Income tax nature of reimbursements relating to leasehold improvements

Esterhuizen, Christelle Elleraey ; Van Schalkwyk, C. J. (Stellenbosch : University of Stellenbosch, 2011-03)

Thesis (MComm)--University of Stellenbosch, 2011.

Thesis

ENGLISH ABSTRACT: It is becoming increasingly common for lessees to receive contributions from lessors towards leasehold improvements costs. A lessee will be entitled to claim an allowance in terms of section 11(g), where expenditure has actually been incurred in pursuance of an obligation in terms of a lease agreement, and the property is used for the production of income. Obstacles arise where the lessee either receives a payment or benefit, in cash or otherwise from the lessor, either as consideration for the lessee to effect the improvements or as inducement for the lessee to enter into the lease agreement. The nature of these payments or benefits received by the lessee for income tax purposes needs to be assessed with reference to the general principles laid down by the South African courts in respect of the “gross income” definition and international case law dealing with the income tax treatment of similar payments made by the lessor to the lessee. Factors also need to be identified, which should be taken into account to assess the income tax nature of these payments or benefits. The terms of the agreement in terms of which such payments or benefits are made should clearly state the purpose thereof, and a conclusive answer will depend on the particular circumstances and facts of each case. The interaction between a payment or benefit received by a lessee and the availability of a leasehold improvements allowance in terms of section 11(g) is a complex matter and it remains to be seen how South African courts will deal with these issues.

AFRIKAANSE OPSOMMING: Dit raak toenemend algemeen dat huurders ʼn bydrae tot huur verbetering koste vanaf verhuurders ontvang. ʼn Huurder sal geregtig wees om ʼn artikel 11(g) toelaag te eis, waar onkostes werklik aangegaan is ter voldoening aan ʼn verpligting ingevolge die huurooreenkoms en die eiendom word gebruik vir die voortbrenging van inkomste. Struikelblokke ontstaan waar die huurder ʼn bedrag of voordeel, in kontant of andersins ontvang vanaf die verhuurder, as vergoeding vir die aanbring van verbeteringe of as beweegrede om die huurooreenkoms te sluit. Die inkomstebelastingaard van hierdie bedrae of voordele ontvang moet beoordeel word met verwysing na die algemene beginsels ontwikkel deur die Suid-Afrikaanse howe met betrekking tot die “bruto inkomste” definisie en internasionale hofsake wat handel met die inkomstebelastinghantering van soortgelyke betalings vanaf die verhuurder aan die huurder. Faktore moet ook identifiseer word wat inag geneem moet word ten einde die aard van hierdie bedrae of voordele vas te stel. Die terme van die ooreenkoms ingevolge waarvan die bedrag of voordeel ontvang word, moet duidelik die doel daarvan uiteensit. ʼn Beslissende antwoord sal afhang van die spesifieke omstandighede en feite van elke geval. Die interaksie tussen ʼn betaling of voordeel ontvang deur die huurder en die beskikbaarheid van ʼn huurverbeteringe toelaag ingevolge artikel 11(g) is ʼn komplekse onderwerp en daar sal nog gesien moet word hoe die Suid-Afrikaanse howe hierdie kwessies sal hanteer.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/15062
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