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Premium on a lease

Updated: Aug 20, 2021

Very often when property is leased, the lessee, in addition to paying a rent for an agreed period, pays a lump sum. This is known as a premium, or some¬ times as ‘key money’, and was once intended to avoid taxation and disguise the true rent. Premiums for leases granted for ty years or less are now taxable. For tax purposes the premium is reduced by 2 per cent for every complete twelve months of the lease’s length after the first twelve months.

Reference: The Penguin Business Dictionary , 3rd edt.

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