APRIL – Important Financial Activity

It’s that time of year again—how are you going to ensure that you are tax compliant as an individual?  It is essential to understand why tax compliance is crucial. Take a look at the information below and seek further details on tax regulations in Lesotho to ensure you’re fully informed.

Understanding Employee Taxes in Lesotho

As employees in Lesotho, it’s important to understand your tax obligations. Taxes play a crucial role in funding government services and infrastructure that benefit society as a whole. By fulfilling your tax responsibilities, you contribute to the development and stability of the country. Our content is only based on individual income tax for now.

Individual Income Tax is a tax to be paid by individuals based on their taxable income. For example, annual gross salary amounting to M120,000.00 and M12,000.00 travel allowance makes M132,000.00 employee’s taxable income for that year.  Applicable rates will be used for calculating the tax payable amount as prescribed by the law in that specific year.  Taxable Income includes salary, bonuses, commissions, allowances, and other benefits received. It’s important to note that not all income is taxable, as certain deductions and exemptions may apply. Example of individuals to register for this type of tax are individuals, sole proprietors, partners, directors, and members.

Tax Rates and Brackets

Lesotho uses a progressive tax system, meaning that higher income earners are subject to higher tax rates. Tax rates and brackets are updated annually by the government. It’s essential to be aware of the current tax rates applicable to your income level.

Per the year 2022/2023 the individual’s taxable income is subject to a progressive two-rate structure of 20% and 30%.

Tax rate of 20% applies to any taxable income up to M69,120.00 maximum per annum.   Any amount in excess of M69,120.00 is taxed at a rate of 30%.

Tax Credit

According to the law, individuals can receive a non-refundable tax credit. This credit is a form of relief given to people who earned taxable income during the assessment year. Essentially, it’s a deduction directly taken from the total amount of taxable income after applying the relevant marginal tax rates. Currently, the non-refundable tax credit stands at M10,824.00 per year.

Example of tax calculation based on annual total gross income of M132,000.00

Filing Tax Returns

While taxes are deducted regularly from salaries, employees still need to file their annual tax return after obtaining P16. This allows reconciliation of figures to detect discrepancies early enough in tax payments and claim any eligible deductions or credits.

Deductions and Allowances

Various deductions and allowances are available to reduce your taxable income and ultimately lower your tax liability. These may include contributions to pension funds, medical expenses, and donations to charitable organizations. Keeping records of these expenses is essential for claiming deductions accurately.

Benefits of Tax Compliance

Complying with tax laws not only fulfills civic duty but also offers several benefits. These include access to social services such as healthcare, education, and infrastructure development, which are funded by tax revenue. Additionally, being tax-compliant can enhance financial stability and reputation.

Consequences of Non-Compliance

Failure to comply with tax laws can result in penalties, fines, and legal consequences. It can also negatively impact your financial well-being and reputation. It’s crucial to meet tax obligations and address any issues promptly to avoid these consequences.

Seeking Assistance

If you have questions or need assistance regarding taxes, don’t hesitate to seek help. You can consult with tax professionals, reach out to the Revenue Services Lesotho, or utilize online resources provided by the government. Understanding your tax obligations and rights is key to ensuring compliance and financial security.

As an employee in Lesotho, understanding your tax responsibilities is essential for financial planning and contributing to the country’s development. By staying informed, fulfilling your obligations, and seeking assistance when needed, you can navigate the tax system with confidence and integrity.