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Lesotho
We have a team of seasoned professionals ready to support your business ventures in Lesotho, ensuring a seamless experience so you can focus on growth, strategy, and expansion across Southern Africa and beyond.
WHY LESOTHO?
Lesotho, a landlocked constitutional monarchy surrounded by South Africa, offers a unique gateway to the Southern African region through its membership in the Southern African Customs Union (SACU) and the Southern African Development Community (SADC). The country is rich in water and renewable energy resources, has access to preferential trade agreements, and boasts a cost-effective, predominantly English-speaking workforce.
With political efforts focused on improving infrastructure, trade facilitation, and foreign investment, Lesotho is gradually transforming into a promising investment hub, especially for sectors like garment manufacturing, hydropower, agriculture, and tourism.
ADVANTAGES
• Duty-free market access to South Africa and other SACU members, along with preferential trade access to the U.S. (AGOA) and the EU (Everything But Arms agreement).
• Cost-competitive labor force with high participation of skilled women in the textile industry.
• Investment support through the Lesotho National Development Corporation (LNDC) and the One-Stop Business Facilitation Centre (OBFC).
• Political stability under a multi-party democratic system with recent peaceful transitions.
• Abundant water resources, which not only provide energy (hydropower) but also generate revenue via exports to South Africa.
• Attractive industrial zones developed and managed by the government with long-term lease incentives.
SIMPLE TAX REGIME
Tax registration is mandatory for companies and partnerships and is integrated with the business registration process at the OBFC.
TAX SLABS
Corporate Tax:
- Resident companies: 25% on taxable income.
- Manufacturing companies (qualifying): 10% for the first 10 years of operation.
- Non-resident companies: Taxed at 25% on income sourced in Lesotho.
Value Added Tax (VAT):
- Standard rate: 15%
- Zero-rated supplies: Exported goods, basic food items, and certain education and health services.
- VAT registration threshold: Annual turnover of LSL 850,000.
Withholding Tax:
- Dividends to non-residents: 25%
- Interest paid to non-residents: 10%
- Royalties: 15%
- Management and technical fees: 10%
INCOME TAX RATES
For Individuals (Residents):
- 0 – LSL 67,440: 20%
- Over LSL 67,440: 30%
Non-Resident Individuals:
- Flat rate of 25% on income derived from Lesotho sources.
All employers are required to deduct Pay-As-You-Earn (PAYE) from employees’ salaries and remit it monthly to the LRA.
LESOTHO COMPANIES
Common Types of Legal Entities in Lesotho:
- Private Limited Company (Pty) Ltd
- Most commonly used structure.
- Requires at least one director and one shareholder.
- No minimum capital requirement.
- Liability is limited to the unpaid amount on shares.
- Public Limited Company (PLC)
- Suitable for large-scale investments and raising capital from the public.
- Requires a minimum of two directors and a company secretary.
- Sole Proprietorship
- Owned and operated by one individual.
- Easy to set up but offers no limited liability.
- Partnership
- Two or more persons share ownership and responsibility.
- Can be registered formally but partners are personally liable.
- Foreign Branch or Subsidiary
- Foreign entities can establish a local branch or incorporate a subsidiary.
- Subsidiaries are treated as local companies.
- Branches are taxed on Lesotho-sourced income.
FOREIGN INVESTMENT
Lesotho welcomes foreign direct investment (FDI) and offers supportive mechanisms through the Lesotho National Development Corporation (LNDC) and OBFC. Though foreign land ownership is restricted, leases can be granted for up to 60 years. Foreign investors are eligible for investment certificates, which unlock various incentives.
Priority sectors include:
- Textiles and Garments
- Renewable Energy and Hydropower
- Agro-processing
- Tourism and Ecotourism
- Water and Infrastructure Projects
INTELLECTUAL PROPERTY RIGHTS
Lesotho is a member of the World Intellectual Property Organization (WIPO) and the African Regional Intellectual Property Organization (ARIPO). IP protection covers:
- Trademarks
- Copyright
- Industrial Designs
- Patents (via ARIPO)
Businesses are advised to register their trademarks and IP assets with the Registrar General’s Office in Maseru.
CONCLUSION
Lesotho provides a strategic platform for businesses looking to access the Southern African market with low-cost operations, regional trade benefits, and sector-specific incentives. Despite certain infrastructural and bureaucratic challenges, Lesotho’s tax-friendly environment, political stability, and resource-driven sectors offer real potential for growth and investment.
