Page 23 - Nexia SAB&T Property and Tax Guide 2025

TAX IMPLICATIONS ON THE LEASING OF PROPERTY

For the landlord:
◆ All income received from rental of a property is of a revenue nature and has to be
declared as part of a landlord’s gross income.
◆ Deductions are available, such as: interest on bond repayments, repairs and
maintenance, municipal rates and taxes, letting agent’s fees (if applicable), and
expenses not recovered from the tenant, such as security, utilities or garden
services. In the case of a sectional title scheme, the levy is also deductible.
◆ In order for the deductions to be allowed the expenditure must have been actually
incurred in the production of income and not be of a capital nature. The landlord
must effectively be able to satisfy SARS that he is carrying on a bona fide trade
through the rental of his property.
◆ The cost of improvements, reconstructions or additions to the property cannot
be deducted, as these expenses are of a capital nature. Improvements made
to leasehold property in terms of a lease agreement by the tenant must be
included in the income of the landlord. Either the stipulated amount or a fair and
reasonable value will be included. There may be relief available for the landlord, in
terms of Section 11(h) of the Income Tax Act.
For the tenant:
◆ The tenant can claim the rental expense as a deduction for tax purposes if the
rental payment or expenditure was actually incurred in the production of income.
◆ If improvements are made to leasehold property in terms of a lease agreement
by the tenant, these must be included in the income of the landlord. Either the
stipulated amount or a fair and reasonable value will be included.
◆ The tenant may deduct such expenditure over the period of the lease. The landlord
may be entitled to discount the value of the improvements over the period of the
lease or 25 years, whichever is the shorter.

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