LEASING

Interest rate

• Fixed or variable interest

Requirements

• Contracting of an insurance policy for the asset financed.
• Inscription of the property financed into the registry, independently of whether the property is equipment or real property.

Payments

The lease payments are prepayable, on a monthly, quarterly, semi-annual or annual basis, with the ability to select between the following modalities:

• Constant.
• Increasing amounts.
• Straight line amortisation.
• Irregular amortisation by payments to account.

VAT

Regardless of the VAT to which the property is subject, the leasing or rental fees are taxable with respect to VAT.

In accordance with these conditions, the leasing contract is classified as:

• Provisioning of services. The lessee does not agree to exercise the purchase option, incurring the tax at the time that each payment period expires. The tax rate applied for the provisioning of services is 21%, except in the case of transactions carried out in the Canary Islands that will be subject to the IGIC (7%).
  
  
• Delivery of property. The lessee agrees to exercise the purchase option. In this case, the tax would be incurred when the goods are made available to the lessee despite the fact that the transfer of ownership does not occur at that time.
  
  

The tax rate will be 21% except in the case of properties suitable for use as a dwelling even if it was not used as such. In the latter case, the reduced rate of 10% would apply. In the case of the Canary Islands, the IGIC (3%, 7%, 9.5% or 13.5%) would be applied depending on the asset being leased.

Tax advantages are subject to future modifications applied by the tax regulator.

What is the difference between leasing and a renting?

While leasing provides the possibility of exercising a purchase option at the end of the contract, renting does not offer that possibility, it is simply a rental arrangement. Renting is not subject to minimum terms, it is not included in CIRBE and it has other additional services.

Is satisfying any requirements necessary for contracting a lease?

Yes. It is mandatory that a legal entity, entrepreneur or professional and that the asset to be financed is intended for business or commercial uses.

Is it possible to freely select the provider of the equipment?

Yes, at Bankinter you will not encounter any obstacle to selecting the provider.

Can there be more than one supplier per transaction?

Yes. The fact that there is more than one supplier does not affect the leasing transaction.

What is the minimum and maximum term for which I can contract a lease?

The minimum legal term is 2 years for capital goods and 10 years for real estate. As for the maximum term, there is no mandatory period, but normally it is not more than 7 years for capital goods and 15 years for real estate.

Is it possible to make an early payment?

Yes, it is possible, although this option is not recommended. Early payment involves the payment of a cancellation fee and could have tax repercussions if the minimum legal term has not been satisfied.

Is it possible to pay amounts early, in addition to those paid in instalments?

No. Due to its leasing nature, the leasing contract does not provide for partial amortisation, although early payment in full is possible.

Is the VAT, or IGIC in the Canary Islands financed also?

The client pays instalment payments throughout the life of the transaction, although the calculation of the instalments is made for the amount of the sale without VAT or IGIC, with Bankinter paying the provider the total amount of the good, with VAT or IGIC included.

What are the tax advantages of real estate leasing?

Properties have a minimum amortisation period which is dependant upon on their characteristics, which is 33 years, in the case of commercial and industrial premises, and 50 years for offices and homes. As amortisations increase, tax costs accelerate, which means a deferral in the payment of taxes.

What are the advantages of a professional financing an office by leasing?

Leasing accelerates the amortisation of the asset being financed and, therefore, increases the amount of the tax expense by reducing the taxable basis corresponding to the tax. In the case of professionals, the marginal tax rate varies with income level and can be much higher than the corporate tax rate. This means that tax savings varies in accordance with the marginal rate for each professional; the higher it is, the greater the tax savings and therefore the tax advantage of the leasing transaction is more significant.

Why is leasing more advantageous than a mortgage for financing the purchase of a property?

First of all, for reasons related to liquidity: Bankinter allows up to 100% of the purchase price of the property without mortgage limitations, in addition to the cost of financing the VAT.

And, finally, because the amortization of the property is accelerated by the leasing transaction. The combination of nominal interest rates which are similar to those for other types of financing and accelerated amortisation means that the effective financial cost of leasing is less than that of other financing alternatives.

Is it possible to finance 100% of the purchase price of a property by leasing?

Yes. Traditional real estate financing (mortgage) has a limitation on the amount financed in relation to the appraised value of the property. In the case of industrial properties, percentages of 50% to 60% are common. Leasing, on the other hand, does not have any limitation and allows financing up to 100% of the cost of the property, provided, logically, that the characteristics of the asset and the transaction applicant's generation of funds justify it.

Can I finance a property by leasing and rent it later?

Yes, with specific previous authorisation from Bankinter. It is very common to finance a property through a leasing transaction in order to utilise it later by subletting it to a third party. With the rental revenue provided by the sublease, it is possible to cover a portion of the lease.