more per annum, it must be registered for VAT. However if a business does not meet the above stipulation they can still apply/volunteer to be registered for VAT.
What Would I Benefit From Applying For VAT?
When you are registered for VAT you have a right to claim back VAT paid to your suppliers. But you also have an obligation to charge VAT from your customers. What you bring in to the Authority is the difference between what you have paid and what you have collected from your customers.
What Documents are Required
A sole trader should bring the following documents:
Traders License
Certified copy of Passport for the owner
A schedule listing all members of employees and benefits offered
A company should bring the following documents:
memorandum and articles of a Articles of Association
Traders License
Certified copies of Passport for the directors
Certificate of Incorporation
A schedule listing all members of employees and benefits offered
A partnership should bring the following documents:
Traders license
Certified copies of partners
Partnership deed
A schedule listing all members of employees and benefits offered
FUTURE OBLIGATIONS
As a registered person you must notify the Lesotho Revenue Authority in writing of any change in the name, commercial name, address of business, change in business activities etc.
You must file a return and pay tax as stipulated in the Acts; (Income Tax and VAT Acts) See the table below regarding due dates.
When Should I file and pay taxes due?
The dates for submission of taxes due and payable to the LRA will be summarised briefly in a Table below:
Table 1.
TAX TYPE
DUE DATE
Income Tax:
Company Tax
Individual Tax
A taxpayer who derives income in a year of assessment is liable to pay three installments of tax due on 30 September, 31 December, and 31 March of that year of Assessment. That is,
File a return annually but pay every quarter.
30th June being return and final payment)
Fringe Benefit Tax (FBT)
The return must be filed within 14 days of the end of the period to which it relates. Payment made quarterly.
30th June is the 1st quarter
30th September is the 2nd quarter
31st March is the 3rd quarter
31st March is the last quarter
Pay As You Earn (PAYE)
15th of every month
Withholding Tax (WHT)
15th of every month
Record Keeping
A business that is run properly requires proper record keeping. This helps to keep abreast of how well the business is running and it also helps to fulfill tax obligations with much ease. Some of the information that needs to be recorded includes the following:
Any accounting records, accounts, books, computer stored information or any other documents, e.g. Receipts and invoices
INCOME SIDE:
When running the business, a vendor needs to keep record of the income generated by the business so that it can be a good indicator of what is happening with the business. Is there enough income generated as compared to expenses, is the business viable or not? Such a list of records includes but is not limited to the following:
Earnings / revenue collected from the sale of goods and / or services provided
Other sources of income such as commission & royalties
On the expenditure side an example of record that needs to be properly kept include the following: expenditures incurred in the starting up a business to produce income, Purchases of stock, Rental, Telephone, Assets, Salaries, Bad debts, Depreciation of premises and equipment etc.
