Returnable leasing, unlike classical financial lease, involves not three parties (seller, lessor and lessee), but two parties in the transaction. This is a type of leasing in which the seller of its subject and the lessee are one person. This is an effective tool for replenishing working capital or refinancing capital investments.
It is more profitable than applying for a loan from a bank or acquiring new assets with your own funds.
What is the mechanism of such operations? How does leaseback work? The enterprise sells its own property to a leasing company and immediately becomes a lessee (rents 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 working capital without attracting additionalfunding sources.
Two contracts are signed at the same time (purchase and sale and leasing). Such a transaction resembles the issuance of a secured loan, only the costs of 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 attributed to the cost of production.
Tax savings are also possible through the use of accelerated depreciation, which is allowed in this case. At the end of the contract, the property at a residual value (equal to almost zero) is transferred to the balance sheet of this enterprise. Therefore, using reverse leasing, you can reduce the tax on such property to a symbolic amount.
The property of the organization (enterprise) in this case does not actually change location and can still be used in the production process.
However, there are certain nuances to concluding such deals. Therefore, in order to assess risks, a potential lessee must calculate the tax consequences before concluding an agreement so that the transaction 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 balance sheet of the recipient at a reduced price, since taxes will be calculated at actual prices.
The tax authorities monitor leaseback transactions quite strictly (suspecting the possibility of fraud with payments), paying close attentionattention to those enterprises that have problems with documentation and tax accounting. Leaseback is used to improve the balance sheet by selling property not at residual, but at market value, which usually significantly exceeds it. But the law on leasing does not prohibit the lessor from buying property from its owner. Therefore, the leaseback agreement fully complies with the requirements of the law.
However, it is not recommended to enter into such transactions for too 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 look for more suitable financing options.
