Leasing
Legal regulations
From a regulatory point of view, the concept of financial rental was included in the seventh additional clause to Law 26/1988, dated 29th July, on Discipline and Intervention of Credit Entities, which was modified by Law 43/1995, regarding Business Tax.
Its current draft considers the following to be financial rental operations:
“Contracts with the exclusive aim of surrendering the use of equipment or buildings, acquired for this end according to the future user’s specifications, in exchange for a counter service which is consistent with paying periodic quotas, which must cover both the cost of recovering the equipment, and the contractually required financial charge.
The equipment involved should only be used by the user for agricultural, fish farming, industrial, commercial, craft-related, service or professional operations. This contract will necessarily include a purchasing option when it comes to term, in favour of the user." It is consequently an essential condition that the user applies the equipment to business or professional activity.
When, for any reason, the user does not acquire the equipment involved in the contract, the leasing party can lend it to another user, without the equipment acquisition principle being considered violated by this fact, according to specifications from the new user.
Intervening parties
Basically the following people participate in a leasing operation:
- Leasing entity, which could be a bank, building society, cooperative or credit entity specialised in these operations. They are known as the leasing party. Financial leasing companies will mainly run leasing operations, although they can also offer the following activities as extras:
- Activities to maintain and preserve the equipment leased out.
- Providing financing connected to a current or future financial leasing operation. Intermediation and management of financial rental operations.
- Assessment and commercial reports.
- Leaseholder, who is the person signing the leasing contract who will have the equipment in their possession whilst the contract is in force, with an option to buy it if they choose.
- Supplier, who acts as the vendor of the equipment to the leasing company. What usually happens is that the leaseholder selects the equipment and the supplier, although the leasing company actually buys it.
Types of leasing and duration:
- Equipment: : This finances the acquisition of machinery, facilities, furniture, data processing equipment, external transport (cars, light and heavy vehicles) and internal transport (fork lift trucks) for a minimum duration of 2 years. Although the law does not give a maximum duration, it is usually no longer than 5 years.
- Real Estate: Using this method, the leasing company acquires a building for the leaseholder intended for a commercial, industrial or service activity, surrendering its use for a minimum duration of 10 years. In the same way as for equipment leasing, the law does not set a maximum duration. One variant is known as lease back where the leasing company acquires the equipment and surrenders its use for a set period and price.
- Usually in Spain, financial leasing is used which is characterised by paying off the equipment during whilst the contract is in force and the purchasing option is usually the price of one quota.
- Potential customers:All legal persons - SA, SAL, SL, SLL, Civil Company, Cooperative, Irregular Company, etc. and physical persons who work for themselves, registered for economic activity tax.
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