Lesotho Investment Income Guide: Dividends 15%, Interest 15%, Royalties 10% 2026
Lesotho applies withholding taxes on investment income paid to non-residents: dividends at 15%, interest at 15%, and royalties at 10%. Residents are generally exempt from withholding tax on dividends and interest. Double Taxation Treaties may reduce these rates. Here is how investment income is taxed in 2026.
The taxation of investment income in Lesotho distinguishes between resident and non-resident recipients. Residents are generally exempt from withholding tax on dividends and interest, while non-residents face withholding tax at rates specified in domestic law (subject to treaty reduction). The LRA administers withholding tax obligations — the payer (the Lesotho company or individual) is responsible for withholding and remitting the tax. Cross-border tax guide →
Real-world example: A Lesotho company pays LSL 200,000 in dividends to a non-resident shareholder. WHT at 15% = LSL 30,000, net payment = LSL 170,000. If the shareholder is resident in a treaty country (e.g., UK with reduced rates), the WHT may be lower. A resident Lesotho shareholder receives dividends without any WHT. Interest of LSL 100,000 paid to a non-resident lender: WHT 15% = LSL 15,000. Corporate tax overview →
Withholding Tax Rates on Investment Income
- Dividends — residents: 0% WHT — dividends paid to Lesotho resident individuals and companies are exempt
- Dividends — non-residents: 15% WHT — may be reduced under applicable DTT
- Interest — residents: 0% WHT — interest paid to Lesotho residents is exempt
- Interest — non-residents: 15% WHT — may be reduced under applicable DTT
- Royalties — residents: 10% WHT — domestic rate applies to residents
- Royalties — non-residents: 10% WHT — may be reduced under applicable DTT
The 15% dividend WHT on non-residents is moderate by international standards. Interest and royalty rates are also competitive within the SADC region.
Double Taxation Treaty Network
Lesotho has DTTs with several countries that reduce withholding tax rates:
- Dividends: Treaty rates typically 5-10% (compared to 15% domestic)
- Interest: Treaty rates typically 5-10% (compared to 15% domestic)
- Royalties: Treaty rates typically 5-10% (compared to 10% domestic)
Treaty benefits require the recipient to be the beneficial owner and provide a Certificate of Tax Residency from the treaty jurisdiction. Lesotho's treaty network includes South Africa, SADC members, the UK, and Mauritius.
Taxation of Other Investment Income
- Bank interest: Interest on savings accounts earned by residents is not subject to withholding tax. Non-residents may be subject to 15% WHT
- Government bonds: Interest on Lesotho government securities may have specific tax treatment
- Capital gains on investments: 0% CGT — Lesotho has no separate capital gains tax
Compliance and Reporting
Lesotho companies paying dividends, interest, or royalties to non-residents must withhold the appropriate tax and remit it to the LRA within the prescribed timeframe. The payer must also file annual withholding tax returns. Recipients seeking treaty relief must provide: a Certificate of Tax Residency from their home country tax authority and a declaration of beneficial ownership. Failure to withhold correctly results in the payer being liable for the unpaid tax plus penalties.
Are dividends from Lesotho companies exempt for residents?
Yes. Dividends paid by Lesotho resident companies to Lesotho resident individuals or companies are exempt from withholding tax. This encourages domestic investment and profit distribution within the economy.
What is the procedure for claiming treaty relief?
The non-resident recipient must submit a Treaty Relief Application to the Lesotho payer, along with a Certificate of Tax Residency from their home country. The payer then applies the reduced rate at source. If tax has been over-withheld, the non-resident can file a refund claim with the LRA.