Leasing is subject to: Value Added Tax (VAT) Withholding Tax and Capital Gain Tax, CITA. Finance Lease VAT is not applicable, that is you don’t have to charge VAT on your finance leases The interest portion of the rental is taxable income Capital portion is a repayment and no tax implication Withholding tax is on the interest portion of rental Lessee has a duty to withhold tax at 10% of interest portion Operating Lease : The total lease rental…
Leasing, is gaining more recognition and acceptance worldwide, both as a profitable business to the lessor and effective financing alternative to the lessee. The popularity of leasing is attributable to the various advantages it offers to the principal parties to a leasing transaction. Leasing is less burdensome on liquidity. This is perhaps the most important reason for using leasing, particularly in a developing country like Nigeria where the means of acquiring productive asset through outright purchase is almost impossible…
Succeeding in the leasing world require lessors to guide against certain pitfalls while documenting their transactions. Some of these pitfalls include: i. Equity Contributions — The word equity connotes ownership. Therefore asking for equity contribution in a lease transaction no matter the percentage gives the lessee a proprietary interest in the leased asset and in the event of default, the lessor will not be able to repossess since the asset is deemed to belong to both parties. The same…