Tax Treatment of Lease Inducement and Lease Surrender Payments
Grange Associates Ltd - 2 May 2013
Effective 1 April 2013 there are changes to the way IRD treats lease
inducement and lease surrender payments.
Lease Inducement Payments
Lease inducement payments are lump sum cash payments made by landlords
to induce tenants to enter a commercial lease.
Previously lease inducement payments were tax deductible to the
landlord and non-taxable to the tenant.
The IRD has now moved to level the playing field by making these lease
inducement payments taxable in the hands of the tenant. For tax purposes, this income will be spread
over the term of the lease.
Lease Surrender Payments
Lease surrender payments are made by tenants to landlords to surrender
existing commercial lease arrangements.
Previously lease surrender payments were taxable in the hands of the
landlord but non-deductible to the tenant.
From 1 April 2013 these payments will remain taxable to the landlord
but will now be tax deductible for the tenant.
All information is correct at the date of article
publication. Please note we provide the information as a service only. Accordingly, the contents are
not intended as a substitute for specific professional advice and should not be relied upon for that
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