VAT was introduced in Lesotho with effect from 1 July 2003, by way of the Value added tax Act No 9 of 2001. VAT replaced the general sales tax system that was used for many years.
The VAT system is administered by the Commissioner for VAT in the Lesotho Revenue Authority (LRA).
Rates and scope
Rates The VAT rates are as follows:
0% on goods and services exported from Lesotho;
5% on supplies of electricity and telephone calls;
15% on import and supplies of alcoholic beverages and tobacco; and
14% on all other taxable supplies
and service (the standard rate).
All goods and services that are subject to VAT, including zero-rated supplies, are referred to as ‘taxable supplies’. The total value of these supplies is referred to as ‘taxable turnover’ for VAT registration purposes.
VAT is a tax on the disposal, either by sale or transfer, of goods or services, either supplied in Lesotho or imported into Lesotho, including supplies to Government.
A ‘supply’ of goods means any arrangement under which the owner of goods parts with, or will part with, possession of those goods. ‘Goods’ means not only tangible movable property but also buildings and de- velopments. The supply of goods also includes the application of the goods for the supplier’s own or for non-business use.
The supply of services includes the making available of any facility, the toleration of any situation or the refraining from doing any act, where a person receives a payment, or the application of services for own use.
VAT is charged on a supply by auction, sale of goods by instalments, lay-by sale and the supply of taxable fringe benefits. A supply of goods or services by an agent for a principal is a supply by the principal.
A supply is taxable if it is made by a vendor for a consideration, as part of a trade or profession. A ‘vendor’ is someone who is, or should be, registered for VAT.
The VAT registration threshold is 500,000 Maloti (equivalent to ZAR500,000) taxable turnover in the past or next 12 months. The LRA may register a person who should be registered for VAT, but has failed to apply for registration. The vendor will be liable to pay VAT on all the taxable supplies made after the registration date, regardless of whether tax was actually charged. Furthermore, additional tax of up to 200% of unpaid VAT may be imposed.
A person whose taxable turnover is below the threshold may apply for voluntary registration. A person who has set up a business where he intends to make taxable supplies in future can apply to be registered for VAT registration, even if he is yet to begin making the taxable supplies.
Subject to certain conditions, groups of companies may apply for a single VAT registration. The Commissioner may at any time exclude any member from the group.
Registration of nonresidents
A person living in Lesotho may be required to register for VAT notwithstanding that only part of his business is carried on in Lesotho and the other part is carried out abroad. A person will also be required to register for VAT if he has a place of business in Lesotho, notwithstanding that he lives abroad. Additionally a person will be required to register for VAT if he has a place of business in Lesotho, even if he only supplies goods or services abroad.
A local fiscal representative is required but a bank account in Lesotho is not a necessity.
Application for registration
An application for VAT registration must be lodged with the Commissioner. If the application is approved, the Commissioner will issue a certificate of registration, which must be displayed in a prominent position.
The format of the VAT registration number is: 1234567. The number used is called a tax identification number (TIN)
The LRA should be notified in writing in the following circumstances and cancellation of registration must take place:
where there is a change in the legal status of an entity (e.g. a partnership is dissolved);
if the business is sold;
if the business ceases trading permanently; or
if a person was registered as an intended trader and the intention to make supplies has ceased.