The Double Taxation Relief (Taxes on Income) (Lesotho) Order 1997

Made: 17th December 1997

At the Court at Buckingham Palace, the 17th day of December 1997 Present, The Queen’s Most Excellent Majesty in Council

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 788 of the said Act, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

1

This Order may be cited as the Double Taxation Relief (Taxes on Income) (Lesotho) Order 1997.

2

It is hereby declared—

• (a) that the arrangements specified in the Convention set out in the Schedule to this Order have been made with the Government of the Kingdom of Lesotho with a view to affording relief from double taxation in relation to income tax, corporation tax or capital gains tax and taxes of a similar character imposed by the laws of Lesotho;

• (b) that those arrangements include provisions with respect to the exchange of information necessary for carrying out the domestic laws of the United Kingdom and the laws of Lesotho concerning taxes covered by the arrangements including, in particular, provisions about the prevention of fiscal evasion with respect to those taxes; and

• (c) that it is expedient that those arrangements should have effect.

SCHEDULE — CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF THE KINGDOM OF LESOTHO FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS

The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Kingdom of Lesotho;

Desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains;

Have agreed as follows:

Article 1 — Personal scope

This Convention shall apply to persons who are residents of one or both of the Contracting States.

Article 2 — Taxes covered

Article 2 — General definitions

Article 4 — Residence

Article 5 — Permanent establishment

Article 6 — Income from immovable property

Article 7 — Business profits

Article 8 — Shipping and air transport

Article 9 — Associated enterprises

Article 10 — Dividends

Article 11 — Interest

Article 12 — Royalties

Article 13 — Management and technical fees

Article 14 — Capital Gains

Each Contracting State may tax capital gains in accordance with the provisions of its domestic law.

Article 15 — Independent personal services

Article 16 — Dependent personal services

Article 17 — Directors' fees

Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 18 — Artistes and sportsmen

Article 19 — Pensions and annuities

Article 20 — Government service

Article 21 — Students

Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that first-mentioned State, provided that such payments arise from sources outside that State.

Article 22 — Other income

Article 23 — Elimination of double taxation

Article 24 — Limitation of relief

Where under any provision of this Convention any income is relieved from tax in a Contracting State and, under the law in force in the other Contracting State a person, in respect of that income, is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the relief to be allowed under this Convention in the first-mentioned Contracting State shall apply only to so much of the income as is taxed in the other Contracting State.

Article 25 — Non-discrimination

Article 26 — Mutual agreement procedure

Article 27 — Exchange of information

Article 28 — Members of diplomatic or permanent missions and consular posts

Article 29 — Entry into force

Article 30 — Termination

This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiry of five years from the date of entry into force of the Convention. In such event, the Convention shall cease to have effect:

• (a) in the United Kingdom:

• (i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the notice is given;

• (ii) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the notice is given;

• (b) in Lesotho:

• for any year of assessment beginning on or after 1st April in the calendar year next following that in which the notice is given.

In witness whereof the undersigned, duly authorised thereto by their respective Governments, have signed this Convention.

Done in duplicate at London this 29th day of January 1997.

Signed

N. H. Nicholls — Clerk of the Privy Council

Explanatory note

(This note is not part of the Order)

The Convention with Lesotho is set out in the Schedule to this Order.

The Convention provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property may be taxed in the country in which the property is situated (Article 6).

Shipping and air transport profits are to be taxed only in the residence state of the operator (Article 8).

The Convention includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country is, in general, not to exceed 10 per cent. of the gross amount of the dividends (Article 10).

The rate of tax imposed in the country of source on interest derived by a resident of the other country is, in general, not to exceed 10 per cent. of the gross amount of the interest. Certain categories of interest (e.g. interest paid to the Government of the other country) will be exempt from tax in the source state (Article 11).

The rate of tax imposed in the country of source on royalties flowing to the other country is, in general, not to exceed 10 per cent. of the gross amount of the royalties (Article 12).

The rate of tax imposed in the country of source on management and technical fees paid to a resident of the other country is, in general, not to exceed 10 per cent. of the gross amount of the fees (Article 13).

Capital gains are to be taxed in accordance with the domestic law of each country (Article 14).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 15 and 16). Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in the latter country (Article 17).

Income derived from the activities of artistes and sportsmen may be taxed in the country in which those activities are exercised, with certain exemptions (Article 18). Occupational pensions (other than those paid in respect of Government Service) and annuities are to be taxed only in the recipient’s country of residence (Article 19). Government Service remuneration and pensions are normally taxable only by the paying Government (Article 20). Certain payments made to visiting students and business apprentices are to be exempt from tax in the country visited (Article 21). There are separate provisions for diplomatic or consular officials (Article 28).

Other income not specified in the Convention (with the exception of income paid out of trusts or the estates of deceased persons in the course of administration) is to be taxable only in the taxpayer’s country of residence, as long as it is not associated with a permanent establishment or fixed base in the country of source (Article 22).

Where income continues to be taxable in both countries credit will be given in the taxpayer’s country of residence for tax imposed by the other country. In the case of dividends, the United Kingdom will give credit for underlying tax paid in Lesotho where the shareholder is a United Kingdom company which controls at least 10 per cent. of the voting power in the company paying the dividends (Article 23).

There are provisions which limit the relief available in certain circumstances (Article 24). There are also provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 25), for consultation to resolve difficulties in the application or interpretation of the Convention (Article 26) and for exchanges of information (Article 27) between the taxation authorities of the two countries.

The Convention will enter into force on the date of the later of the notifications by each country of the completion of the procedures required by its law to bring the Convention into force. The Convention is to take effect in the United Kingdom on or after 1st April in respect of corporation tax, and on or after 6th April for income tax and capital gains tax, in the calendar year next following that in which it enters into force (Article 29). The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.

Footnotes