Lesotho and South Africa – Double Taxation Agreement

Lesotho and South Africa have agreed on legislation pertaining to a Double Taxation Agreement (DTA). The Purpose of this Agreement is to ensure that each country subject to the agreement knows what taxing rights they hold against taxpayers. This agreement ensures that the taxpayer is not taxed on both side of the border.

The DTA sets out certain requirements that the taxpayer will have to adhere in order to ascertain as to where the taxpayer falls as a tax resident.

The DTA applies to Lesotho tax residents only and brings amongst others, changes in the withholding tax rates on the following gross incomes:

  1. Interest                     10%;
  2. Technical fees         10%;
  3. Royalties                  10%
  4. Dividends                10%

In terms of dividends:

  1. 10% of the gross amount of the dividends if the beneficial owners is a company which holds at least 25% of the capital of the company paying dividends; or
  2. 15% of the gross amount of the dividends in all other cases.

While this agreement does not have the Organisation for Economic Co-operation and Development’s (OECD) recent “Entitlement to benefits Article”, it does however contain provisions on the main purpose test to limit undue claims on the lower withholding tax rates.

It is advised that the entry into force of the DTA is observed and that it is applied.  The DTA can be accessed on the Lesotho Revenue Authority website at http://lra.org.ls/sites/default/files/2020-08/Lesotho%20Botswana%20DTA_1.pdf

 

This article was written by Zurayda Mayet. She is a director at Kleingeld Mayet and has acted for a wide range of clients that include multinational-corporations, government institutions, non-governmental organizations, private individuals, listed and unlisted companies. Her experience stretches across corporate, commercial, company and cannabis law in various sectors both in South Africa and Lesotho.