Tax Rebates from the 15% Final Tax for Long Term Rents
24 June 2020
Legal notice 258 of 2020, introduces a new tax rebate (applicable for rents starting on the 1st January 2020 and afterwards) which is deducted from the 15% final tax imposed in terms of Article 31D of the Income Tax Act (ITA).
The rules apply to income derived on or after 1 January 2020 from a private residential lease with a duration of two years or more that is registered with the Housing Authority as a long private residential lease in accordance with the Private Residential Leases Act. The lease period is ascertained by reference to the original period as agreed in the relative contract and no regard shall be taken of any period of renewal or extension of the original period. Moreover, the tax rebate is available only if the lessor opts to tax the rental income in terms of the 15% final tax imposed by Article 31D ITA rather than in terms of Article 4 of the ITA.
The rebate is granted in the form of a deduction from the tax chargeable in terms of article 31D of the ITA on the rental income from each relevant and eligible private residential lease, and shall be determined by reference to the duration of that lease and the number of bedrooms of the leased premises as stated in the contract as provided in the following table:
In the year during which a lease commences or is terminated, the rebate must be reduced pro rata to the number of days for which the lease is in force for that year. In any case, the rebate for any year in respect of a lease cannot exceed fifteen percent (15%) of the rent derived in that year from that lease. It is understood that the rebate claim is to be made through the same (to be updated) form through which the Article 31D ITA final tax is paid.
The Housing Authority is required, by not later than the 31st January of each year, to furnish the Commissioner with a list of every long private residential lease contract for a duration of at least two years that was registered with it, by the lessor or the lessee, as at the 31st December of the preceding year indicating, with respect to each contract, and on the basis of the information made available to it, the date of the commencement of the lease, the annual rent and the amount of the rebate calculated in accordance with mechanism in the table above.
If it results to the Commissioner that a rebate granted to a person was not actually due, he may request that person to pay an amount of tax equivalent to that rebate. Upon the service on that person of a notice of such a request, that person shall become liable to pay to the Commissioner the said amount with interest which shall run as from the 1st May of the year of assessment f or which the rebate was granted, without prejudice to the provisions of Article 51 of the ITA and to any penalty for which that person may be liable in accordance with any provision of the Income Tax Acts. There is a right to an objection and appeal to such notice.
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