Lesotho VAT, GST, and Sales Tax Guide

Lesotho

Lesotho GMT +2

Please direct all queries regarding Lesotho to the persons listed below in the Bloemfontein, South Africa office.

Indirect tax contacts

Emile F. Du Toit

+27 (51) 406-3516 +27 (82) 856-1552 emile.dutoit@za.ey.com

Rofhiwa Netshiswinzhe +27 (51) 406-3566 +27 (82) 617-2227 rofhiwa.netshiswinzhe@za.ey.com

A. At a glance

Name of the tax

Value-added tax (VAT)

Local name Value-added tax (VAT)

Date introduced 1 January 2001

Trading bloc membership Southern African Development Community (SADC) Southern African Customs Union (SACU) African Growth and Opportunity Act (AGOA) Cotonou Agreement

Administered by Lesotho Revenue Authority (LRA) (http://www.lra.org.ls/)

VAT rates

Standard 15%

Reduced 10%

Other Zero-rated (0%) and exempt

VAT number format 8-digit number, usually starting with “500,” for example “500XXXXX”

VAT return periods

Thresholds

Monthly

Registration Annual taxable supplies of more than LSL850,000

Recovery of VAT by non-established businesses No

B. Scope of the tax

VAT applies to the following transactions:

• The supply of goods or services made in Lesotho by a registered person

• Reverse-charge services received by a person in Lesotho that is not entitled to claim full input tax credits (referred to as imported services)

• The importation of goods from outside Lesotho, regardless of the status of the importer

Goods that are imported from countries in the Southern African Customs Union (that is, Botswana, Namibia, South Africa and Swaziland) are not subject to customs duty, but they are subject to VAT.

A taxable supply in Lesotho means a supply of goods or services (other than an exempt supply) made in Lesotho by a vendor (i.e., a taxable person) for consideration in the course or furtherance of an enterprise carried on by the vendor. A taxable supply also includes a supply by way of an export of goods or services by a vendor for consideration in the course or furtherance of an enterprise carried on by the vendor.

A supply is made in the course or furtherance of an enterprise carried on by a vendor if the sup ply is made by the vendor as part of, or incidental to, any independent economic activity of the vendor, whatever the purposes or results of that activity. An enterprise does not include in the case of an individual, any activities carried on by that individual or any other person only as part of that individual’s hobby or leisure activities.

C. Who is liable

Registration is compulsory for any business that supplies taxable goods/services and whose annual taxable supplies (turnover) exceeds the registration threshold.

A person is required to register for VAT as a vendor, under the following circumstances:

• Within 14 days of the end of any period of 12 months if during that period the person made taxable supplies the taxable value of which exceeds LSL850,000 per annum

Or

• At the beginning of any period of 12 months where there are reasonable grounds to expect that the total taxable value of taxable supplies to be made by the person during that period will exceed LSL850,000 per annum

VAT is imposed on every taxable supply and every taxable import. VAT payable in the case of a taxable supply is to be accounted for by the vendor making the supply, or in the case of a taxable import, is to be paid by the importer. A taxable supply means a supply of goods or services made in Lesotho by a vendor for consideration in the course or furtherance of an enterprise carried on by the vendor. A taxable supply includes a supply by way of an export of goods or services by a vendor for consideration.

Exemption from registration. The VAT law in Lesotho does not contain any provision for exemp tion from registration.

Voluntary registration and small businesses. A person whose turnover is below the compulsory registration threshold may register for VAT on a voluntary basis if the value of its taxable supplies exceeds LSL850,000 in any 12-month period. The application for voluntary registration must be made to the Commissioner of Domestic Taxes who has the discretion to accept or reject such a request based on the merits of the case.

Group registration. Group VAT registration is not allowed in Lesotho.

Non-established businesses. It must be noted that the normal registration requirements are only applicable to entities that are based in Lesotho. They do not apply to nonresidents.

A “non-established business” is a business that has no fixed establishment in Lesotho. Where nonresidents carry on an enterprise outside of Lesotho, but whose goods or services are con sumed in Lesotho, that nonresident shall apply for VAT registration irrespective of whether such person meets the LSL850,000 threshold. Such registration shall be renewable annually, at the expiry of the last registration date.

Should a nonresident have a “permanent establishment” (PE) in Lesotho and registers either an external company (branch) or an internal company (subsidiary), then the M850,000 threshold would apply, and they would be required to register for VAT if this threshold is exceeded.

Tax representatives. A registered VAT vendor needs to appoint a natural person residing in Lesotho as a tax representative to assist in tax matters. No bank account, however, is necessary.

Reverse charge. The Lesotho Revenue Authority (LRA) will introduce a reverse-charge mecha nism to tax import services. At the time of preparing this chapter, the proposed VAT legislation has not been finalized or implemented in Lesotho. As such, the current position is that the importer of the service makes payments to the LRA on the amount of services imported. If the service is used for the supply of taxable supplies, then the input can be claimed in a subsequent return.

Domestic reverse charge. There are no domestic reverse charges in Lesotho.

Digital economy. The supply of electronic services by a non-established business to recipients in Lesotho is subject to import VAT. An import means, in the case of services, a supply of services by a person in the course of furtherance of an enterprise carried on outside Lesotho where the services are for use or consumption in Lesotho, where:

• Such services are supplied by electronic means such as television or internet.

• Where the supplier is established out of Lesotho and the importer is an established in Lesotho who is importing television or internet services, then it shall be that importer who is liable to pay tax on such taxable import.

• Where such non-established business conducts sufficient business in Lesotho to the extent that such cable television or other service may be treated as supplied in Lesotho and not imported, then the Lesotho operation shall be liable to VAT through its PE.

The term “electronic means” is defined in the VAT Act. In relation to the supply of services, it means the transmission sent initially and received or downloaded at its destination of equipment for the processing (including digital compression) and storage of data or software, or entirely transmitted, conveyed and received by wire, wireless or optical means, or by other electronic means, including television broadcasting but excluding radio broadcasting.

Nonresident providers of electronically supplied services for business-to-business (B2B) and business-to-consumer (B2C) supplies are not required to register and account for VAT on supplies in Lesotho. This does not apply, however, if the nonresident has a permanent establishment in Lesotho, and if its taxable supplies exceed the VAT registration threshold.

The VAT due on the supply is treated as import VAT and is borne by the customer (i.e., the person receiving the service). As the reverse-charge mechanism has not yet been implemented in Lesotho for imported services (see the Reverse charge mechanism), the importer of the service is required to pay the import VAT due to the LRA on the amount of services imported. If the service is used for the supply of taxable supplies (i.e., the electronically supplied service was made B2B not B2C), then the input can be claimed in a subsequent return.

There are no other specific e-commerce rules for imported goods in Lesotho.

Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Lesotho.

Registration procedures. To register for VAT, the vendor must visit the LRA Advice Centre (in person) to obtain Form VAT1. This should be submitted together with supporting documents as advised by the LRA. After registration, a VAT registration number will be issued. The certificate when issued must be displayed in a prominent position at your business so that customers and visiting tax officials may see it. Should an individual not qualify to be registered for VAT, they will receive a notification from the Commissioner Domestic Taxes explaining the reasons why they have not been approved for registration.

Deregistration. The LRA is not clear on deregistration procedures. Communication with the LRA is required prior to deregistration to clarify the process.

Changes to VAT registration details. A vendor is required to maintain up to date records. There is no requirement nor timing to notify the tax authority. However, additional tax may apply to any person who fails to maintain proper records or issues false or misleading statement. For example, an invoice with the incorrect address.

D. Rates

The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero-rate.

The VAT rates are:

• Standard rate: 15%

• Reduced rate: 10% (increased from 9% to 10% from 1 April 2021)

• Zero-rate: 0%

The standard rate of VAT applies to all supplies of goods or services, unless a specific measure provides for a reduced rate, the zero-rate or exemption.

Note that zero-rated goods shall be restricted to those listed in Schedule IV of the Act, provided that the determination and duration of this rate shall be dictated by the extent to which such items may be regarded as a basic necessity. The minister shall make Regulations to redetermine the rate as a matter of State policy.

Examples of goods and services taxable at 0%

• Agricultural input (fertilizers, seeds and pesticides)

• Beans

• Bread

• Lentils

• Livestock feed and poultry feed

• Maize (grain)

• Maize meal

• Milk

• Paraffin intended for use as fuel for cooking, illuminating or heating

• Peas

• Sorghum meal

• Unmalted sorghum grain

• Wheat (grain)

• Wheat flour

• Export of goods or services from Lesotho by a vendor

• Goods that are supplied in the course of repairing, renovating or modifying a taxable supply, subject to the requirements set out in section 6A(3)(a)

• Supply consisting of illuminating kerosene intended for use as fuel for cooking, illuminating or heating and are not mixed with another substance

• Supply of services that would otherwise be taxable, which comprise the transport of goods or any ancillary transport services supplied directly in connection with the exportation from or importation into Lesotho of goods or the movement of goods through Lesotho from one export country to another export country, where such services are supplied directly to a person who is not a resident of Lesotho and is not a vendor, otherwise than through an agent or other person

• Services that are supplied directly in connection with land or any improvement thereto, situated in any export country

• Services that are supplied directly in respect of: Movable property situated in any export country at the time the services are rendered Goods temporarily admitted into Lesotho from an export country that are exempt from tax importation, as listed in Schedule II

Arranging the supply of goods being exported outside of Lesotho and transportation of goods within Lesotho for a person who is not a resident of Lesotho and is not a vendor

International transport passengers originating in Lesotho with a destination outside Lesotho

• Supply of goods or services is part of a transfer of an enterprise as a going concern by a vendor, provided certain requirements are complied with as contained in the Act

• Electricity

Examples of goods and services taxable at 10%

Examples of exempt supplies of goods and services

• Education services provided by the following: Pre-primary, primary or secondary school College or university

Institution established for the promotion of adult education, vocational training, technical education or the education or training of physically or mentally handicapped persons, which is registered with the Ministry of Education

• Financial services, defined as follows:

Granting, negotiating and dealing with loans, credit, credit guarantees and any security for money, including management of loans, credit or credit guarantees by the grantor

Transactions concerning deposit and current accounts, payments, transfers, debts, cheques and negotiable instruments, other than debt collection and factoring

Transactions relating to shares, stocks, bonds and other securities, other than custodial services

Management of investment funds

• Transportation services, defined as the transportation of fare-paying passengers and their per sonal effects by road

• Supply of public postal, transportation, medical or dental, financial, insurance or education services

• Supply of unimproved land

• Certain supplies by way of lease or letting of immovable property subject to certain provisions

• Supply of water

• Supply by amateur sporting organization of sport activities, where such activities are deemed for the purposes of this Act to be nonprofessional

• Supply of cultural activities and supplies deemed to be so by the Commissioner General, which would include, but are not restricted to, the collection of entrance fees, or where such events are regular events (provided that such activity is for a nonprofit supply or service)

• Supply of charity arrangements by an organization or institution deemed by the Commissioner General to engage in or conduct charitable activities or work subject to certain provisions

• Any supply prescribed by the Minister in regulations as an exempt supply

Option to tax for exempt supplies. The option to tax exempt supplies is not available in Lesotho.

E. Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.”

In Lesotho, the general time of supplies would be the earliest of the following:

• The date on which the goods are delivered or made available, or the performance of the ser vices is completed

• The date on which the invoice for the supply is issued

• The date on which payment (including part payment) for the supply is made

Other tax points are used for a variety of situations, including “rental agreements,” change in use, auctions, gifts, hire purchase agreements and finance leases.

Deposits and prepayments. There are no special time of supply rules for deposits and prepay ments. As such, therefore the general time of supply rules apply (as outlined above).

Continuous supplies of services. The tax point for continuous supplies of services is the earliest of:

• The date on which the goods are delivered or made available, or the performance of the ser vices is completed

• The date on which the invoice for the supply is issued

• The date on which payment (including part payment) for the supply is made

Goods sent on approval for sale or return. There are no special time of supply rules for supplies of goods sent on approval for sale or return. As such, therefore the general time of supply rules apply (as outlined above).

Reverse-charge services. There are no special time of supply rules for the supply of reversecharge services. As such, the general time of supply rules apply (as outlined above).

Leased assets. For time of supply purposes, a “rental agreement” means any agreement for the letting of goods other than a hire purchase agreement or finance lease.

The supply of goods under a hire purchase agreement or finance lease occurs on the date of commencement of the hire or lease. Where goods are supplied under a rental agreement or goods or services are supplied on a continuous basis under an agreement or law that provides for peri odic payments, the goods or services are treated as successively supplied for successive parts of the period of the agreement or as determined by such law, and each successive supply occurs on the earlier of the date on which the payment is due or received.

Imported goods. The time of supply for imported goods is when the goods require clearance under the Customs and Excise Act, 1982, on the date on which the clearance is made or in any other case, on the date the goods are brought into Lesotho.

Goods supplied by auction. Where goods are supplied by auction (other than by way of a sale outof-hand), the time of supply is the date of the auction.

Exempt supplies. Where goods or services are applied to own or exempt use, the time of supply is the date on which the goods or services are first applied to own or exempt use.

Gifts. Where goods or services are supplied by way of gift, the time of supply is the date on which ownership in the goods passes or the performance of the services is completed.

F. Recovery of VAT by taxable persons

VAT payable by a vendor for a tax period is calculated according to the following formula, A-B where A is the total value added tax payable in respect of taxable supplies made by the vendor during the tax period; and B is the total input tax claimable by the vendor during the tax period and allowed as a credit in terms of the Act. In the event of B exceeding A, a refund of VAT is only allowed subject to an application for a refund to the Commissioner.

The time limit for a taxable person to reclaim input tax in Lesotho is four years. Application for refunds must be done in writing within 20 days after the end of the calendar quarter or within four years after the tax is due and payable.

Input tax means value added tax paid or payable in respect of a taxable supply to, or a taxable import by, any person, but does not include additional tax.

Input tax can be claimed to the extent that the input tax is payable or paid in respect of a taxable supply or taxable import by the vendor in the course of business of an enterprise carried on by the vendor, subject to the following conditions:

• Where there is a valid tax invoice

Or

• Where there is a bill of entry or other document prescribed under the Customs and Excise Act, 1982, evidencing the amount of input tax payable or paid

There are instances where input tax can be claimed without a valid tax invoice. For this circum stance, the following needs to be proved to the Commissioner General:

• That the vendor took all reasonable steps to acquire a VAT invoice

• That the failure to acquire a VAT invoice was not the fault of the vendor

• That the amount of input tax claimed by the vendor is correct

If in consequence of a fraudulent action or misrepresentation by the recipient of the supply, a vendor applied a lower rate of tax (including a zero rate) than that correctly applicable to the supply, the Commissioner General may raise an assessment upon the recipient for the amount of VAT payable together with any additional tax that has become payable. The amount may also be recovered from the vendor.

Further, the input tax is allowable in the tax period in which the taxable purchases or imports are made. The vendor will only be allowed the input tax credit upon proof of valid tax invoices indi cating the tax incurred by the vendor on acquiring taxable supplies in the tax period concerned.

It is also important to take note that the input tax incurred by the vendor will only be refunded to the extent that it exceeds the output tax on the reported sales.

Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are not used for taxable purposes (for example, goods acquired for private use or services used for making exempt supplies). Input tax is nondeductible on purchases of goods and services that are not used for taxable purposes, such as private expenses. This also includes any other goods or services that are not used for taxable purposes.

Examples of items for which input tax is nondeductible

• Exempt supplies of goods and services

• Items considered to be of a personal nature

• For tax on purchases of used goods if the taxable value of a taxable supply of those goods is determined as the lesser of consideration paid or fair market value of the supply

• For any tax that is refundable

• For tax on purchases for noncommercial vehicles, entertainment representation and payments in kind to staff

Examples of items for which input tax is deductible (if related to a taxable business use)

If a vendor meets the definition of a taxable supply, then that supply can have input tax claimed, unless it is specifically stated as a supply that an input cannot be claimed, see above.

Partial exemption. If a vendor makes a purchase of a taxable supply in the furtherance of their enterprise, then input tax may be claimed. If the purchase is for their own personal use or exempt use, then no input may be applied. If the purchase is to be used for both taxable and personal or exempt use, then the vendor would have to apply an apportionment based on the taxable versus personal or exempt usage, i.e., turnover. The legislation does not specifically address this matter; however, an acceptable method would have to be applied to determine the eligible input claim able.

Capital goods. “Capital goods” in the Lesotho VAT Act means plant and equipment (including spare parts therefore, but not including registrable motor vehicles) for use directly in manufactur ing.

Input tax incurred on capital goods can be claimed to the extent that the input tax is payable or paid in respect of a taxable supply or taxable import by the vendor in the course of business of an enterprise carried on by the vendor. If a vendor intends to use a capital good acquired for making taxable supplies, the vendor may deduct the input tax incurred on acquisition, but only to the extent of payment made. If the capital good is intended to be used partially for making taxable supplies and partially for nontaxable supplies, only the portion relating to the intended taxable use may be deducted.

Refunds. A person may apply to the Commissioner General for a refund VAT paid in excess of the amount due. Where the Commissioner General is satisfied that the refund is due to the ven dor, they may apply the amount of tax overpaid against any other outstanding VAT liability or income tax liability or refund the amount. The Commissioner General may conduct VAT audits prior to refunds being paid out. Application for refunds shall be done in writing within 20 days after the end of the calendar quarter or within four years after the tax is due and payable. Refunds owing to certain organizations, such as diplomats, contractors and charitable activities, will fol low specific rules.

Pre-registration costs. Where a person is registered for VAT, they can claim input tax relating to taxable supplies prior to registration, provided the goods or services were acquired by that person not more than two months before the date of registration and an application for the credit is made within two months after the registration date.

A person can claim an input tax credit in respect of goods and services relating to pre-incorpo ration expenses upon the incorporation where the vendor is a legal persona, but such person needs to register first for VAT and claim in respect of a commercial entity.

Bad debts. A vendor is allowed a credit for the VAT paid in respect of a taxable supply made by the vendor where the whole or part of the consideration for the supply is subsequently treated as a bad debt. The credit allowed is the amount of the VAT paid in respect of the supply that cor responds to the amount of the debt treated as bad.

The credit arises on the later of the date on which the bad debt was written off in the accounts of the vendor or 12 months after the end of the tax period in which the value added tax was paid in respect of the supply.

Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Lesotho.

G. Recovery of VAT by non-established businesses

Input tax incurred by non-established businesses in Lesotho is not recoverable.

H. Invoicing

VAT invoices. A vendor making a taxable supply to another vendor shall provide that other ven dor, at the time of the supply, with an original VAT invoice for the supply.

Credit notes. Credit notes must be issued by the vendor making the supply in the case where the consideration for the supply is reduced after an invoice has already been issued. This can be the result of, among others, cancellation of the supply, a discount offered, etc.

Debit notes are issued by the vendor making the supply in the case where the consideration for the supply is increased after an invoice has already been issued. This can be the result of, among others; the reduced rate of VAT being used instead of a standard rate of tax, a wrongly reduced quantity of goods is invoiced, etc.

Electronic invoicing. Electronic invoicing is allowed in Lesotho, but it is not mandatory. It should contain the same particulars as nonelectronic invoices, but the format of electronic invoices is not prescribed. Vendors do not need prior approval from the Commissioner to implement elec tronic invoicing.

Simplified VAT invoices. Simplified VAT invoicing is not allowed in Lesotho. As such, full VAT invoices are required.

Self-billing. Self-billing is not allowed in Lesotho.

Proof of exports. The rate of VAT imposed on an export of goods or services from Lesotho by a vendor is zero. “Exports” in Lesotho are defined as the following:

• In the case of goods, the delivery of the goods to, or the making available of the goods at, an address outside Lesotho as evidenced by documentary proof acceptable to the Commissioner General

Or

• In the case of services, the supply of the services for use or consumption outside Lesotho as evidenced by documentary proof acceptable to the Commissioner General, not being services, which are supplied directly in connection with any movable or immovable property situated in Lesotho at the time of the supply

Customs documentation relating to imports and exports must be retained by the vendor in order to zero-rate the exports. The legislation does not state what is considered to be acceptable docu mentary proof for such zero-rating. This would therefore be at the discretion of the Commissioner. The vendor would have to submit what they consider sufficient support of their goods or ser vices.

Foreign currency invoices. If an amount is expressed in a currency other than the domestic currency, which is the Lesotho loti (LSL), the amount shall be converted at the exchange rate apply ing between the currency and loti at the time of supply.

Supplies to nontaxable persons. There are no special invoicing rules for supplies to nontaxable persons in Lesotho. As such, full VAT invoices are required.

Records. In Lesotho, VAT books and records must be held within the country. A VAT registered vendor must maintain the following records, physically stored in Lesotho, in the Sesotho or English languages:

• Original VAT invoices, credit notes and debit notes received by the vendor

• A copy of all VAT invoices, credit notes and debit notes issued by the vendor

• Customs documentation relating to imports and exports by the vendor

• Such other accounts and records as may be prescribed by the Commissioner General

Each vendor must maintain up-to-date books of account, physically stored in Lesotho, in the Sesotho or English languages that meet the following conditions:

• Correctly record and explain the transactions entered into by the vendor

• Will, at any time, enable the financial position of the vendor to be determined with reasonable accuracy

• Will enable the accounts of the vendor to be readily and properly audited

• Will enable the directors of a vendor that is a company to ensure that any balance sheet, profit and loss account, or income and expenditure statement of the vendor complies with the require ments applicable under all relevant laws of Lesotho

Record retention period. Records or accounts must be retained for as long as they remain mate rial in the administration of the VAT Act. It is, however, accepted in practice that a duration of six years is the norm.

Electronic archiving. Electronic archiving is not allowed in Lesotho. Archiving must be made in paper form only.

I. Returns and payment

Periodic returns. The VAT return period is monthly for all taxable persons. VAT returns must be filed by the 20th day after the end of the tax period. This deadline is the same whether the returns are filed in person (at the LRA advice center) or by email.

Periodic payments. VAT must be paid by the 20th day after the end of the tax period. Payment should be made in person at the LRA banking hall in Maseru or the banks (standard Lesotho Bank, Nedbank Lesotho, FNB, Post Bank). Payments can also be made by electronic fund trans fer and the proof of payment submitted to the LRA, together with the return filing for allocation and receipting.

Electronic filing. Electronic filing is allowed in Lesotho, but not mandatory. Vendors may file VAT returns electronically to the LRA via the e-services platform.

Payments on account. Payments on account are not required in Lesotho.

Special schemes. Cash accounting. Where 90% or more of the total taxable value of taxable sup plies made by a vendor consists of the supply of services, the vendor may apply, in writing, to the Commissioner General to calculate VAT payable under the cash accounting special method. If the Commissioner General considers it appropriate to do so, the Commissioner General may grant the application by notice in writing with effect from the date specified in the notice. Cash accounting is where you claim input tax and declare output tax on a payment basis.

Goods sold by auction. A supply of goods by auction is treated as a supply of goods for consid eration by the auctioneer as vendor-made in the course or furtherance of an enterprise carried on by the auctioneer.

A supply of goods or services occurs where goods are supplied by auction (other than by way of a sale out-of-hand), on the date of the auction.

Where VAT is payable by an auctioneer in respect of the supply of goods, the auctioneer shall charge the purchaser the amount of VAT payable in respect of the sale by adding the VAT to the amount of a successful bid, or in the case of sales out-of-hand, to the purchase price and shall recover that tax from the purchaser.

Sporting activities. A supply by amateur sporting organization of sport activities, where such activities are deemed to be nonprofessional, are exempt from VAT.

Annual returns. Annual returns are not required in Lesotho.

Supplementary filings. No supplementary filings are required in Lesotho.

Correcting errors in previous returns. The vendor may apply in writing for a voluntary disclosure process to declare any errors that they may have identified on previous filings.

However, adjustments must be made to a return where an incorrect amount of VAT was declared, the supply is canceled, the consideration has been amended, goods have been returned, amount charged on VAT invoice was incorrect, etc. Such an adjustment must be made in the returns in the fiscal year the error took place.

Digital tax administration. There are no transactional reporting requirements in Lesotho.

J. Penalties

Penalties for late registration. Once a vendor meets the VAT registration threshold, it is obliged to register for VAT, as its business is regarded as a registerable business. If a vendor fails to register for VAT, it will be liable to pay the VAT on all the taxable supplies it has made, regardless of whether it has actually charged and collected the tax. The Commissioner Domestic Taxes is entitled to consider the vendor’s entire liability by looking back to the date it became liable to register and consequently recover the tax due for earlier periods.

In addition, the Commissioner can impose an additional amount of tax as a penalty for the vendor’s failure to comply. This additional tax may be charged at the maximum rate of 200% of the unaccounted tax liability. Also, if it is discovered later that the actual VAT registration date (i.e., when the registration threshold was breached) was a date earlier than the one the vendor showed on the registration form, it will have to pay the VAT on the taxable supplies it made from the earlier date, together with the penal additional tax.

Penalties for late payment and filings. A vendor who fails to file a return or fails to pay VAT within the time required is liable for additional tax on the VAT payable for the period of the return at the rate of 3% per month or part of the month the return is outstanding.

Penalties for errors. There are no specific penalties for errors. However, additional penalties can be issued for the following:

• Offenses related to VAT invoices, credit notes and debit notes – failure to provide an invoice, credit note and debit note as required

• Failure to give security – failure to pay security on import of goods

• Failure to comply with recovery provisions – failure to provide assistance to the Commissioner in recovering VAT due from third parties

• Failure to maintain proper records – not maintain proper records in terms of legislation

• Failure to provide reasonable assistance – failure to assist the Commissioner in executing their duties

• Improper use of taxable person identification number or VAT number – knowingly using a false taxable person identification number or VAT number on a return

• Failure to comply with a Section 50 notice – a Section 50 notice is a request for information issued by the Commissioner – failure to respond to such a request carries a penalty

• Failure to maintain secrecy – both the taxable person and an officer of the revenue authority has a duty to maintain secrecy in relation to the information

• Breach of Section 86 – prohibition on advertising; pricing on tax-exclusive or tax-inclusive basis – a vendor who advertises that the VAT on a supply will be borne or absorbed by the person

• Obstructing taxation officers – failure to assist officers to carry out their duties per legislation

• Impersonating an officer – there is a penalty for impersonating an officer of the authority

• Other offenses by companies – this section states that the nominated person, directors and other members of management are responsible for the above offenses if taken during the time they were in office

A taxable person who fails to abide by the legislation in relation to the above commits an offense and is liable on conviction to a fine. The fine ranges from an amount not less than LSL2,000 but not exceeding LSL12,000 or to an imprisonment for a term not less than two years but not exceeding six years or both.

Penalties for fraud. A vendor who makes false or misleading statements, commits an offense and is liable on conviction to where the statement or omission was made knowingly or recklessly, a fine not less than LSL4,000 but not exceeding LSL12,000 or to imprisonment for a term not less than two years but not exceeding six years or both; or in any other case, a fine not less than LSL2,000 but not exceeding LSL6,000 or to imprisonment for a term not less than one year but not exceeding three years or both.

Personal liability for company officers. A vendor who makes false or misleading statements, com mits an offense and is liable on conviction to where the statement or omission was made knowingly or recklessly, a fine not less than M4,000 but not exceeding M12,000 or to imprisonment for a term not less than two years but not exceeding six years or both; or in any other case, a fine not less than M2,000 but not exceeding M6,000 or to imprisonment for a term not less than one year but not exceeding three years or both.

The section does not apply where the offense was committed without such person’s consent or knowledge, and the person exercised all such diligence to prevent the commission of the offense as ought to have been exercised having regard to the nature of the person’s functions and all the circumstances.

Statute of limitations. The statute of limitations in Lesotho is four years. The time limit for amending an assessment are as follows:

• Where fraud or gross or willful neglect has been committed by, or on behalf of, the person assessed in respect of the period of assessment, the assessment may be amended at any time. Or

• In any other case, the assessment may be amended within four years after service of the notice of assessment.