To own or not to own
Leasing can be an important instrument for financing your business or reducing your business’s balance sheet total. For tax purposes, a distinction is made between a financial lease and operating lease: in the case of a financial lease, the lessee is the owner, whereas in the case of an operating lease, the lessor is the owner. The owner of an asset for tax purposes must capitalize it, may depreciate it, and can claim investment-related tax incentives. A lease’s qualification for tax purposes depends on a number of factors, such as its term and residual-value risk. However, a single lease, for instance, may be classified differently for corporate income tax purposes than for VAT purposes.
How can KPMG Meijburg & Co assist you?
We would be pleased to inform you about concluding a financial or operating lease for one or more business assets, and assist you in determining which options will offer your business the most benefits. If you already plan to lease, we would of course be glad to tailor our advice regarding such issues as:
- utilizing leasing as a tax-planning instrument;
- utilizing leasing to benefit from investment-related tax incentives;
- cross-border leasing; and
- the VAT aspects of leasing.
How will you benefit?
- For cross-border leases, differences in the relevant countries’ interpretation of financial and operating leases may be utilized, resulting in tax savings in both the lessor’s and the lessee’s countries.
- Tax-exempt parties having insufficient profits for tax purposes may utilize leasing to benefit from investment-related tax incentives.
- For lessees with a limited or no right to deduct VAT, leasing can be an interesting option for easing the VAT burden.
- By leasing business assets instead of financing them using loans, you can avoid having your interest deduction restricted under thin-capitalization legislation.
- Losses can be kept available for set-off by combining leasing with the sale of a business asset (sale and lease-back).
Why choose KPMG Meijburg & Co?
Our lease specialists are experts in the field of leasing options, including those involving cross-border and other situations. This expertise extends to such areas as real estate, aircraft, power plants, and leasing aimed at utilizing energy and environmental investment incentives. Finally, our experts cooperate closely with the extensive international network of lease specialists maintained by our partner firm, KPMG.