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Mauritius: New tax treaty with Lesotho

10 August 2021
– 4 Minute Read


The double taxation agreement (DTA) that was signed by Mauritius and Lesotho on 2 March 2021 entered into force on 7 June 2021. The new DTA replaces the DTA entered into between the two countries in 1997.

The Mauritian Ministry of Finance indicated that investors from each country looking for opportunities in the other will benefit from the agreement. It is expected to encourage inbound foreign direct investment between the countries. 

While Lesotho has not signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) to update its DTAs and lessen the opportunity for tax avoidance by multinational enterprises, it is apposite to note that the mandatory elements under the MLI (i.e. the inclusion of anti-treaty abuse provision and a mutual agreement procedure for resolution of tax disputes) are included in the new DTA. The salient features of the new DTA are set out below.

Withholding tax rates 

The new DTA provides for maximum source country taxation as follows:



Conditions Include:



The recipient is the beneficial owner of the income.






Technical Services



The maximum withholding tax rates in respect of dividends, interest and royalties under the old DTA have been maintained, while the maximum withholding tax rate of 7.5% on technical services is a new addition under the new DTA.

Capital gains

The old DTA provided that a country may tax gains derived from the alienation of shares or any other comparable interest in a company whose assets consist wholly or principally of immovable property situated in such country. 

However, the new DTA specifically provides that the entitlement of a country to tax gains from the alienation of shares or any other comparable interest is in respect of shares or interest, that have derived at any time during the 365 days preceding the alienation, more than 50% of their value directly or indirectly from immovable property situated in such country.

Treaty abuse 

The new DTA is largely consistent with the Base Erosion and Profit Shifting (BEPS) Action Point 6, which aims to prevent the abuse of DTAs. The minimum standard has been reflected as follows:

  • The new DTA makes it clear through its new title and preamble that it is not intended to create opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining relief provided for in the DTA for the indirect benefit of residents in third states); and
  • The adoption of the principal purpose test (PPT), which will deny benefits of the DTA in respect of an item of income where it is reasonable to conclude that one of the principal purposes of any arrangement or transaction is to obtain the benefits of the DTA. This is unless it is established that granting these benefits is in accordance with the object and purpose of the provisions of the treaty. 

Mutual agreement procedure

The new DTA includes a mutual agreement procedure (MAP) which allows a taxpayer who is taxed contrary to the provisions of the DTA to present his/her case to the competent authority of either contracting states (i.e. the Director General of the Mauritius Revenue Authority or the Commissioner General for the Lesotho Revenue Authority). 

The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the DTA. If the competent authority is unable to resolve the matter unilaterally, the competent authorities of both contracting states must consult to endeavour to resolve the matter by mutual agreement. 

The new DTA also makes provision for arbitration to be used if agreement has not been reached within two years of the date on which all information needed has been provided to both competent authorities. A request for arbitration must be made by the taxpayer in writing. 


The new DTA will take effect as follows below.

In the case of Mauritius:

  • in respect of taxes withheld at source on amounts paid or credited on or after 1 July 2021; and 
  • in respect of other taxes, for taxable years beginning on or after 1 July 2021.

In the case of Lesotho:

  • in respect of taxes withheld at source, on amounts paid or credited on or after 1 April 2022; and
  • in respect of other taxes, for taxable years beginning on or after 1 April 2022.