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What are the benefits of Cross Border Lease?

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posted Jun 16 by Shamita

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Cross-border leasing is a leasing arrangement where lessor and lessee are situated in different countries because the lease transaction takes place between parties of two or more countries, it is called cross-border lease.
The basic prerequisites are relatively high tax rates in the lessor’s country, liberal depreciation rules and either very flexible or very formalistic rules governing tax ownership.

Cross-border leasing has been widely used in some European countries, to arbitrage the difference in the tax laws of different jurisdictions, usually between a European country and the United States. Typically, this rests on the fact that, for tax purposes, some jurisdictions assign ownership and the attendant depreciation allowances to the entity that has legal title to an asset, while others (like the U.S.) assign it to the entity that has the most indicia of tax ownership (legal title being only one of several factors taken into account). In these cases, with sufficiently long leases (often 99 years), an asset can end up with two effective owners, one in each jurisdiction; this is often referred to as a double-dip lease.

Benefits of Cross Border Lease are as follows :--

--The advantages of cross-border leasing include the tax benefits available in some countries.
--It can also serve as a mechanism for selling equipment manufactured in the lessor's country.
--There is significant risk, however: different judicial systems, the risk of double taxation, wrong estimation of credit risk, political risk, or currency risk, etc.
--A characteristic example of such transactions is shipping financing.
--Hypo Leasing Austria actually owns a separate affiliate that deals only in financing vessels, and its clients are individuals and companies from across the region.

answer Jun 17 by Mukul Chag
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