Leasing is a financial service, a form of crediting acquisition of fixed assets or costly products. Leasing is most commonly used for various business purposes. Actually, leasing means a long-term lease with following option to acquire ownership of the leased asset. In addition, leasing is a legitimate opportunity to reduce the tax base for the particular period of time.
Types of leasing
- Finance lease: The term of the leasing contract is comparable to the economic life of the leased asset. Typically, at the end of the leasing contract the residual value of the leased asset is close to zero and the asset can be acquired by lessee with no extra charges.
- Operating lease. The term of the leasing contract is significantly shorter than the economic life of the leased asset. After the end of the leasing contract, the leased asset is either returned to the lessor and can be leased repeatedly or it is acquired by the lessee who pays the remaining value of the asset. The lease rate is usually higher than in case of finance lease.
Payment schedule options
General established in practice types of payment schedules are:
- Step payments/ Regressive payments (monthly payments decrease gradually during the lease).
- Level payments (monthly payments remain unchanged for the entire duration of the lease).
- Seasonal payments (payment schedule is tied to seasonal income of the lessee’s business).
Economic advantage of leasing assets
- Acquisition of fixed assets in form of leasing-purchasing can reduce the tax burden of the enterprise. In particular, the contractual lease payments (as these are expenses) reduce the tax base for income tax.
- In addition, accelerated amortization helps to reduce the assessed value of property that is the tax base for property taxes and even more decrease the tax base for income tax.
- As money is paid by small installments after the purchase, there is a possibility to optimize the cash flow.
Robur International equipment leasing offers :
GOC Robur International successfully works with two established leading leasing companies: