Lesotho offers the Sole Proprietorship business status, allowing individuals to operate businesses in their own name and report income as part of their personal tax obligations. This article covers the key features, tax implications, and regulatory details for sole proprietors in Lesotho, based on the latest data available for 2025.
Overview of Sole Proprietorship Status in Lesotho
A sole proprietorship in Lesotho is a straightforward, accessible business structure. Any individual can establish this status without forming a separate legal entity. Activities are conducted in the owner’s name, and business income is taxed along with the individual’s other personal income.
Key Features of Sole Proprietorship in Lesotho
- Ownership: Single individual owns and manages the business
- Legal Entity: Not a separate legal entity from the owner
- Registration: Only required with the Lesotho Revenue Authority (LRA) for tax purposes if earning above the tax threshold
- Banking & Invoicing: Can invoice clients and make financial transactions in the owner’s name
- Taxation: Income is taxed as part of personal annual income
Taxation for Sole Proprietors in Lesotho (2025)
Sole proprietors must be mindful of the personal income tax regime. If annual business and other income exceed the set threshold, registration with the LRA is mandatory. The applicable tax rates are progressive:
| Annual Income (LSL) | Personal Tax Rate (%) |
|---|---|
| Up to M67,440 | 20% |
| Above M67,440 | 30% |
Note: Currency is in Lesotho Loti (LSL). For reference, 1 LSL ≈ $0.055 USD (January 2025), so M67,440 ≈ $3,709 USD.
Registration & Compliance
If your annual business income surpasses the tax threshold, you are required to register with the Lesotho Revenue Authority for tax purposes. Once registered, all income generated by the sole proprietorship—including side businesses for individuals—must be reported on your individual tax return.
Practical Example of Taxation
Suppose a sole proprietor in Lesotho earns M90,000 (≈ $4,950 USD) in total annual income for 2025:
- The first M67,440 is taxed at 20% (M13,488; ≈ $742 USD)
- The remaining M22,560 is taxed at 30% (M6,768; ≈ $372 USD)
- Total tax due: M20,256 (≈ $1,114 USD) for the year
Ease of Access and Popularity
The sole proprietorship model is widely used in Lesotho. It’s a preferred approach for local business owners due to its simplicity: there is minimal setup, and the ongoing compliance requirements are focused mainly on tax reporting for those with earnings above the threshold. This status is open to all regular citizens and does not require complex licensing or business formalities outside of tax compliance requirements.
Official Sources for Further Information
Pro Tips for Sole Proprietors in Lesotho
- Track your earnings carefully throughout the year to ensure you register with the LRA promptly if you cross the income tax threshold.
- Maintain simple but accurate records for all income and business expenses—this will greatly facilitate your annual tax filings.
- Remember that all your business income must be included in your individual tax return, so plan for the higher bracket if your combined income exceeds M67,440.
- If in doubt, consult directly with the LRA using official resources to clarify specific compliance requirements.
In summary, Lesotho makes available a straightforward sole proprietorship status in 2025. Registration with the tax authority is only required for individuals exceeding the set income threshold, and business profits are simply taxed along with other personal income. The system’s accessibility and well-documented requirements mean that this remains a practical solution for most individual business owners in Lesotho. For maximum compliance, be proactive in tracking your income and remain alert to the annual tax brackets and filing requirements.