Financial leasing is governed by the Act on Credit Institutions and Financial Enterprises. With this construction, the lessee may acquire ownership rights to the leased object by means of a closed-end or an open-end (with call option) financial leasing.
The essential elements of finance leasing are:
The leased object must be capitalised on the balance sheet of the lessee and a corresponding liability reported for the payment of future instalments. Furthermore, the lessee depreciates the assets in its accounts. The lessor retains title to the leased object. The lessee is the beneficial owner of the leased object, including all pertinent rights and obligations. At the end of the lease, either an unconditional hand-over (with or without residual value) or a handover option with a residual value can be agreed. To conduct financial leasing, the lessor must be a PLtd (public limited company) and needs authorisation from the PSZÁF (Hungarian state supervisory authority for banks and financial institutions).
- The leased object is owned by SG Eszközfinanszírozás Zrt.
- The leased object is used by the lessee (the rental fee consists of capital and interest; interests may be set off as costs)
- Payment of VAT:
- in a lump sum in case of a closed-end financial leasing (but may be reclaimed upon the capital invoice)
- in case of an open-end financial leasing, VAT will be paid monthly after capital instalment (such monthly VAT sum may be reclaimed)
- At the end of the term, with the payment of the last rental instalment, the lessee will automatically acquire ownership title to the leased object (only in case of having fulfilled all contractual obligations). In case of an open-end financial leasing, the calculated residual value shall match the estimated market value.
Advantages of this construction:
- will set up the leased object in his/her books as asset and depreciate same, thus gaining tax benefits (for investment)
- records the leased object in his/her balance as tangible asset which is then deemed to be an investment and results in tax benefits
- records the financing transaction as long-term debt which provides better transparency
- may set off the interests as costs
- pays VAT in a lump sum in advance but may reclaim such VAT amount in his/her next tax return
- has the leased object at his/her disposal at the end of the term and may sell or otherwise charge same.
- Similarly to credit transactions, this construction includes the lowest interest.