Amendments to the Income Tax Act, 1962 (ITA)
Amendments to the Value-Added Tax, 1991 (VAT Act)
A lessee who is a vendor is deemed to have made a "taxable supply to the lessor" where the lessee effects leasehold improvements on the fixed property of the lessor. The time of supply is deemed to at the time the leasehold improvements are completed. The value of the supply for the lessee will be any consideration charged, or deemed to be nil where no consideration was charged by the lessee. In both instances, the lessee will be entitled to full input tax relief. Where the lessor is a vendor, the lessor will be deemed to have made a taxable supply to the extent that the lessor uses the leasehold improvements for making non-taxable supplies, or where input tax deductions are denied as the improvements are used for entertainment. In this instance, the lessor will have to account for output VAT on the market value of the improvements (being the higher of actual cost, the agreed value or actual open market value).