doing business in Lesotho

country profile international treaties and memberships

government • Executive: The king is the chief of state, and the prime minister is the international • African Continental Free Trade Area Agreement
structure head of government. The monarchy is hereditary with no executive or and regional • African Development Bank Group
legislative powers. The leader of the majority party or majority coalition in organisations • African Union
the National Assembly automatically becomes prime minister following and customs • Commonwealth
legislative elections. unions • Common Monetary Area (“CMA”)
• Legislative: Lesotho has a bicameral Parliament. • Group of 77
• Judicial: The highest courts are the Court of Appeal and the High Court; • International Monetary Fund
both the Court of Appeal and the High Court have jurisdiction in • Organisation of African, Caribbean and Pacific States (“OACPS”)
constitutional matters. The subordinate courts are the magistrate courts, • Southern African Customs Union
customary or traditional courts and military courts. • Southern African Development Community (“SADC”)
• Next parliamentary elections: October 2027. • United Nations
economic • Nominal GDP (USD billions): 2.66 • World Bank Group
data • GDP per capita (USD): 1 242.60 • World Customs Organization
• Inflation rate (% change): 4.98 • Lesotho receives preferential treatment under the agreements listed here:
• Government revenue (% of GDP): 46.34 http://ptadb.wto.org/Country.aspx?code=426
• Government gross debt (% of GDP): 41.89 bilateral • Lesotho has bilateral investment treaties in force with Germany,
investment Switzerland, and the United Kingdom.
*Source: IMF (November 2023 estimates) treaties

• Lesotho depends on a narrow economic base of textile manufacturing, investment- • African Growth and Opportunity Act
agriculture, remittances, and regional customs revenue, but diamond related • Cotonou Agreement (may be succeeded by the European Union and
mining has grown in recent years. agreements / OACPS Partnership Agreement)
• The main industries include food, beverages, textiles, apparel assembly,
institutions • Multilateral Investment Guarantee Agency
handicrafts, construction, and tourism. • World Trade Organization
• Lesotho’s main export partners are the United States, Belgium, South
dispute • Convention on the Settlement of Investment Disputes between States and
Africa, and Switzerland. The main export commodities include diamonds,
resolution Nationals of Other States (ICSID Convention)
clothing and apparel, wool, low-voltage protection equipment, and wheat
• United Nations Convention on the Recognition and Enforcement of
flours.
Foreign Arbitral Awards (New York Convention)
• Lesotho’s main import partners are South Africa and China. The main
import commodities include refined petroleum, clothing and apparel, intellectual • A comprehensive list of IP-related treaties signed by Lesotho is available
packaged medicines, delivery trucks, and poultry meats. property (“IP”) at:
treaties https://wipolex.wipo.int/en/legislation/members/profile/LS?collection=treati
risk ratings • S&P Global Overall Country Risk (Q4 2023): 135/211
es
• Corruption Perceptions Index (2022): 99/180
• See the trade marks section below for further detail.

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doing business in Lesotho

legal regime local • In terms of Lesotho’s employment and immigration legislation, an

applicable legal • Lesotho’s legal system is based on English common law and Roman- employment vs employee may be seconded to Lesotho, as it is not a legal requirement for
regime Dutch law. secondment either local or foreign employees to be employed by a local entity.

dispute • Lesotho established a Commercial Court in 2010 in an effort to improve fixed-term • Fixed-term contracts are allowed in terms of Lesotho’s Labour Code
resolution capacity in resolving commercial cases. contracts and Order, with no limitation on the duration of such contracts.
• Foreign investors have full and equal recourse to the Lesotho courts to temporary • The use of labour brokers is permitted only in respect of persons to be
settle commercial and labour disputes. employment employed outside of Lesotho, and the minister may, by notice in the
• Arbitration is governed by the Arbitration Act. services gazette, prohibit recruitment by labour brokers. Labour brokers must be
registered and licensed.
land • All land in Lesotho is vested in the Basotho nation and held in trust by the
acquisition, King. Land cannot be owned either by foreigners or Basotho under payment in local • There is no requirement for remuneration to be paid in local currency.
planning, and Lesotho's constitution. currency
use • Under the current system, Basotho and commercial entities, majority restraint of trade • Restraint of trade agreements are valid and enforceable in Lesotho,
controlled by Lesotho citizens, may lease land from the state on a long- agreements subject to reasonableness.
term lease for up to 90 years for residential use and either 60 years or 30
years for business use. foreign investment regime
• Foreign citizens and investors may only sub-lease land from Basotho- investment • Lesotho does not have specific foreign investment legislation, but
owned entities for a maximum of 30 years for business use. Foreign regime investment is regulated by a broad range of laws, many of which are
companies are allowed to enter into sub-leases for land if such companies sector specific.
have at least 20% local shareholding. • The Lesotho National Development Corporation (“LNDC”), part of the
• All transactions in leases and sub-leases, including issue, transfer, and Ministry of Trade and Industry, Cooperatives and Marketing (“MITICM”), is
mortgages, require government approval. responsible for investment promotion, facilitation, and incentives.
• The LNDC has established a One Stop Business Facilitation Centre
competition (“OBFC”) where all services required for the issuance of licences, permits,
merger control • There is currently no specific competition law regime governing merger and import and export clearances are housed. The OBFC comprises of
and prohibited control or prohibited practices in Lesotho. The Competition Act, 2022 has officials from the Lesotho Revenue Authority (“LRA”), the MITICM, and the
practices been promulgated, but is yet to come into force on a date to be published Ministries of Labour and Employment, and Home Affairs.
in the government gazette.
• Mergers are governed under the Companies Act, 2011. A merger proposal
registration / • No specific investment permit is required for foreign companies, but they
licensing must apply to the MITICM for required business licences and permits.
must be submitted to the Registrar of Companies for registration approval.
requirements
employment non-industry • The following general non-industry specific registrations / licences may
immigration • Expatriates working in Lesotho must hold a valid work permit and those specific also be required:
intending to remain in Lesotho and apply for citizenship are required to registrations /
obtain a residence permit. licences
• A work permit will only be issued once the National Employment Service MITICM • Businesses operating in Lesotho must hold a valid general operating
has confirmed that, at the time of application for the permit, no citizen of licence from the MITICM, which is to be applied for at the OBFC.
Lesotho is qualified and available for employment in the position to be • A health certificate, issued after a satisfactory inspection of the entity’s
occupied by the expatriate. premises by health officers of the relevant municipal counsel, is a
• In practice, provided that there is proof that an application for a work prerequisite for the licence.
permit has been submitted, expatriates are allowed in the country. • Following registration of a business, the company must also apply for a
• A work permit is valid for a period of up to two years and renewal business identification card, which is valid for three years for local entities
applications should be submitted three months prior to the expiry of the and one year for foreign entities.
work permit.

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doing business in Lesotho

LRA • All taxpayers must register with the LRA. A company is automatically directors • A private company must have at least one director.
registered for income tax and issued with a taxpayer identification number • There is generally no requirement to have any resident directors.
(“TIN”) on incorporation at the OBFC, but it is required to register
separately for employees’ tax (PAYE), fringe benefits tax, and VAT if its company • A private company is not required to appoint a company secretary.
turnover exceeds the registration threshold (see ‘tax’ below). secretary
• Each director is required to have a TIN. auditor • A private company must appoint an auditor who is:
• a member of the Lesotho Institute of Accountants (“LIA”) holding a
workmen’s • Employers are required to take out workmen’s compensation insurance
valid practice certificate;
compensation with an insurance company to cover employee injuries sustained while on
• a member of an association of accountants constituted outside of
duty.
Lesotho which is recognised by the LIA and registered with the LIA;
industry- • Industry-specific licences may be required. or
specific • registered with, and recognised by, the LIA as qualified for
licences appointment based on his/her adequate knowledge and experience.
incentives • Incentives include: registered • Every company must have a registered office in Lesotho to which all
• a tax deduction of 125% of expenditure incurred on the training or address communications and notices may be addressed.
tertiary education of a Lesotho citizen employed by a taxpayer in a • A company may have its registered address at the offices of its
business; accountants, lawyers or a third party.
• an amortisation deduction of start-up costs; and
• a concessional tax rate of 10% applying to income from shelf • Shelf companies are not available in Lesotho.
manufacturing and commercial farming. companies
registration • Companies are registered with the Registrar of Companies, and it takes
exchange • Exchange control regulations do not apply to transactions with member process approximately three to four weeks to complete registration once all the
control states of the CMA, i.e., South Africa, Namibia and Eswatini, provided that
required documents have been submitted.
regulation the flows are strictly in local currency.
• Exchange control is administered by the Central Bank of Lesotho in tax
conjunction with the South African Reserve Bank. tax system • Lesotho has a residence-based tax system in terms of which residents are
• Transactions which involve the transfer of funds to countries outside the subject to tax on their world-wide income, whereas non-residents are
CMA are subject to Central Bank of Lesotho approval. subject to tax only on their Lesotho-sourced income.
• Both the Maloti (LSL) and South African Rand (ZAR) (based on an
exchange rate of 1:1) are accepted as legal tender. corporate • A company is resident in Lesotho if it:
residence • is incorporated in Lesotho;
types of • Private limited liability company; • has its management and control in Lesotho; or
entities • public limited liability company; • undertakes the majority of its operations in Lesotho.
available for • external company (registered branch of foreign company); and
foreign • non-profit company. corporate tax • Resident companies and permanent establishment of foreign companies
investment rate are subject to corporate tax at the rate of 25%.
private limited liability company • A concessional tax rate of 10% applies to income from manufacturing and
minimum • A minimum of one shareholder is required and the maximum allowed is commercial farming.
number of 50. capital gains • Capital gains are included in ordinary taxable income subject to the
shareholders • There is generally no requirement for local shareholding, but it may be tax (“CGT”) corporate income tax at the standard rate.
required in specified industries such as mining.
minimum share • There are no minimum share capital requirements in Lesotho. In practice,
capital the Registrar of Companies requires a minimum of 1 000 shares with a
nominal value of LSL1 each.

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doing business in Lesotho

withholding tax WHT rate Employee • The income tax rates applicable to resident individuals are:
(“WHT”) rates taxes
payment to residents non-residents* chargeable income (LSL) tax rate
branch profits N/A 25% (on repatriated profits) up to 69 120 20%
dividends N/A 25% over 69 120 30%
0% (on manufacturing income)
• Employers are liable to fringe benefit tax at a rate of 40% on the taxable
interest 10% 25% value of fringe benefits provided to employees, including housing, utilities,
15% (on loans used to earn vehicles, domestic assistance, meals, medical care, and loans.
manufacturing income)
social security • Lesotho does not have a social security system.
royalties N/A 25% contributions • Employers may make contributions to complying superannuation funds for
15% (on technology used to earn the provision of retirement benefits to employees or their dependants.
manufacturing income) • Employers are also mandated by the Workmen’s Compensation Act,
1977, to insure themselves and their employees against occupational
management, N/A 25% (on management fees)
injuries, diseases, and other hazards.
consulting, and 15% (on management services used
technical service to earn manufacturing income) payroll tax • There is no payroll tax in Lesotho.
fees
10% (on Lesotho-source service stamp duty • Stamp duty is levied under the Stamp Duties Act, 1972 on a wide range of
contract income) instruments, including marketable securities, and documents at rates
*The withholding tax rate may be reduced in terms of a relevant double tax generally range from LSL0.08 to LSL40, depending on the nature of the
agreement. instrument or document.
• Transfer duty at the rate of 3% is levied on the transfer of immovable
double tax • DTAs are in force with Botswana, Eswatini, Mauritius, South Africa, and property with a value of up to LSL10 000 and 4% on other properties
agreements the United Kingdom. under the Transfer Duty Act, 1965.
(“DTAs”)
value added tax
Losses • Losses may be carried forward indefinitely. (“VAT”)
• Foreign-source and domestic-source losses may only be deducted from
foreign-source and domestic-source income, respectively.
taxable supplies • VAT is levied on the supply of goods and services in Lesotho and on the
importation of goods and services.
• Business losses, property losses and manufacturing losses may only be
deducted from business income, property income and manufacturing VAT rate • 15%
income, respectively. • A rate of 10% applies to utilities such as electricity.
Transfer • Broad general anti-avoidance rules exist in respect of transactions registration • A person who has an annual taxable turnover / expected annual taxable
pricing between associated taxpayers to prevent the evasion of tax in Lesotho. threshold turnover exceeding LSL850 000 must register for VAT purposes.
• An associate in relation to a person is any other person who acts or is • Businesses whose turnover is below the registration threshold may apply
likely to act in accordance with the directions, requests, suggestions, or for voluntary registration, provided any other registration requirements are
wishes of the person whether or not the directions, requests, suggestions, met.
or wishes are communicated to that other person.
reverse VAT on • Resident companies are required to account for output VAT in respect of
Limitations on • In terms of Lesotho’s thin capitalisation rules, the maximum accepted imported imported services rendered by non-resident companies.
interest debt-to-equity-ratio for companies not principally engaged in a money- services • To the extent that such services are utilised in the making of VATable
deductibility lending business is 3:1. supplies, the VAT can be claimed as an input credit in the subsequent
month.

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doing business in Lesotho

trade marks ENS is a full-service law firm with significant experience and specialist expertise that spans all
commercial areas of law, tax, forensics, and IP across Africa. For more information or assistance please
international • Banjul Protocol (ARIPO) (local legislation has yet to be enacted to give
conventions, contact:
effect to the Banjul Protocol)
treaties, and • Berne Convention
Celia Becker
arrangements • Convention concerning the Protection of the World Cultural and Natural Executive | Africa regulatory and business intelligence
Heritage cbecker@ENSafrica.com
• Convention for the Safeguarding of the Intangible Cultural Heritage
• Convention on the Protection and Promotion of the Diversity of Cultural This document contains general information and no information provided herein may in any way be
Expressions construed as legal advice from ENS, any of its personnel and/or its correspondent firms. Professional
• Harare Protocol advice must be sought from ENS before any action is taken based on the information provided herein.
• Lusaka Agreement This document is the property of ENS, and consent must be obtained from ENS before the information
• Madrid Agreement and Protocol (local legislation has yet to be enacted to provided herein is reproduced and/or distributed in any way.
give effect to either instrument)
• Paris Convention LAST UPDATED NOVEMBER 2023
• World Intellectual Property Organization Convention
• World Trade Organization / Trade-Related Aspects of Intellectual Property
Rights (TRIPS)
classification • The International Classification of Goods and Services (Nice
Classification) applies.
• Multi-class applications are allowed (i.e., an application may cover more
than one class).
categories of • Provision is made for:
trade marks • ordinary trade marks (goods and service trade marks); and
• collective marks.
filing • Full particulars of applicant;
requirements • simply signed Power of Attorney;
• electronic copy of the trade mark; and
• certified copy of priority document (if applicable), along with a verified
English translation.
procedure • An application is examined for formal requirements as well as for
compliance with substantive and relative requirements.
oppositions • Oppositions may be lodged within three months of advertisement. The
and non-use Registrar of Trade Marks has the power to grant extensions of the
cancellations deadline.
• A registered trade mark may be cancelled on action by an interested party
if it has not been used for a continuous period of three years after the date
of registration.
duration and • Trade marks are effective for 10 years from the date of filing and thereafter
renewal renewable every 10 years.