Today on the leasing service market it is possible to distinguish two kinds of leasing: financial and operational leasing. Avis Ukraine offers operational and financial leasing to legal persons on the term from 12 to 48 months with prolongation possibility.
In operational leasing cars are on Avis’s balance, thus increasing general Lessee’s profitability. In financial leasing a car is transferred to the Lessee’s balance and leasing payments belong to the company’s expenses decreasing the income taxation amount.
Financial Leasing vs Operational Leasing
| Financial Lease | Operational Lease |
|---|---|
| Criteria | |
| During the leasing period 75% of car value must be amortized or amount of lease payments (lease interest, insurance interest + offset of car value (VAT excluded) should be equal or more than the incoming (initial book value (VAT excluded) car value | The term of car usage must not exceed depreciation period. |
| At the end of lease contract proprietary right on a car may be transferred to Lessee (in case the last payment i.e. Residual Value is paid) | At the end of lease contract proprietary right on a car remains at Lesser |
| Account on Lessee’s balance | Should be taken into account on Lessor’s Balance |
| Tax on profit | |
| Initial car value is not included into profit before tax, but it increases the balance value of adequate group of fixed assets and ought to be amortized. Such a Tax amortization is the subject of Gross Costs which reduces profit before tax. | Initial car value is not included into profit before tax, but it is included into lease payment from Lessor’s amortization amount. |
| Leasing payments (insurance, % for debt capital, leasing percent) | Leasing payments are 50% deductible from profit before tax |
| Expenses on petrol purchasing are 50% deductible from profit before tax | Expenses on petrol purchasing are 50% deductible from profit before tax |
| If Lessee requires it is possible to receive paid service of waybill registration for petrol writing off. Expenses of this service are fully deductible from profit before tax | If Lessee requires it is possible to receive paid service of waybill registration for petrol writing off. Expenses of this service are fully deductible from profit before tax |
| VAT | |
| VAT refunds in amount of 100% from incoming (initial) car value. Lease payment, which consists of insurance payment, interest on loan, interest on lease, is not taxable by double VAT. 100% VAT belongs to service payments, what is an integral part of a financial leasing agreement with services. | 100% of VAT refund |
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