In terms of Lesotho income tax law, a key distinction that affects your tax obligations is whether you are considered a resident or non-resident for tax purposes. This distinction impacts not only what income is taxable, but also how much and from which sources.
Under the Income Tax Act of Lesotho, tax is levied on all individuals and entities earning chargeable income. However, how this tax is applied depends on your residency status, which is governed primarily by section 5 of the Act.
What Defines a “Resident” in Terms of Lesotho Tax Law?
According to section 5 of the Income Tax Act, an individual will be classified as a resident for tax purposes in Lesotho if they meet any of the following criteria:
- Normal abode and presence: The individual maintains a usual place of residence in Lesotho and is present in the country for any part of the tax year. There is no fixed minimum period, but a brief visit (e.g., one or two days) may not be sufficient unless it constitutes a meaningful portion of the year.
- Physical presence test: The person spends more than 182 days in Lesotho within any rolling 12-month period. Importantly, these days do not need to be consecutive, partial days also count as full days under this rule.
- Government officials abroad: Officials serving abroad on behalf of the Government of Lesotho (GOL) are still considered tax residents of Lesotho.
- Ordinary domicile: Individuals who are generally regarded as residing in Lesotho, even if they are not physically present during the year. This assessment is based on factors such as nationality, frequency and regularity of visits, family ties, business interests, lifestyle, and whether the individual maintains a home in Lesotho.
In certain cases, the law also examines whether the individual had a closer connection to Lesotho or to another country. Considerations include social and family relations, business locations, property ownership, and participation in cultural or political life.
How Does Residency Affect Income Tax in Lesotho?
Section 17(2) of the Act outlines the global income taxation rule for residents: if you qualify as a tax resident of Lesotho, you are required to declare and pay tax on worldwide income, regardless of where it was earned.
Non-residents, by contrast, are taxed only on income sourced within Lesotho.
What Is Considered Lesotho-Sourced Income?
In determining whether income is Lesotho-sourced, the law refers to section 123 of the Income Tax Act. Income is deemed to originate from Lesotho if:
- It is earned through work, business, or activity conducted within the country, or
- It arises from services provided under a contract with the Government of Lesotho.
Foreign Income and Tax Exemptions for Lesotho Residents
For residents working abroad, section 104 provides a useful tax relief provision: if a resident of Lesotho earns income in another country and that income is taxed in that foreign jurisdiction, then it will typically be exempt from taxation in Lesotho.
This rule is designed to avoid double taxation and promote tax fairness for citizens who are employed internationally.
Filing Obligations for Taxpayers in Lesotho
All individuals and legal entities with chargeable income in Lesotho are required to submit an annual tax return, in accordance with sections 128 and 129 of the Act. The only exception is where the total income falls below the abatement threshold, in which case a return is not mandatory.
Final Thoughts: Consult a Lesotho Tax Lawyer
Understanding whether you are a resident or non-resident under Lesotho tax law is essential to ensure full compliance and to avoid penalties. The rules around Lesotho tax residency can be complex, especially for individuals with cross-border connections or dual residence status.
For tailored advice on your income tax obligations, exemptions, and filing requirements, contact our team who can assess your personal or business circumstances and guide you in meeting all regulatory obligations.