Untitled Flashcards Set

EMPLOYEE This means an individual who is in employment. EMPLOYER This means a person who employs or remunerates an employee. EMPLOYMENT This term is defined broadly to mean employment at that term is generally understood and to the holding of any office or appointment. An employment relationship will not exist where a person is genuinely engaged as a independent contractor. The determination of whether a person is an employee or independent contractor involves looking at several factors, including whether the hirer has the legal right to control the manner in which the work is to be performed and the degree of integration of the service provided within the hire’s business. This latter point will depend on such things as-  Whether the service provider is engaged on a continuous basis  Whether the hirer controls the timing and scheduling of work, and  Whether the hirer provides the working tools, plant and other relevant facilities This term is relevant to identifying who is an employee or employer, both of which terms are separately defined in section 3(1). It is also relevant to the determination of what is 22 employment income, the application of the fringe benefits tax, and the application of pay as you-earn withholding tax. INTEREST This definition is intended to expand upon the ordinary meaning of interest. According to general principles, interest means an amount paid by a debtor to a creditor in respect of moneys owing by the debtor to the creditor as consideration for the loan of the monies or for the forbearance to sue for credit provided in the form of goods or services. The definition expressly includes a discount, premium, or swap payment as interest. This reflects the fact that, particularly in international transactions, these payments are functionally equivalent to interest. A loan is made at a discount where the creditor lends less money than the nominal principal required to be repaid, the discount representing the difference between the amount lent and the nominal principal. A loan is made at a “premium’ where the holder of debt is required to pay an additional amount on issuance above the nominal principal. Interest swaps occur where a party that has borrowed under a floating interest rate seeks to limit its exposure to interest rate fluctuations by swapping interest obligations with another party (usually a financial institution) which has borrowed an equivalent amount at fixed interest rates. Payments made between the parties in satisfaction of offset arrangements pursuant to the swap are within the definition of interest for the purposes of the Act. INVESTMENT ASSET This term is defined to mean all assets of a taxpayer, other than:- a) A business asset Or c) Any asset that does not produce income subject to Lesotho Income tax (including withholding tax under S.107 or S.108) and held primarily for personnel use by the taxpayer. 23 As to the meaning of “asset” see the definition of “business asset”. The first exclusion ensures that gains on disposal of business assets are treated as business income; while losses are allowed as a deduction. The second exclusion ensured that there are no tax consequences on the disposal of personal use assets if it does not produce income and is held by the taxpayer primarily for personal use. It follows than an income-producing asset is treated as an investment asset. This includes, for example, shares, debt obligations, and rental properties. It also follows that a non-income producing asset (for example, vacant land or a piece of art) which is held for resale at a profit is an investment asset. Where a non-income producing asset is held for personal and another use, it will not be an investment asset if it is primarily held for personal use. Whether a non-income producing asset is held primarily for personal use is a question of fact and degree to be determined to have regard to all the circumstances.