Abstract
M.Comm.
The for-profit business must maximise owners' wealth over the long term. It is
accomplished by legally structuring the lease to minimise tax liability.
Accounting profits and tax liability arising from the lease are determined in
different ways: different lease structures could result in similar accounting
profits, but different tax liability. A lease's accounting profits may be preestimated
with relative certainty, but it's difficult to pre-estimate its tax
liability. It's especially difficult with long-term leases that stretch over a
number of accounting periods and tax years. There isn't a specific framework
with which tax liability arising from the lease of immovable property may be
determined and minimised.
This study focuses on determining and minimising income tax liability within
the context of the leasing of immovable property in South Africa. The
workings of the factors that give rise to the tax liability are distinguished.
Different types oflease agreements, reflecting the commercial objectives, are
identified. A framework is then constructed from these factors to simplizy
determination of the tax liability, and to structure the lease so that tax liability
may be reduced. The different types of lease agreements are imposed on the
framework to subordinate the reduction of tax liability to the parties'
commercial objectives.