ABC leasing - learn about the basic types of this service

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The essence of the lease is the transfer by the lessor (leasing company) of the right to use a specific item to the lessee (customer) at the time specified in the agreement. In return, the lessee undertakes to pay monthly payments (lease instalments). The most popular types of leasing include: operating lease, finance lease, repayable lease.

Operational leasing - what is it all about?

The operating lease, the so-called service lease, belongs to the group of leases with the possibility of purchasing equipment after the end of the lease agreement.

The essence of an operating lease is to make a vehicle or an object available to the lessee without the transfer of ownership. The object is transferred to the lessee for use for a specified period of time, which should be shorter than the standard operating life of the object.

In operating leases, the leasing company makes depreciation write-offs, while the lessee has the possibility to include the initial payment, lease instalments (in full, i.e. the capital part and the interest part), payments related to the currently used object in the tax deductible costs.

To sum up, operating leases can be regarded as operating leases if the following three conditions are met at the same time:

• The contract is concluded for a limited period of time
• The duration of the contract may not be shorter than 40% of the normative depreciation period.
• The sum of net payments may not be lower than the initial value of the leased object.

Essence of financial leasing

In a finance lease (the so-called capital lease), the lessor gives the leased object to the lessee and at the same time transfers the property rights to this object to the lessee. Thus, the lessee makes depreciation write-offs on its own - contrary to operating leases. In addition, the user of the vehicle or object may include the costs associated with the use of the object and the interest part of the installment in the tax deductible cost. It should be remembered, however, that in financial leasing VAT has to be paid in advance for the entire term of the contract.

In summary, a finance lease occurs when the following three criteria are met:

• The contract is concluded for a limited period of time
• The agreement contains provisions on the lessee's right to make depreciation write-offs;
• The sum of net fees is not lower than the initial value of the fixed asset.

Returnable leasing - what is it?

Returnable leasing is the least used form. Its essence is the resale by the lessee (lessee) of its fixed asset in exchange for cash from the leasing company (lessor). As a result, the lessee uses the object on the basis of a lease agreement. In practice, only the owner changes - the user remains the same.