Business

Relief for taxpayers

Bereng Mpaki

THE government has increased the income tax threshold from M3 025 to M4 000 per month.

This was done through the release of legal notice number 84 published on 3 October 2019.

This means individuals who earn between M3 025 and M4 000 will no longer pay tax after the increase of the tax shield created by tax credit increase from M7 200 to 9 600 per annum M605 to M800 monthly.

Lesotho Revenue Authority (LRA) public relations manager Pheello Mphana said this in a recent interview with the Lesotho Times.

He said the increase in tax credit would decrease the overall income tax.

This has been done through increasing the tax credit from M7 200 to 9 600 per annum or M605 per month to M800 per month.

The development is part of a raft of tax related policy decisions meant for the current financial year announced by Finance minister Moeketsi Majoro earlier this year.

Tax credit is a rebate or relief granted by law to every individual who earns taxable income. A tax credit is directly deductible from the amount of tax which an individual is liable to paying after the tax rates.

All individuals who earn chargeable income are entitled to a fixed and equal amount of a tax credit per annum. The income tax amendment regulation no. 84 of 2019 issued on 3 October 2019 has increased tax credit from M605 to M800 per month.

“Firstly, as a result of this change, the individual income tax threshold (or threshold income) is going to increase from M3025 to M4000 per month,” Mr Mphana said.

“This means that individuals who earn between M3025 and M4000 will no longer pay tax because of the tax shield created by an increase in tax credit from M605 to M800 per month.

“Secondly, this change is going to increase the disposable income available to taxpayers for spending on goods and services. In monetary terms, on average an individual who previously earned chargeable income prior to this change will realise an increase in disposable income (after tax income) of about M 195 per month or M 2340 per annum.”

He said while personal income tax collection by the government is likely to decline and also lead to an increase in value added tax (VAT), this could off-set the difference.

“The personal income tax (PIT) collection is likely to decline by a certain percentage following the change in tax credit. The LRA is yet to determine a percentage following this change…

“This change is effective from 1 October 2019. However, since most employers would have already processed October 2019 payrolls, the expectation is that the change will be seen when employers implement the changes for the end of November 2019 payroll going forward,” Mr Mphana said.

The tax credit change applies to taxpayers who are registered for personal income tax (PIT) such as self-employed individuals (sole traders), individual partners in a partnership business arrangement, professionals, employees, directors of companies, trustees and members of associations.

Show More

Sunday Express

Sunday Express is Lesotho's only Sunday newspaper. News: editor@sundayexpress.co.ls | Advertising: marketing@lestimes.co.ls Telephone: +266 2231 5356

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
Close