Abstract
The premature termination of lease agreements is a common occurrence in the South African and international business arena. When a lease is terminated prematurely, it is currently the practice that the person who terminates the lease agreement has to pay a termination penalty. This article investigates the income tax treatment possibilities of the penalty paid by a lessor. For purposes of this investigation the income tax treatment of lease termination penalties in Australia, Canada, the United States of America and South Africa are investigated. This is done in order to identify guidelines and principles that could possibly be used in a South African context, which may lead to the efficient and correct treatment of lease termination penalties for South African income tax purposes. The investigation concludes that the factors surrounding the lease termination transaction as well as the intention of the parties involved, will determine the appropriate income tax treatment of the penalty. The question must be asked whether or not the termination penalty was incurred as part of a ‘profit-making scheme’ and what happens after the penalty has been incurred. It is recommended that, where the penalty is deemed to be capital in nature, the merit of allowing some sort of capital allowance (similar to the one used in the United States of America) should be investigated.
Highlights
#Mr Leonard C Willemse is a senior lecturer at the Department Accountancy, University of Stellenbosch, Stellenbosch, South Africa. +Mr David F Badenhorst is a professional accountant(SA) at Tenk Loubser Inc, Stellenbosch, South Africa
Uit bostaande volg dit dat wanneer die inkomstebelastingimplikasies vir beide die betalende en ontvangende party van die beëindigingsboete bepaal word, hulle met die vraag oor hoe om die betaling of ontvangste van die beëindigingsboete vir inkomstebelastingdoeleindes te hanteer, gekonfronteer word
Die Suid-Afrikaanse Inkomstediens (SAID) het die beëindigingsboete as kapitaal van aard in die hande van die verhuurder hanteer, maar die verhuurder het hom tot die belastinghof gewend waar regter Herbstein op bladsy 432 en 433 van hierdie hofsaak soos volg geredeneer het: The true nature of the transaction in the instant case before the Court seems to me to have been that the money was spent for the purpose of acquiring, if not a new asset, at any rate a portion of the machinery which would enable the profit which was eventually earned to be earned
Summary
Huurooreenkomste is alledaagse verskynsels in die Suid-Afrikaanse en internasionale sakesektor. In teenstelling hiermee gaan die voortydige beëindiging van ’n huurooreenkoms egter gewoonlik met die betaling of ontvangste van ’n beëindigingsboete gepaard. In die praktyk gebeur dit dikwels dat huurooreenkomste voortydig deur óf die huurder óf die verhuurder beëindig kan word. Die gevolg hiervan is dat die verhuurder die bate terugneem en die huurder/verhuurder dan ‘n beëindigingsboete vir die voortydige beëindiging van die huur moet betaal. Ten einde hierdie huuruitgawes te besnoei, moet die huurder óf met sy verhuurder vir ‘n laer huurtarief onderhandel óf hy moet die huurooreenkoms voortydig beëindig om sodoende ‘n goedkoper huurooreenkoms te beding. Verhuurders wat deur die resessie nadelig beïnvloed is, is ook genoop om alternatiewe moontlikhede vir die doeltreffender aanwending van hul bates te soek, byvoorbeeld om ‘n ander huurder te verkry om sodoende ‘n hoër huur te bekom, of om die verhuurde eiendom self te gebruik
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