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.

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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 purpose.   

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