Under Financial Leasing, Factoring And Financing Company Law Numbered 6361 (hereinafter referred as “Law”), Financial Leasing is stated as a leasing transaction enabling one of the following aspects on condition to be based on a financial leasing contract; transferring the possession of an asset by the lessor authorized pursuant to the Law or related legislation to the lessee at the end of the lease giving the lessee the right to purchase the asset at a sum less than its current market value at the end of the lease period.
- What can you rent with financial leasing and what are the advantages of benefiting from financial leasing method for energy projects?
In accrodance with Article 19 of the Law; movables and immovables may be subject to a financial leasing contract in Turkey. Any goods which indivudally constitutes an asset may be leased under financial leasing contract.
Thus, financial leasing is an advantageous method to be used while meeting the investment of energy facilities and its equipment. It enables a building owner to use a renewable energy installation without having to buy it. The installation is owned or invested in by another party, usually a financial institution. The building owner pays a periodic lease payment to that party that is determined under financial leasing contract.
Using financial leasing method will also bring some advantages listed below while imlementing the Energy Poject:
- Without touching your equity, the project can be financed.
- Periodic payment plans are created according to the cash flow of the project.
- There is an option to purchase the leased asset at a representative price at the end of the leasing period.
- The project’s financial electricity needs will be met and it also contributes to the annual greenhouse gas emission reduction.
- It plays an important role in increasing productivity and profitability by using the working capitals to meet other needs of the firms by providing them to be used by renting instead of purchasing the investment goods.
- The financial leasing contract has some tax advantages. As per Decision of the Council of Ministers dated 30.12.2007 and numbered 2007/13033, %1 VAT is appliacable for some equipments or complementary parts of the project. Also the investors who hold “Investment Incentive Certificate” will be subject to customs tax exemption and VAT exemption support while leasing of machineries and equipments that are covered by the financial leasing contract.
- The financial leasing contracs and the papers related to its acqusition, amentdement or security deposit are exempt from stamp tax or charges.
- Risk management with fixed rent against fluctuations in currency values and interest rates.
- What are the phases of financial leasing process?
1-The lessee selects the property or asset and makes a preliminary agreement with the seller including the price and delivery terms.
2-Prior sale of the property or asset, the lessor presents the payment plans to be applied to the lessee for the investment to be made.
3-Upon agreement on payment plan between the lessee and lessor, the parties executes a financial leasing contract in a written form. Every natural and legal person authorized to conduct legal proceedings may be a lessee and participation and development banks as well as financial leasing companies may be a lessor under a financial leasing contract. Real estate and movable goods under financial lease contract shall be annoted or registered to the land registery, to the special registries for movable goods, if any, be and notified to the Association of Financial Leasing, Factoring and Financing Companies (“the Association”). Movable goods not registered to a special registery shall be registered to the special registery to be kept by the Association. The registery to be kept by the Association is accessible by public and the persons who are not party of a financial leasing contract may not allege that a lease annoniation was unbeknownst by to them.
4- Upon execution of financial leasing contract, the lessor buys the property from the seller and the invoice is issued to the lessor. In imports, the importer is the lessor. It fulfills the necessary financing conditions for the import of the good and imports the good. By delivering the goods to the lessee, the lessee obtains the property. The purchased property must be insured. The insurer party is specified as per mutual covenant of the parties under the financial lease contract. But in any case, insurer premiums shall be paid by lessee.
5-In accordance with the terms of the financial leasing contract, rental fees are collected from the lessee.
6-In case the lessee and lessor agreed purchasing of the property and/or asset under financial lease contract, at the end of the contract period, the goods are transferred to the lessee at a representative price.
- Is ıt possible to operate financial leasing from a company incorporated abroad?
In accordance with Article 51 of Law, the financial leasing companies which are incorporated abroad can make financial leasing to the investors who are located in Turkey on the condition that cross-border financial leasing contract is registered at the special registry of Union of Financial Leasing, Factoring and Financing Companies (hereinafter referred as to ‘Union’ or ‘FKB’).
- Is it possible to sell and lease back the equipment or asset which I own?
The sell and lease back method is not regulated under prior regulation, namely Financial Leasing Law No.3226. However under Article 51 of Law; sale and lease back is regulated as a financial leasing method which enables businesses to sell an asset, property rights of which is owned by said business, to a financing company and continue to use such asset by leasing it back from the same financing company by means of a financial leasing contract. The sell lease back method has exemptions with respect to corporation income tax, VAT, stamp tax and title deed fees.
According to statistics, % 30 of electricy production is aimed to be obtained from renewable energy sources in 2023 and 3 GW installed power is aimed to be reached in solar energy. Considering the need of natural resources and global change in the world, benefiting from financial leasing’s method opportunities will bring advantages for investors that designing projects.
As the financial leasing has its own legislation, seeking legal advice is recommended in order to procure the lessee’s rights under lease contract. Please be noted that the content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
1-Türkiye Ekonomisinde Yenilenebilir Enerji Projelerinin Gerçekleştirilmesinde Sorunlar ve Çözüm Önerileri-Günüşen Yılmaz-A Yılmaz