What is a withholding tax?

Withholding tax is a tax charged on income or payment made on the supply of services. It is imposed on Lesotho source income. Withholding tax is deducted by the payer (withholding agent) from gross amount due to payee. It is a provisional tax, and the Taxpayer (payee) gets a credit of the amount of tax withheld when filing a tax return at the end of the year of assessment.

Who is liable to withhold and remit tax? 

The withholding agent is liable to withhold tax when a payment is made to the payee for the services rendered.

Which transactions are withholding taxes applicable on?

Withholding taxes are applicable to the following:

Service fees payable to non-residents:

Withholding taxes are applicable on payments for services such as accounting, auditing, economic, financial, legal, management, and consultancy, engineering, architectural and surveying.

Service fees paid under employment contracts:

Withholding tax is applicable on an employment income paid by the employer to the employee under an employment contract (PAYE).

Payments to resident contractors:

Withholding taxes are applicable on payments made to resident contractors. It is important to note that, the Act defines a resident contractor as a person engaged in the business of leasing vehicles, plant, or equipment, or of providing construction, transportation, painting or decorating, plumbing, drainage, or irrigation, roofing or tiling, earthmoving or excavation, landscaping, building demolition, site restoration and installation of services or appliances.

Passive income:

This refers to income which is derived without active involvement in generating it. Examples of passive income are interest, dividends, royalties, management charge, patent fees, and trademark fees.

Amounts paid to:

Withholding taxes are applicable on payments made to artistes, sportspersons and musicians who are entertainers, (including professional clubs but excluding amateur sporting associations).

When should a withholding agent file remit and file withholding tax return? 

Withholding tax is collected monthly, or whenever tax has been withheld, and it is accounted for monthly by the withholding agent, and remitted to RSL on or before the 15^th of the month, following the month or tax period in which it was deducted and withheld.

When should withholding tax be paid? 

Taxes withheld should be remitted to RSL by the 15^th day of the month, following the tax period (month) in which it was deducted and withheld.

Find the guide on the attachments below for tax rates applicable to Withholding Taxes and DTA guide on Technical Services between Lesotho and South Africa