7. What is a “lease premium”? Should it be included in the assessable value for Property Tax?
A lease premium is a non-refundable lump sum payment made by the tenant to the owner upon the signing of the tenancy agreement (e.g. a consent fee payable to the owner for accepting the transfer of tenancy from the “old tenant” to the “new tenant”). It is part of the consideration/money paid for using the property and is chargeable to Property Tax.
The lease premium shall be included in the assessable value that is subject to assessment in the year that the lease begins. If the lease period does not fall within a single year of assessment, owners should spread the lease premium over the lease period or a maximum period of 36 months, whichever is shorter.
On the other hand, a rent deposit is returnable to the tenant at the end of the tenancy. Therefore, it is not income and should not be declared in the owner's Tax Return.
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