Lesotho's Minister of Finance has launched the Voluntary Disclosure Program (VDP) which grants amnesty for outstanding income tax and value added tax (VAT) liabilities. Specifically, businesses and individuals who participate in the VDP (voluntarily come forward to address their tax deficits) will not be subject to prosecution and the imposition of additional taxes on outstanding tax liabilities. Following successful participation in the VDP, taxpayers will be in good standing with the Lesotho Revenue Authority (LRA).

The VDP covers tax liabilities incurred after 1 April 2015. The program is administered by the LRA. This Alert summarizes details of the program as outlined in the LRA's Frequently Asked Questions.

The VDP covers the following types of income:

• Business income
• Foreign-source income
• Capital gains
• Employment income
• Property income
• Investment income
• Commercial farming income
• Any other type of income

Examples of tax non-compliance that can be disclosed under the VDP include:

• Unremitted tax and source deductions
• Unreported foreign-source income
• Over claiming of expenses or making a claim of ineligible expenses
• Under-declaration of income
• An incorrect refund claim
• Failure to register for tax
• Failure to file a tax return
• Failure to pay
• Failure to keep business records
• Failure to declare imported goods including motor vehicles and pay VAT
• Any other offenses as provided by the Income Tax and VAT Acts

VDP participants must pay all taxes due within the time frame agreed to under the settlement plan with the LRA.

Applicants are required to complete and submit the VDP application form, together with the following documents: identity documents; business registration documents; business records; and any relevant supporting documentation. Applicants will be notified of the status of their application within 15 working days.

Taxpayers with pending tax cases under audit or investigation who make a valid disclosure prior to 31 March 2018 are entitled to participate in the VDP. If they participate in the VDP, their criminal cases will not be prosecuted, provided that they have not been brought before a court of law.

Also, VDP benefits will be terminated under the following cases:

• The LRA discovers after the conclusion of a VDP agreement that an applicant did not make a full, honest and truthful voluntary disclosure; or
• The applicant fails to comply with the terms and conditions of the VDP settlement plan agreed to with the LRA.

The VDP took effect on 12 February 2018 and has no end date at this time. Taxpayers are therefore advised to make use of this initiative given the high additional tax rate in Lesotho, currently at 22% per annum.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young Advisory Services (Pty) Ltd, Bloemfontein

• Emile du Toit
  emile.dutoit@za.ey.com

Ernst & Young Advisory Services (Pty) Ltd., Africa ITS Leader, Johannesburg

• Marius Leivestad
  marius.leivestad@za.ey.com

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

• Rendani Neluvhalani
  rendani.mabel.neluvhalani@uk.ey.com
• Byron Thomas
  bthomas4@uk.ey.com

Ernst & Young LLP, Pan African Tax Desk, New York

• Silke Mattern
  silke.mattern@ey.com
• Dele A. Olaogun
  dele.olaogun@ey.com
• Jacob Shipalane
  jacob.shipalane1@ey.com

Ernst & Young LLP, Pan African Tax Desk, Houston

• Elvis Ngwa
  elvis.ngwa@ey.com

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ATTACHMENT

PDF version of this Tax Alert