The COVID-19 pandemic has wreaked (and continues to wreck) chaos on economies across the globe. The lockdown has seen many businesses struggling to pay rent, or to even keep afloat. Simultaneously, landlords are faced with pressure to collect rental income; or face their own demise.

This article delves into whether the law permits tenants to receive some form of rental payment relief, and if so, what the tax consequences are. Likewise, if a landlord offers some payment discount, what this will mean for the landlord from a tax perspective.

Let’s Start at the Beginning

Under a lease agreement, landlords bind themselves to give tenants temporary use and enjoyment of property. Tenants, in turn, bind themselves in the lease agreement to pay a rental amount as compensation for that use and enjoyment.

In certain instances, a tenant may be disturbed in the use and enjoyment of the leased premises by an extraordinary event (legally known as a vis maior or casus fortuitous), over which neither the tenant nor the landlord could reasonably have foreseen or guarded against. In such an instance, a landlord is not guilty of breach of contract but the tenant may be entitled to a remission/ reduction of the rent; depending on what the particular lease agreement provides. The amount of the remission would then align with the extent of beneficial usage which the tenant has over the leased premises at a given time.

Income Tax and Provisional Tax Consequences

Assuming that a reduction of rent is permitted in law and the parties agree to this (or a court rules that a reduction is required), the landlord no longer “receives” the full rental amount under the lease agreement. Furthermore, the full rental amount no longer “accrues” to the landlord; by virtue of the fact that the landlord is no longer entitled to the full rental, but rather the reduced amount.

As a result, the landlord will not be required to pay income tax on the full rental amount specified in the lease agreement. Where the landlord is a provisional taxpayer, the reduced rental amount will also be the only portion on which provisional tax payments will be required to be made by the landlord.

In the event that the tenant operates a business from the leased premises, the tenant would then also not be entitled to claim the full rental amount (specified in the lease agreement) as an income tax deduction. Instead, the reduced rental amount would be the deduction amount that the tenant would be entitled to.


Natasha Wilkinson - Admitted Attorney of the High Court of South Africa

Natasha Wilkinson
Admitted Attorney