Bereng Mpaki

LESOTHO and Botswana have implemented a tax treaty to address double taxation and prevent fiscal and tax evasion by traders between the two countries.

The treaty was signed in January this year.

The Lesotho Revenue Authority (LRA) this week said the treaty would enable trade and enhance economic relations between the two countries by providing tax certainty to investors of both countries.

The treaty is expected to mainly benefit multinational businesses that conduct international trade between Lesotho and Botswana.

Lesotho signed a similar deal with eSwatini last September.

“The LRA hereby notifies the business community and the public at large of the entry into force of the Lesotho-Botswana Double Taxation Agreement (DTA), also known as tax treaty,” LRA said in a statement this week.

“Following the finalisation of internal processes by both countries, the date agreed was that of 30 January 2020. Treaties are meant to attract foreign direct investment and to provide tax certainty to such investors should they decide to engage in business in one of the treaty-partnering countries.

“Of most importance, the role of a DTA is to eliminate double taxation, tax evasion and avoidance. With global guidance by Organisation for Economic Co-operation and Development (OECD) and the United Nations (UN), the Southern Africa Development Community (SADC) region has come up with a model to follow in concluding tax treaties, which has resulted in this new agreement. This DTA should enable trade and enhanced economic relations between Lesotho and Botswana.”

The DTA applies to Botswana and Lesotho tax residents only and brings among others, changes in the withholding tax rates on the following gross incomes; 10 percent interest; 10 percent technical fees and 10 percent royalties.

It applies on dividends when 10 percent of the gross amount of the dividends if the beneficial owner is a company which holds at least 25 percent of the capital of the company paying dividends.