Lesotho Corporate Tax Guide: CIT 25%, Manufacturing 10%, Mining Varies 2026
Lesotho's Corporate Income Tax (CIT) regime features a standard rate of 25%. Manufacturing companies benefit from a reduced rate of 10%. Mining companies are subject to a separate fiscal regime with varying rates. Lesotho is a major textile and apparel manufacturing hub with specific incentives for the sector. Here is how Lesotho corporate tax works in 2026.
Corporate Income Tax in Lesotho is governed by the Income Tax Act 1993 and administered by the Lesotho Revenue Authority (LRA). The standard CIT rate of 25% applies to most legal entities. The manufacturing rate of 10% is a significant incentive for the textile, apparel, and light manufacturing sectors. Companies must file annual CIT returns by June 30 following the end of the tax year. The fiscal year for companies generally follows the calendar year, though companies may apply for alternative year-ends. Filing and compliance guide →
Real-world example: A Maseru-based retail company with annual turnover of LSL 20 million and taxable profit of LSL 5 million pays CIT at 25% = LSL 1,250,000. A textile manufacturing company with LSL 30 million turnover and LSL 8 million profit pays CIT at 10% = LSL 800,000. A mining company pays under a separate negotiated fiscal regime. Compare this to South Africa where the same profits would incur 27% CIT, or Botswana at 22%. IT and services sector →
Corporate Tax Rate Structure
- 25% (standard): All companies not eligible for reduced rates
- 10% (manufacturing): Manufacturing companies, including textile, apparel, and food processing
- Mining: Varying rates under the Mines and Minerals Act — rates are negotiated per mining development agreement
- Thin capitalization: Interest deductions limited for companies with related-party debt exceeding 3:1 debt-to-equity ratio
The 10% manufacturing rate is a key incentive to attract foreign direct investment, particularly in the textile and apparel sector which is Lesotho's largest employer outside government. Lesotho is a member of the Southern African Customs Union (SACU), providing preferential access to regional markets.
Taxable Income and Deductions
Corporate taxable income is calculated as accounting profit adjusted for tax purposes. Key rules include:
- Depreciation: Wear-and-tear allowances apply — buildings 5%, machinery 20%, vehicles 25%, computers 33.3%
- Interest deductibility: Thin capitalization rules limit interest deductions (debt-to-equity ratio 3:1)
- Loss carryforward: Tax losses can be carried forward indefinitely (subject to continuity of ownership test)
- Dividend deduction: Dividends received from Lesotho resident companies are generally exempt from CIT
- Capital gains: Lesotho has no separate CGT; gains on business assets are treated as ordinary income
Transfer pricing rules apply for transactions with related parties, following OECD guidelines. Lesotho has thin capitalization rules to prevent profit shifting through excessive debt financing.
Withholding Taxes on Outbound Payments
Lesotho imposes withholding tax on certain payments to non-residents:
- Dividends: 15% WHT (0% for residents)
- Interest: 15% WHT (0% for residents)
- Royalties: 10% WHT
WHT rates may be reduced under Lesotho's Double Taxation Treaties (SADC members, South Africa, UK, Mauritius). Investment income guide →
Tax Incentives and Exemptions
Lesotho offers various incentives to attract investment:
- Manufacturing: Reduced CIT of 10% for qualifying manufacturing activities
- Textile/apparel: Specific incentives for textile and garment manufacturers, including customs duty exemptions under SACU
- Export processing: Benefits for companies operating in export processing zones
- Employment incentives: CIT deductions for hiring additional workers in certain sectors
Incentives typically require prior approval from the Lesotho National Development Corporation (LNDC) or the Ministry of Trade and Industry.
Who needs to register for CIT in Lesotho?
All legal entities (companies, branches of foreign entities) must register for CIT with the LRA. Registration is required before starting business operations. Non-resident companies with a permanent establishment in Lesotho are also subject to CIT on Lesotho-source income.
What is the filing deadline for corporate tax?
Annual CIT returns must be filed by June 30 following the end of the tax year. Provisional tax is paid in two installments during the year (based on estimated taxable income), with a final settlement upon filing. Late filing penalties apply.
Are there any regional taxes in Lesotho?
No. Lesotho has a unitary tax system with no regional or municipal corporate taxes. The 25% CIT (or reduced rate) is the only corporate-level tax. There is no trade tax, business tax, or local surcharge on corporate profits.