On 7 February 2019, South African Revenue Service (SARS) has issued Interpretation Note 109, which clarifies the rules on the tax treatment of lease premiums.
The Note explains that, in the earlier year of assessment of receipt or accrual, lessor who receive lease premiums are required to include the full amount of the premium in their gross income. On the other hand, lessees who pay the premium to a lessor for the right of use or occupation are generally allowed an allowance over the period of the lease.
In limited circumstances, a lessor may eligible for a special allowance in respect of lease premiums included in gross income. The amount of the allowance, if it applies, is equal to such amount as the Commissioner deems reasonable, taking into account the special circumstances of the case and the length of the lease.
