Leasing

The Ministry of Education and Science of the Russian Federation

Plekhanov Russian University

 

 

 

Chair of Foreign Languages

 

 

 

 

PROJECT

 

“Leasing”

 

 

 

 

 

 

Performed by

Romanova Ekaterina Gennadievna

Distance Learning Faculty

Group M 201

 

Supervised by

 Kalashnikova N.A.

 

 

 

 

Project defended on:

 

______________ 2012 __

 

Evaluation:

____________________

 

Tutor’s signature:

 

____________________

 

 

 

 

 

 

 

 

 

Moscow 2012

 

Contents.

Project Paper Annotation_________________________________________________________

Introduction___________________________________________________________________

Chapter 1. Leasing versus lease____________________________________________________

Chapter 2. Functions and objects of leasing___________________________________________

Chapter 3. Participants of leasing relations___________________________________________

Chapter 4. Benefits of leasing______________________________________________________

Conclusion____________________________________________________________________

References____________________________________________________________________

Glossary______________________________________________________________________

 

 

PROJECT PAPER ANNOTATION.

Theme:  “Leasing”

This project considers the problem of leasing relations along with the lessor and the lessee include additional figure - the seller of the leased property, which is absent in the lease.

I have considered the difference between leasing and lease, because many people identify these two aspects. For the lease of the owner of the property, passing it for a certain period of temporary use, in the established term gets it back, and for the provided service receives Commission fee.

In the implementation of the leasing transaction the parties have entered into at least two contracts: purchase-sale contract and the contract of lease.

For the lease of the active role of the lessee, which is not characteristic of lease relations.

Оn expiration of the lease provides for the following options relationship of parties: the extension of the agreement, to return the property, the transfer of the right of ownership to the property to the lessee.

And of course, there are a lot of benefits of leasing as for lesser, for the lessee and for the state. First of all, leasing payments are fully included in the cost price of production (services), which significantly reduces the tax base and gives the opportunity to save on the tax on profit. Then leasing allows you to attract significant amounts of private investment in the economy of the country.

 

 

Introduction.

The idea of leasing is one of the oldest in entrepreneurial activity. The disclosure of the essence of the leasing transaction dates back to distant times of Aristotle.

The economic essence of leasing for a long time remains in dispute. The content and its role in the theory and practice is interpreted in different ways and are often contradictory.

Some consider leasing as a way of crediting of business activities, other fully identify it with the long-term rent or to one of its forms.

For the lease of the owner of the property, passing it for a certain period of temporary use, in the established term gets it back, and for the provided service receives Commission fee.

Speaking about leasing, many spend the analogy with the lease, and at the same time almost totally identify these concepts. In fact, there are some differences of leasing from the lease.

 

Chapter 1. Leasing versus lease.

Leasing relations along with the lessor and the lessee include additional figure - the seller of the leased property, which is absent in the lease.

In the implementation of the leasing transaction the parties have entered into at least two contracts: purchase-sale contract and the contract of lease.

For the lease of the active role of the lessee, which is not characteristic of lease relations. The preemptive right choice of property and the seller belongs to the user. The lessor shall be obliged to inform the seller of the property that it is acquired specially for delivery in financial rent (leasing).

Property letting in the lease, as a rule, is not the manufacturer or the initial owner of, a financial institution or specialized leasing company;

When calculating the lease payments is recorded the purchase price of the property, the period of time for which is a leasing contract, the residual value, the creditworthiness of the lessee, as well as the existing legislation, particularly in respect of taxation and the periods of depreciation; the calculation of the lease payments amount of payments depends mainly on the market conditions.

In contrast to the lease relations, with leasing, the lessee is vested with the rights and duties inherent to the buyer.

Differently distributed risks in the contracts of lease and leasing, associated with the shortcomings detected in the property: under the contract of lease the lessor is liable to the lessee for all the shortcomings that impede the use of the property, and according to the leasing contract, the lessor shall not be, as a rule, any liability for the above shortcomings. The lessor is also free from warranty on the property.

In contrast to the lease relations, in the event of early termination of the leasing contract on fault or on request of the lessee, as a rule, the last must repay the total amount stipulated in the contract.

On expiration of the lease, the lessee is obliged to return the property; on expiry of the lease provides for the following options relationship of parties: the extension of the agreement, to return the property, the transfer of the right of ownership to the property to the lessee.

According to the Federal law «On financial lease (leasing)», lease - a combination of economic and legal relations that arise in connection with the sale of a lease agreement, including the acquisition of a subject of leasing.

In turn, the leasing contract is a contract under which the lessor undertakes to acquire the property specified by the lessee the property from them the same seller and transfer it into temporary ownership, use the certain conditions for a certain amount and for a certain period with the right of or without the right of further redemption.

Leasing in Russia underwent several stages of formation of the economic forms and its legal environment since the end of 80-ies - early 90-ies of the previous century.

Chapter 2. Functions and objects of leasing.

There are the following functions of leasing:

1) the Finance function is expressed in the liberation of the lessee from a lump-sum payment of the full value of the property;

2) the production - is an opportunity of operative solving of production problems with the temporary use and not expensive property;

3) sales - is an opportunity of expansion of sales channels, the conquest of new markets, increase in sales volume;

4) the function of receiving tax benefits. Firstly, for the leased property, there is a possibility of application of accelerated amortization with a coefficient of up to 3 (in addition to fixed assets related to the 1 - 3 depreciation groups). In connection with this also reduces the total amount of tax on property, subject to payment. Also there is the possibility of attributing the cost of leasing payments, thus it turns out the tax savings on income tax.

Objects of leasing can be any unemployed things, including buildings, structures, vehicles, equipment, as well as the company as a whole and other movable and immovable property used for entrepreneurial activity.

Thus, the first requirement for the subjects of leasing is using them exclusively for business purposes. This excludes the provision of property under a leasing contract physical persons for personal purposes, as well as public, non-profit organizations.

Objects of leasing may not be land plots and other natural objects, the property, which the Federal laws prohibited for free circulation or for which is set the special procedure of treatment, as well as intangible assets.

The most common objects are transport facilities, equipment, less often - the objects of real estate.

Chapter 3. Participants of leasing relations.

All participants of leasing relations are divided into direct and indirect. The direct participants of the leasing transaction, that is, to the so-called subjects of leasing are only three members - leasing policy, the lessors, suppliers (sellers) of the leased property. Indirect same participants of the leasing transaction are banks, insurance companies, intermediary organizations, leasing brokers. May not be the subjects of leasing public, charitable organizations and other non-commercial associations of enterprises.

The lessor - a natural or legal person who, at the expense of attracted and (or) own funds acquires in the course of implementation of a leasing agreement the owner of the property and provides it as a subject of leasing to the lessee for a fee, for a certain period of time and under certain conditions for temporary possession and use with the transition or without the transfer to the lessee of the right of ownership of the leased asset.

The lessee - a natural or legal person who, in accordance with the contract of leasing shall be obliged to accept the leased asset for a fee, for a certain period of time and under certain conditions for temporary possession and use in accordance with the leasing agreement.

The seller is a natural or legal person who, in accordance with the contract of purchase and sale by the lessor sells the lessor in a specified time the property which is the subject of leasing. The seller may simultaneously act as the lessee within the same legal relationship.

In our country of any of the subjects of leasing can be a resident or non-resident of the Russian Federation, as well as a subject of entrepreneurial activity with the participation of a foreign investor, which carries out its activity in accordance with the legislation of the Russian Federation.

In Western countries and in Russia's leasing services market is characterized by the diversity of forms of leasing, models of leasing contracts and legal norms, regulating leasing operations and defining the rights and obligations of the lessor and the lessee.

In the form of the transaction include:

• direct - a type of lease in which the combined functions of the seller and the lessor, i.e. the lessor and the seller - this is a different legal entity, however, they represent the General interest.

• indirect - traditional type of lease in which the lessor, lessee and seller independent of each other and represent their own interests;

• return - a type of lease in which the functions of the seller and the lessee performs the same face. Operations leaseback enable the enterprise to temporarily release the associated capital through the sale of the property and at the same time to continue them is actually used;

• leasing provider - this lease-back with the difference that the end user of the property is a third party which has received the object of the subleasing agreement. This type of leasing is profitable, if the subject of leasing is a rare equipment or if her relationship with the lessor;

• sublease - type of sub-lease of assets under which the lessee under a contract to a third party for temporary possession and use for a fee property, earlier received from the lessor under a leasing agreement.

For the duration of the transaction:

• operational - a type of lease in which the term of the leasing contract is significantly less than the depreciation period. As a rule, the asset is accounted for on the balance sheet of the lessor and the expected return of the property to the lessor at the end of the leasing contract. Allocation of operational leasing is estimated ambiguously "in the legislation there is no definition of operational leasing. Earlier the term «operating lease» is mentioned in the law on leasing, and then was deleted;

• financial - a type of lease in which the term of the leasing contract commensurate with the term of depreciation. As a rule, on completion of the transaction is expected the right of redemption at the residual value.

The object of the transaction:

• leasing of movable property;

• leasing of real estate.

On terms of service:

• net (net-lease) - a type of lease in which the obligations of the lessor does not include the provision of any services, i.e. all costs associated with the repair, maintenance and service, insurance, etc. is the lessee;

• leasing in the package (wet) - involves the provision of a lessor to a complex of services on repair, maintenance, insurance, etc., the costs associated with the provision of services, are included in the composition of the leasing payment;

• General - involves the provision of a lessor leasing the line where the the lessee may obtain property without the conclusion every time a new contract.

On the market:

• inner - a type of lease in which all participants of the leasing transaction are residents of one country;

• international - participants of the leasing transaction are 2 or more countries. Stands out direct international leasing (transaction is between the representatives of two different countries) and of transit and international leasing (participants of leasing relations are of three or more different States).

Chapter 4. Benefits of leasing.

Under condition of depreciation:

• leasing with full amortization - is characterized by the coincidence of the duration of the leasing transaction with the normative term of depreciation of the object;

• leasing with the partial amortization - does not imply a full depreciation of leasing object to the expiration of the term of the contract.

According to the type of leasing payments:

• the money - type of the lease when the lease payments are made in the monetary form;

• compensation - for payment of leasing payments in the form of finished products, produced on leasing the property of, or in the form of counter services;

• combined - presupposes a combination of cash and compensation of leasing.

In relation to the tax benefits:

• dummy, is of a speculative nature and is designed for using benefits of operating in the country, in this case according to their economic substance, is not a leasing transaction, but rather represents a purchase and sale transaction with payment by installments;

• valid - in legal terms, consistent with applicable law and economic content of leasing transactions.

For the participants of the leasing deal leasing has the following advantages:

For the state:

§ Leasing allows you to attract significant amounts of private investment in the economy of the country;

§ thanks to the lease becomes possible technical re-equipment of enterprises;

§ growth of volumes of production, produced with the use of leased equipment provides additional tax revenues to the budget;

§ increase in volumes of production, produced with the use of leased equipment, helps in solving socio-economic problems of the society;

§ leasing increases the competition between banks and leasing companies that lowers interest rates and stimulate the supply of capital in sectors of the economy;

§ investment on the basis of leasing contributes to the development of business and increase in employment.

Among the benefits of leasing to the lessor:

§ Active growth of the market of leasing services in Russia;

§ leasing provides the opportunity to lessor to extend the variety of services;

§ subject of leasing is a guarantee of credit repayment in the event of bankruptcy of the lessee can be implemented for the reimbursement of outstanding leasing payments;

§ the use of tax and depreciation benefits broadens the range of potential lessees;

§ leasing provides additional opportunities for expansion of the activities.

For sellers objects of leasing:

§ Opportunity with the help of leasing to expand marketing channels for the product and the size of possible sales, which appears to be a very important factor in conditions of rigid competitive struggle;

§ reduction of expenditures on advertising and search of clients;

§ payment of equipment lessor;

§ support of solvent demand for the products;

§ possibility of reduction of stocks of finished products, accelerate capital turnover.

For Lessee:

§ Accelerated depreciation. The right to accelerated depreciation is regulated by Chapter 25 of the RF tax code article 259, paragraph 7. The depreciation deductions are accrued in the hand, on the balance of which is object of leasing. Taxpayers have the right to apply to the basic depreciation norm special coefficient, but no higher than 3: in respect of depreciable fixed assets that are the subject of the contract of financial lease (leasing contract), the taxpayers, in which the fixed assets should be accounted for in accordance with the terms of the contract of financial lease (leasing contract). The special factor is not applied to fixed assets related to the first - third depreciation groups;

Savings on tax on profit:

- Leasing payments are treated as current expenses included in cost of products or services, with the result that to this extent reduces the taxable base for the tax on profit of organizations (article 264 paragraph 10 of the RF tax code);

- «lease (leasing) payments for rented (the leased) property, as well as costs of purchase of the property, transferred in leasing. In case, if the property received under the lease agreement, are accounted for by the lessee, the expenses calculated in accordance with this sub-paragraph, shall be: (a) a lessee - lease (leasing) payments less amount of depreciation on these assets, calculated in accordance with article 259 of the RF tax code; b) the lessor's expenses for the acquisition of the property, transferred in leasing».

§ Savings on tax on property. Property tax applies to financial results of activity of the enterprise, thus reducing the taxable base for tax on profit.

§ Payment of VAT in leasing:

- The payment of the remaining part of the VAT to fill the entire term of the leasing agreement;

- Payment of VAT are made in the course of the lease contract with each lease payment;

- The VAT paid to the leasing company, reduces the payments of VAT into the budget;

 

 

Conclusion.

Now we can conclude that leasing has advantages in comparison with Bank crediting.

Accessibility: the decision on the implementation of a leasing transaction is based to a large extent on the ability of the lessee generate a sufficient amount of cash for the payment of leasing payments, and to a lesser extent depends on the credit history of the enterprise;

• For the conclusion of a leasing transaction it is necessary to pay from 20% - 50% from cost of leasing object (e.g., a car). Thus, the acquisition of property are carried out without the lump sum of the diversion of a large volume of own funds;

• Leasing payments are fully included in the cost price of production (services), which significantly reduces the tax base and gives the opportunity to save on the tax on profit;

• Are more forgiving and flexible requirements for additional security (in some cases, additional collateral is generally not required);

• Term of lease agreement may exceed the term of the loan. During the term of the leasing contract of the equipment, as a rule, fully pays;

• The leasing company does not generate additional conditions, in contrast to banks, such as the transfer of cash turnover in the Bank, the minimum balance on the accounts in this Bank, my dear settlement-cash servicing;

• Taking into account the tax privileges provided by the legislation on leasing transactions, the effectiveness of financing the purchase of equipment and vehicles with the help of leasing significantly higher in comparison with the credit, but is often the only possible official source of financing for enterprises because of the greater accessibility.

 

References.

1. Federal law dated 29.10.1998 № 164-FZ «On financial lease (leasing)» as amended on 08.05 2010
2. Adam N. a., Types A.A. Leasing: Legal entity; Economic framework; Accounting and taxation: textbook. - SPb.: Peter, 2007. - 160 p.
3. Gazman V.D. Leasing of Russia 2009//Leasing review. - 2010, №1.