Tax preferences

Considering accounting and taxes, operative leasing brings several advantages to the table for the client. These advantages consider that the client does not own the vehicle and it is not presumed, that he/she will own the vehicle in the future (even though this is an option).

Throughout the agreement (vehicle operation)

Operative leasing payments are accounted just like any other service directly into the costs (real amounts) for the period, during which the vehicle is actually used (12 – 84 months).

If the client decides to purchase a vehicle in the form of a “direct buy”, he/she will have to include the vehicle within the property (balance) and depreciate the vehicle for a minimum of 4 years, in accordance with the Income tax Act no. 586/1992 Coll. Including the vehicle within the balance also has a declining impact on the financial indexes such as profit / assets.

Financial leasing requires the waiving the first increased installment with costs for further periods. Additionally, financial leasing must be included in the balance, if the company reports according to IFRS international accounting standards, which again has a declining impact on the indexes. This is why operative leasing is favored by foreign companies. It is simpler considering accounting and reporting. Once financial leasing is concluded, the vehicle must be transferred into the possession of the lessee.

Contract conclusion

Revenue is subjected to taxation in case a used vehicle, which the company possessed (even after the conclusion of financial leasing), is being sold.

On the other hand, the company is not required to pay tax for operative leasing because the vehicle is being sold by the leasing firm and not the company. Additionally, the leasing firm has processed the method of selling used vehicles and therefore realizes a higher purchase price, than the client would be capable of reaching himself. Hopefully, we do not need to remind you, that for leasing installments, the client only pays the purchase price minus the remaining value, i.e. the higher the remaining value, the lower the installments.