Leaseback: benefits and risks. Leaseback

Leaseback, in contrast to classical financial leasing, involves not three parties (seller, lessor and lessee), but two, in participation in the transaction. This is a type of leasing in which the seller of the item and the lessee are one person. This effective tool for or refinancing capital investments.

It is more profitable than applying for a loan from a bank or acquiring new assets.

What is the mechanism of such operations? How does leaseback work? The company sells its own property to the leasing company and immediately becomes a lessee (leases it). That is, the client receives 100% of the value of the property, and at the same time it remains in his use (“returned”). In this way you can get it without attracting additional sources of financing.

Two contracts are concluded simultaneously (purchase and sale and leasing). Such a transaction is reminiscent of issuing a secured loan, only the costs for it will be lower than the interest paid to the bank. In addition, leaseback allows the company to minimize the cost of paying taxes, since lease payments are fully included in the cost of production.

Tax savings are also possible due to the use that is permitted in this case. At the end of the contract, the property (equal to almost zero) is transferred to the balance sheet of this enterprise. Therefore, using leaseback, you can reduce the tax on such property to symbolic amounts.

In this case, it does not actually change location and can still be used in production process.

However, there are certain nuances of concluding such transactions. Therefore, to assess risks, a potential lessee must calculate before concluding a contract tax consequences so that the deal does not turn out to be unprofitable. This is especially true if it is necessary to lease equipment, machinery or cars, which are reflected on the recipient’s balance sheet at a reduced price, since taxes will be calculated based on actual prices.

Tax authorities quite strictly monitor leaseback transactions (suspecting the possibility of fraud with payments), paying close attention to those enterprises that have problems with maintaining documentation and tax accounting. Leaseback is used to improve balance sheet indicators by selling property not at the residual value, but at a value that usually significantly exceeds it. But the leasing law does not prohibit the lessor from buying property from its owner. Therefore, the leaseback agreement fully complies with legal requirements.

However, it is not recommended to enter into such transactions for very young enterprises that have not yet strengthened economically. Leasing is justified during periods of serious modernization of stable enterprises that currently lack their own funds or do not have the opportunity (time) to search for more suitable financing options.

Leasing services are actively developing in Russia. Typically, a leasing transaction involves the acquisition of property for the lessee and its lease with the condition of further purchase.

But the concept of leasing includes various types transactions. One of the options is leaseback, aimed at attracting working capital.

The essence

Leasing involves the acquisition by the lessor of property for the client and its subsequent transfer for rent. Unlike conventional leasing transactions, in leaseback, the client acts as both a seller and a lessee.

Typically, companies resort to leaseback in situations of shortage of working capital. In this case, the property that originally belonged to the client is transferred to the ownership of the leasing company.

Simultaneously with the purchase and sale agreement, a leasing agreement is concluded, and the client receives his equipment or other property for rent. Leaseback, in essence, represents an alternative to secured loans.

General characteristics of leasing relations

There are various options for leasing transactions.

With classic leasing, a minimum of four participants are involved in the transaction:

• the lessor financing the transaction;
• lessee purchasing property;
• the seller supplying machinery, equipment or other leasing object;
• an insurance company that insures the leased object against various risks.

Large transactions usually involve the involvement of additional parties, such as banks.

Leaseback differs from classical leasing in that the seller and lessee are the same person. In essence, the client sells the property to the leasing company and immediately leases it with the right of subsequent purchase.

Leaseback of real estate for individuals

Leaseback is popular mainly among business representatives as a source of replenishment of working capital. In principle, the legislation allows participation in transactions by individuals.

Leasing companies take into account the risk of low solvency of private clients and prefer not to cooperate with this category of clients. Although there are exceptions, they are very few.

Let's give detailed conditions for real estate leaseback for individuals in the following table.

Often, when leasing back real estate, individuals receive not very attractive conditions. The value of the property is underestimated, and various commissions and fines are included in the contract.

The situation with unfavorable conditions for real estate leasing back for individuals is connected with the fact that this form of financing is mainly sought by clients who find themselves in a hopeless situation.

Important! In most cases, real estate leaseback for individuals can only be considered as a temporary solution to the problem.

For legal entities

The services of leasing companies in Russia are mainly aimed at business representatives. This is due to the opportunity to obtain VAT deductions from the lessee, which causes increased demand for the service.

Companies are ready to offer leaseback services commercial real estate or production premises. At the same time, the conditions from different companies may differ slightly.

In the following table we compare the most popular real estate leaseback offers for legal entities.

Video: Development results

Legislation

Leaseback does not contradict current legislation Russian Federation and is a completely legal scheme.

Leasing transactions are regulated by the following documents:

• Civil Code of the Russian Federation (Article 665 - 670);
• Federal Law “On Financial Lease (Leasing)” dated October 29, 1998 N 164-FZ;
• UNIDROIT Convention on International Financial Leasing;
• Federal Law of February 8, 1998 N 16-FZ “On the accession of the Russian Federation to the UNIDROIT Convention on International Financial Leasing.

Before concluding a deal, you should definitely spend a little time and study in detail legislative framework. This will eliminate unnecessary questions when concluding a payment agreement.

Strict compliance with the law will allow you to obtain maximum benefit from the leasing transaction and will eliminate various problems.

According to the law, ownership of the property remains with the leasing company until it is repurchased. This prevents the lessee from pledging it to the bank or selling it again.

Scheme

The interaction between the parties during leaseback is slightly different from the classical scheme. This is due to the fact that the seller and the lessee are the same person.

Let's consider the standard scheme of a leaseback transaction:

• the client submits an application for financing and a package of documents to the company;
• the lessor's specialists analyze the information and documents received and make a decision on the transaction;
• the parties agree on the terms of a specific transaction and sign a leasing agreement simultaneously with the property purchase and sale agreement;
• ownership of the property passes to the lessor, and the lessee receives it for temporary possession;
• the client pays regular payments and redeems the property at the end of the contract term.

Typically, the registration procedure takes from 5 to 20 working days, depending on the type of leased property and the amount of financing.

Terms

The cost of the leased property is determined by the parties through negotiations or based on assessments. In this case, the volume of financing can reach 70-90% of the cost of the leased property.

The terms of the transaction may provide for advance payment of the project at the expense of the client’s own funds. In this case, the amount of joint financing can reach 100% of the property price.

The price increase is determined individually for each client. It depends on financial indicators lessee, leased object, transaction term and other conditions. The minimum increase in price per year is 5-8%.

It is necessary to take into account that property transferred under a leasing agreement must be insured. This ultimately has a negative impact on the final price increase, significantly increasing it.

The validity period of a leaseback agreement for vehicles can be up to 3 years, for equipment – ​​5, and for real estate, rolling stock, and aircraft – 10 years.

Table. Basic conditions of leaseback.

Goals

The main purpose of leaseback for companies is to obtain additional working capital.

There are also additional goals:

• reducing the tax burden in a legal way;
• use of opportunities for accelerated depreciation of property;
• consolidation of equipment within one transaction when purchasing from a large number of suppliers.

Individuals resort to leaseback when they find themselves in difficult financial situations. It's no secret that signing an agreement with a leasing company is easier than getting a bank loan.

Objects

Almost any equipment and machinery, as well as real estate, can be leased objects. In this case, it is possible to register a transaction not only with new property, but also with used property.

Let's consider the most common options for leasing objects:

• cars (cars, trucks);
• railway and water transport;
• special equipment;
• real estate;
• aircraft;
• various equipment.

Calculation example for cars

When concluding a leasing agreement, the parties must sign a payment schedule. It specifies specific amounts. In this case, the peculiarities of the activities of a particular client and his wishes may be taken into account.

Let's look at what parts the lease payment consists of:

• depreciation charges;
• payment for used borrowed funds;
• leasing company commission;
• payment additional services(for example, insurance);
• the cost of the property being purchased.

Typically, the following formula is used to calculate the total amount of lease payments:

Total lease payments = current year depreciation + usage fee borrowed funds+ lessor commission + additional fee services + VAT.

Let's give an example of calculating leasing payments for a car worth 1 million rubles, a leasing period of 5 years, an increase in price of 7% per year, and a redemption value of 1%.

It’s easy to determine the overall price increase:

1000000 rub. / 100 * 7% * 5 years = 350,000 rubles (for all 5 years).

Let's calculate the entire leasing cost:

1,000,000 + 350,000 + 10,000 (1% of the redemption value) = 1,360,000 rubles.

When concluding a transaction, the client pays advance payment– 30%. It is 300,000 rubles. According to the payment schedule, the amount will then be 1,260,000 – 300,000 = 960,000 rubles.

Sample contract

Each company independently forms standard contracts leasing for various types transactions. They should be carefully studied, as sometimes they contain conditions that are not convenient for the client, for example, fines and commissions.

Let's consider the main points of the leaseback agreement that you should pay attention to when signing:

• validity period;
• transaction amount;
• interest rate and commissions;
• penalties;
• conditions for early redemption of property.

Accounting and tax accounting

The lessee, when selling equipment, must reflect income in the amount of the full sales price excluding VAT and at the same time other expenses in the amount of the cost of the equipment.

Tax accounting also recognizes income from the sale of property without VAT. It is reduced by the cost of the purchased equipment excluding VAT, and when purchasing used equipment - in the amount of the residual value.

The operation of transfer of ownership is considered an object of taxation. Invoices for the transaction must be issued within the deadlines established by law.

Upon receipt of property from a leasing company, the equipment is taken into account in the amount full price taking into account the redemption price and is reflected in the debit of account 08 “Investments in non-current assets» subaccount “Purchase of fixed assets under a leasing agreement” in correspondence with the credit of account 76 subaccount “Debt to the lessor”.

Tax risks

Tax authorities often pay close attention to leaseback transactions. Federal Tax Service officials believe that in this way companies are trying to illegally evade taxes.

You should know that leaseback transactions are not prohibited by law. It is necessary to be prepared in advance to respond to claims from tax authorities with the involvement of appropriate lawyers.

Pros and cons

Leaseback is one of the popular measures to attract additional funds while maintaining the right to own property.

It has the following advantages:

• long terms;
• quick approval of the transaction;
• the possibility of obtaining tax preferences;
• minimum set of documents.

Of the minuses it should be noted compulsory insurance the subject of leasing and increased attention to such transactions from the tax authorities.

Leaseback is an excellent way to attract working capital for legal entities. This source of financing allows you to quickly obtain the missing finances, but it is necessary to take into account the risks associated with the transaction. If the contract is violated, the lessee risks being left without property.

Leasing has different forms of implementation. One of them is leaseback. Leaseback is sale of property to a leasing organization, which then transfers it for use to the seller. Agreement leaseback in this case it will be easier.

In total there are two parties involved, there are no clauses regarding the transfer of property and related issues.

Often such a scheme used in cases where an enterprise needs additional funds for its development, but credit funds turn out to be unavailable for some reason.

Practical features of leaseback

The object used is property that has a high value and can withstand use for a sufficiently long time. It is also taken into account that property must remain morally fit for its use.

In practice, leasing companies prefer not to enter into contracts for property that is used during the year. From the point of view of entrepreneurs, this is to some extent means losing complete control over your enterprise.

Leasing is characterized by the frequent absence of collateral (collateral, guarantee), as is the case with loans. In Russia, reverse leasing rarely occurs without collateral. But in comparison with bank collateral conditions, Leasing collateral still contains less stringent conditions.

This happens in the case of a transaction with a technological and production equipment . Such property has a narrow scope of application and is more difficult to sell.

The security does not apply in the event high cost property and high demand at him. An example would be foreign-made cars. But in practice, real estate is the subject of leaseback.

Do not forget that if the tenant does not fulfill his part of the contract, then a lot of time will pass before the leasing company can sell property in order to compensate for losses due to the actions of the second party.

Leasing companies for the most part work not only with their own funds, but also with investors’ money, even with money received through.

That's why Domestic cars are rarely used as leasing items due to their relatively low quality.

Leaseback is based on a formal purchase and sale transaction, but the lessee may face certain difficulties. In the case of a transaction, the property is appraised; the appraiser's price is significantly less than the market price. The leasing company may also impose requirements for the use of the property. But, if the company has an excellent reputation and has positive work experience, then the minimum requirements will be set.

Reverse leasing is an activity not only for leasing companies themselves, but also for banks. Car dealerships often provide such services.

Taxation issues

Property turnover under leasing agreements has advantages due to the reduction of part of the tax burden. But this is possible for organizations working on common system taxation.

Payments for the use of property received under a leasing agreement are included in the company’s expenses and reduce the amount of funds from which taxes must be paid. The same applies to insurance premium payments.

Direct and leaseback are two financial transactions that allow you to obtain for use assets that are not owned by the enterprise without purchasing them. This is especially beneficial if their value decreases over time. In a broad sense, leasing cars and any other assets is an agreement between two parties in which one of them acquires the rights to use them in exchange for monthly payments. This operation not only allows you to start using equipment in the production process when there is no money to buy it, but also to keep it, actually selling it to an investor. We'll talk about this in today's article.

Historical background

Leasing has served many purposes over the centuries. The essence of it legislative regulation depended on the socio-economic conditions at that time. In particular, until the early 19th century, leasing was most often used in the agricultural sector. Later it became commonplace for city residents. Modern legislation governing the relationship between tenant and property owner developed under the influence of Adam Smith's "free hand" market and the principle of laissez-faire. Over time, amendments began to arise to protect the rights of the buyer. Ultimately, many countries have seen reforms that have made life easier for renters. Today, both parties to the leasing agreement are protected almost equally in all developed countries.

Definition and general information

Leaseback is a financial transaction in which one market entity sells its asset and then leases it for long term. Thus, he gets the opportunity to use equipment that no longer belongs to him. This operation is most often used for fixed assets, in particular real estate, as well as durable capital goods, such as airplanes and trains. The term may be used by national governments to refer to the sale and subsequent lease of their own territorial assets. The US wanted to sell the Falkland Islands to Argentina and use a leaseback for their continued use for the next 99 years. The agreement with China on Hong Kong was similar. The use of such an operation is usually caused by financial or tax aspects of the activities of a business entity.

Leaseback: scheme

This financial transaction necessarily involves two participants. The first of them simultaneously acts as the seller of his property and the lessee. He loses ownership of equipment, real estate or vehicles, but gets the opportunity to continue using them for a fee. Let's consider real estate leaseback:

1. Remove an asset from your balance sheet.
2. Conclude long-term contract, under which leaseback will be carried out.
3. Sell ​​the property and make an advance.
4. Spend the money received from the lessor at your own discretion.
5. Continue to use the asset and make monthly payments for it.
6. Enter expenses into the balance sheet, reducing the taxable profit of the enterprise.
7. Upon expiration of the contract, receive the property back into your ownership.

You need to understand that if the lessee violates the terms of the agreement new owner may terminate the agreement in unilaterally and refuse to return the asset.

Leaseback agreement

Under the terms of the agreement, after the purchase, the asset is transferred to the seller for a fee. The main reason for using an operation such as leaseback is the transfer of ownership rights holding company while preserving the value and profitability of the asset. Also, the seller can receive additional financial resources by transferring a household asset to the buyer. For the lessor, this operation is a long-term secured investment. He does not have to worry about losing money or the agreed interest, because he always has the opportunity to keep the asset if the seller violates the terms of the contract. Leaseback individuals often practiced by investment trusts that operate large amounts of real estate, ranging from office space to hospitals and apartments.

Key elements of the agreement

Leasing relationships are secured by a legal contract. In the USA, it also has the features of a transaction. Each type of leasing has its own special conditions which are specified in the agreement. In general, the contract includes the following aspects:

• Names of the parties to the agreement.
• Start date and term of the contract.
• Location of the leased object.
• Provision regarding automatic renewal if agreed upon by the parties.
• The amount and frequency of payments for the use of the asset.
• Other conditions (insurance for losses, restrictions on the use of property, maintenance and who is responsible for it).
• Termination clause (describes the situation when the contract ends early or is cancelled).

Possible solutions to the problem of “toxic” banking assets

According to BBC business editor Robert Peston, one way to combat the mortgage crisis is leaseback. He highlights two main advantages of this operation:

• There is no need to evaluate toxic assets.
• Losses from the latter are absorbed by banks in clearly fixed groups over a long-term period.

Reasons for relinquishing ownership

An equipment leaseback typically begins with one party (usually a corporation) selling the property to another (most often an institutional investor or trust). Then she rents it for a percentage for a certain term. The main reasons for carrying out such a financial transaction are:

• Expanding the business, purchasing new equipment for production, investing in new opportunities. Leasing vehicles or other assets allows a corporation to access greater capital than traditional financing vehicles. Upon sale, the company gains access to 100% of the value of its assets. Traditional financing mechanisms limit the amount to loan-to-value and coverage ratios.
• Paying off debts and improving the company's balance sheet.
• Reducing the tax obligations of the lessee, which is caused by an increase in the value of land and real estate. Moreover, the seller, when renting premises, can deduct these payments as legal expenses.
• Limiting the risks associated with owning real estate, such as cyclical market fluctuations.

Benefits for the lessor

An investor or trust acquiring ownership of real estate or other assets also has sufficient reasons to do so. Among them:

• Fair return on investment in the form of rental payments throughout the leasing term, ownership of a depreciable asset that already has a reliable tenant.
• Availability of a long-term agreement on the owned asset with guaranteed monthly payments.
• The ability to deduct investments in depreciable real estate, a car or equipment from the tax base, which will allow you to quickly return the money spent on its purchase.

Legislative framework in different countries

Leaseback agreements are popular in France, USA, UK, Australia, Asia and even India. And there is a simple explanation for this. In France, entering into such an agreement has significant tax benefits. Under the scheme, the seller can use the property from one to eight weeks per year (maximum six out of twelve months). The French government encourages by providing tax benefits, leasebacks in the tourism sector to alleviate the shortage of rental housing. The scheme can also be used for the acquisition of vacant land, which is then again given to the state for use. Typical contract Leasing is usually concluded in France for 9-11 years and can be extended.

In the US, such a financial transaction is usually carried out with real estate. It is in the nature of a loan, where rental payments act as interest on it. Lack of funding forces everything more businesses resort to such an operation as lease-back of equipment. It allows you to quickly receive significant cash injections. It should be noted that the agreement may either provide for the return of ownership at the end of the term or leave the property in the possession of the investor. In the first case, this happens at the end of the year in case of an audit by the Internal Tax Service.

The concept of leaseback is widespread in European countries, particularly in Spain and Switzerland. The most commonly sold assets are studios, apartments and villas. Most often they are located near ski and beach resorts and golf clubs.

Leaseback is very convenient for legal entities, since such lease allows you to quickly replenish fixed assets and receive additional profit. The scheme of such a lease itself is very convenient - it does not require the delivery of property and the search for a seller, there is no need to wait for it to be delivered to the enterprise.

Most often, only 2 parties are involved in such a transaction - the leasing company and the client; the subject of the contract itself does not change its actual location and owner.

The nuances of leaseback

A leaseback is a transfer own property into possession of an intermediary (leasing companies) and further rental of the same property by the original owner.

To put it simply, the essence of leaseback is as follows: any enterprise, owning, for example, housing or equipment, sells it to a leasing company and immediately leases it. In this case, the property remains as fixed assets in the enterprise, but is now the property of the lessor.

The leaseback scheme looks like this:

• After the preliminary consent of the parties, a purchase and sale and leasing agreement are simultaneously concluded. This is done so that the client (individual or legal entity) could make timely entries of accounting and accounting records for leaseback, and the leasing company managed to record real estate or equipment on its balance sheet.
• The contract specifies the amount of the property redemption, which is paid one-time to the seller. From now on, the client becomes a lessee, and will be forced to pay rental payments to the new owner.
• After the end of the transaction period, the lessee can buy back his property from the leasing company. In this case, the value of the subject of the transaction will be nominal (residual), as an option the leasing agreement is extended.

Thus, the property remains part of the enterprise’s fixed assets all this time, the company receives the financing it needs at the moment, the leasing company makes a profit, since leasing payments in total are always greater than the redemption value under the contract.

Difference from conventional financial leasing

From operational and financial leasing, returnable leasing differs in the status of the parties to the transaction. In this case, the seller is also the lessee.

The leasing company buys the property and leases it to the same client. Accordingly, two contracts are concluded at once - leasing and purchase and sale.

In addition, there are other differences:

• The contract period is quite long; moreover, the more expensive the property, the longer the lease term. The maximum permissible leaseback period is 3 years for vehicles and equipment, 5 years for buildings and structures.
• Such a lease agreement is concluded not for the purpose of obtaining certain property for the company, but for the purpose of attracting additional financing. Moreover, the client can spend the money received in an inappropriate way for any needs of the enterprise.
• Not needed when concluding a deal balance sheet and other financial documents.

Leaseback is quite often used to reduce tax contributions, the agreement itself implies this. Theoretically, this is possible, but tax authorities carefully check such transactions, especially if the participants are related companies.

Thus, lessees may be denied reimbursement of value added tax and deductions if it is proven during inspections that the transaction was initially concluded only for the sake of tax savings. Therefore, even at the stage of contract preparation, it is often necessary business case leaseback. Tax risks in leasebacks they are usually compensated at fairly high rates.

Property requirement

By general rule The subject of a leaseback transaction may be certain property:

• real estate - residential and non-residential: structures, workshops, buildings, buildings, apartments and entire enterprises;
• cars - trucks, cars;
• technique;
• equipment.

When transferring ownership of property from a client to a leasing company, the latter must take into account the degree of its depreciation and liquidity. In all cases, the secondary market must be active in the region where the transaction is concluded. Rare and expensive equipment or a car is quite risky for a leasing company, since if the client refuses to buy it, it will be quite difficult to sell it.

In addition, the technical feasibility of dismantling, transportation, and reinstallation without loss in price is taken into account. If we are talking about real estate, it is taken into account market value, location, infrastructure and other nuances. The ownership of the subject of the transaction must be verified.

In any case, leaseback has an advantage over a bank loan and is often used to refinance capital investments and when the client’s financial condition is poor. An enterprise can use the financing received from a leasing company to repay debts to creditors; in addition, these funds can be used to modernize production and increase competitiveness.

In this case, the leasing company is at much greater risk, which is why this type of lease is not the most preferable for an intermediary. The first difficulties arise in the process of assessing property, which is most often used, financial condition The recipient is also carefully checked. Unscrupulous clients often try to get rid of fixed assets that are not profitable using leaseback.