Lesotho

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Overall Phase 2 Rating is Largely Compliant

Table of Determinations and Ratings of the Phase 2 Review

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   While there are no share warrants to bearer in circulation at present, the mechanisms in place may be insufficient to ensure the availability of identity information all holders of share warrants.  Lesotho should take steps to ensure that robust mechanisms are in place to identify owners of share warrants to bearer or eliminate companies’ ability to issue such share warrants. 
Phase 2 Rating Factors Recommendations
Partially Compliant.  Domestic and foreign (external) companies were not regularly monitored during the review period. However in December 2015 a programme was put in place to monitor compliance of the obligations in the Companies Act. As a result, 17 591 out of 29 030 companies were struck off from the Companies Registry and a new regular oversight programme was established to systematically monitor compliance with these obligations.  Lesotho should monitor the implementation of this new oversight programme and exercise its enforcement powers as appropriate to ensure that ownership and identity information for domestic and foreign (external) companies is available in practice. 
Lesotho authorities do not have regular oversight to monitor the compliance of legal obligations to ensure that ownership and identity information is available for general partnerships, all types of (including voting trusts) and societies. Existing enforcement provisions to ensure that ownerships and identity information is available for these type of entities or arrangements have never been applied in practice.  Lesotho should put in place an oversight programme to ensure compliance with the obligations to maintain ownership and identity information of partnerships, all types of trusts and societies, and exercise its enforcement powers as appropriate to ensure that such information is available in practice. 
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Only trusts that receive taxable income would be subject to obligations under the Income Tax Act to keep accounting records. The availability of accounting information is not ensured for trusts that receive only foreign-source income.  Lesotho should ensure the availability of accounting records of all trusts in Lesotho even where the trust is not carrying on business or is not subject to tax in Lesotho. 
Phase 2 Rating Factors Recommendations
Largely Compliant.  Lesotho authorities monitor compliance with the accounting recordkeeping obligations prescribed by the tax laws but this supervision is limited to registered taxpayers, which include domestic and foreign (external) companies, partnerships and trusts deriving income in Lesotho. There is a regular oversight programme which covers that the accounting requirements prescribed by the Income Tax Act are complied with. However, the compliance level for partnerships is low and trusts that only receive foreign-source income and where the settlor is a non-resident are not covered by the oversight that LRA conducts.  Lesotho should put in place a comprehensive oversight programme to ensure compliance with and enforcement of the obligation to maintain reliable accounting records and underlying documents for all relevant entities and arrangements. 
Banking information should be available for all account-holders. (ToR A.3)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Largely Compliant.  During the review period there was no oversight on compliance of AML regulations by banks regarding their customer due diligence requirements.  Lesotho should put in place an oversight program to ensure compliance with AML regulations and effectively apply enforcement measures on banks regarding their customer due diligence requirements. 
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
Exchange of information mechanisms should provide for effective exchange of information. (ToR C.1)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdictions' network of information exchange mechanisms should cover all relevant partners. (ToR C.2)
Determination Factors Recommendations
The element is in place.     Lesotho should continue to develop its EOI network to the standard with all relevant partners. 
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdictions' mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5)
Determination Factors Recommendations
The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.      
Phase 2 Rating Factors Recommendations
Largely Compliant.  Lesotho has allocated resources and has in place organisational processes for exchange of information that appear to be adequate for dealing with incoming EOI requests in a timely manner. Lesotho has only received 2 requests for information.  Lesotho should continue to monitor the practical implementation of the organisational processes of the EOI unit, in particular taking account of any significant changes to the volume of incoming EOI requests, to ensure that they are sufficient for effective EOI in practice. 

Earlier self-assessment based annual reports entitled Tax Co-operation 2010: Towards a Level Playing Field are also available.