Enabling Environment for Attractive Tax Rates
A favorable fiscal and financial environment has been created to promote an attractive investment climate in Lesotho this includes:
- 0% tax income generated from exporting manufactured goods outside of the South Africa Customs Union (SACU)
- Maximum manufacturing tax rates of 10% on profits derived from sales within SACU
- No withholding tax on dividends distributed by manufacturing firms to local or foreign shareholders
- No advanced corporation taxes are paid by companies on the distribution of manufacturing profits
- Training costs are allowable at 12% for tax purposes
- Payments made in respect of external management skills and related to manufacturing operations are subject to withholding tax of 15%
- Easy repatriation of manufacturing profits
- VAT rate of 14% (ensuring harmonization with the RSA).
Furthermore, the Lesotho Revenue Authority has introduced flexible Vat payment systems, to tax compliant firms, to ease cash flow constraints Tariff Rebates & Duty Free Access to Global Markets.
A number of financial incentives are available to manufacturing companies establishing businesses in Lesotho include:
- Unimpeded access to foreign exchange.
- Export Finance Facility.
- Long-term loans.
- The existence of an import vat credit facility provides input tax credit upon importation and local purchasing of raw materials and capital goods.
Lesotho government is irrevocably committed to the development of the private sector. It is a signatory to the Convention on the Settlement of Investment Disputes between states and nationals of other states, furthermore she is a party to Avoidance of Double taxation Agreements with several states.
Manufacturers are afforded a full duty rebate on imported raw materials or components for use solely in the processing or manufacture of goods for the export market. This facility assists exporters to avoid the strain imposed on their liquidity by customs and other duties for the importation of raw materials or components at the time of importation. A company located anywhere in Lesotho can have effective Export Processing Zone status.
Lesotho is also a member of the Multilateral Investment Guarantee Agency (MIGA). MIGA promotes/encourages the flow of foreign direct investments to developing countries by providing investment guarantees to investors to mitigate against specified non-commercial risks associated with a project, such as: political risks, transfer restrictions, expropriation, breach of contract, war and civil disturbances in the host countries.
Access to markets
Lesotho is a member of two main regional Orgarnisations to wit the Southern African Customs Union (SACU) and Southern African Development Community (SADC). There are also other arrangements outside the region which include the Cotonou Agreement with the European Union (EU) and African Growth and Opportunity Act (AGOA) with the United States of America (USA). Almost all Lesotho exports receive better than Most the Favoured Nations (MFN) treatment to these markets.
As a member of the Southern African Customs Union (SACU) Lesotho's textiles & garment firms are able to access almost the entire range of SACU rebates.
Lesotho based companies can also export to other countries duty free or at reduced tariffs in Western Europe (except EU) such as Switzerland and Austria; Nordic countries under Nordic / SADC Accord; and the Commonwealth countries such as Australia, Canada, and New Zealand.