Kingdom of Lesotho

Payroll taxes consist primarily of employee PAYE income tax. Under the PAYE system employers deduct income tax monthly, using a progressive rate of 20% on monthly income up to LSL 6,480 and 30% on income exceeding that threshold. Each employee benefits from a non-refundable monthly tax credit of LSL 1,020, which is applied to reduce their income tax liability. Unlike many jurisdictions, Lesotho does not operate a universal mandatory social security system with fixed contribution rates applicable to all employers and employees. Pension arrangements and medical coverage are typically governed by employer-specific policies or sector-based schemes rather than a standard statutory framework. Where applicable, employers may facilitate contributions to approved pension or retirement schemes, based on employment contracts or organisational policies. Medical aid or insurance contributions may also be provided, depending on employer arrangements. In addition to PAYE, certain employers may be subject to additional obligations. A Skills Development Levy (SDL) may apply to employers meeting prescribed payroll thresholds, typically calculated as a percentage of total payroll (subject to confirmation with current regulations). Employers are also required to take out workmen’s compensation insurance with an insurance company to cover employee injuries while on duty. Depending on the sector and benefits, employers may also need to account for Fringe Benefit Tax (FBT) on non-cash benefits like company vehicles, housing or other benefits in kind.