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Output tax

Output tax is the total VAT payable in respect of taxable supplies made by the vendor during the tax period. Prices are all VAT inclusive.

Exemptions and zero-rating

Exempt supplies

Exempt supplies, in relation to which no input tax deductions can be made, include, but are not limited to:

  • education;

  • financial services;

  • passenger transport;

  • insurance;

  • public postal services;

  • unimproved land;

  • lease or letting of immovable property where the tenant is a manufacturer and the property is used by him principally for carrying on a manufacturing enterprise;

  • water; and

  • services of doctors and dentists (but not, for example, osteopaths).

The following imports are exempt from VAT:

  • an import of goods prescribed in Schedule II; and

  • an import of goods or services that would be exempt as above if supplied in Lesotho.

Zero-rated supplies

Zero-rated supplies include (but are not limited to) the following:

  • maize meal;

  • maize, but excluding popcorn or green mealies for human consumption;



beans – dried, whole, split, crushed or in powder form, but not further prepared or processed, or where packaged as seed;

agricultural input, e.g. fertilisers, seeds and pesticides;

paraffin intended for cooking, illuminating and heating, not mixed or blended with any other substance for any purpose other than cooking, illuminating or heating;

milk intended for domestic consumption;

bread intended for domestic consumption;

peas – dried, whole, split, crushed or in powder form, but not further prepared or processed, canned, or frozen, or packaged as seed;

certain animal feeds and substances;

lentils – dried, shelled but not skinned or split;

sorghum meal; unmalted sorghum grain; wheat grain; and wheat flour.

The vendor must be in possession of a proper VAT invoice for purchases made in Lesotho, or customs documentation in respect of goods imported into the country. Where a vendor has lost a tax invoice, he should request the supplier for a duplicate of the invoice, otherwise a photocopy of the invoice is not allowed when seeking input tax credit. The replacement invoice must be clearly marked by the supplier as a duplicate.

Input tax expressly denied

There are specific items on which VAT cannot be reclaimed:

  • telephone and electricity bills not exceeding M5,000 annually per telephone line or electricity meter (input tax can only be claimed on expenses exceeding M5,000);

  • motorcars, except in the case of car dealers, leasing businesses or financial institutions engaged in leasing. Maintenance and repairs to motor vehicles, used solely for business purposes, can be claimed; and

Input tax

Input tax deductions allowed

  • business entertainment, namely hospitality of any kind provided in connection with a business, including the supply of meals, drinks, entertainment at clubs and the provision of recreational facilities.

VAT incurred on goods purchased for resale, raw materials purchased by manufacturers and certain services used for the installation of capital goods may be deducted as input tax. However, input tax does not include the VAT paid on goods or services for someone else’s business, or the VAT on private purchases. VAT incurred on goods and services acquired to make exempt supplies is not recoverable.

Partial exemption

If a vendor makes taxable supplies as well as exempt supplies, he may claim part of the input tax paid on his purchases. Similarly, where goods or services are used for both business and private purposes, a vendor is only allowed a credit for input tax incurred for business use.

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