Main principles and benefits of Financial Leasing

  • Targeted asset is purchased by the Leasing company and usufruct of the assets transferred to lessee for at least 3 years against rental payments. At the end of the contract term, ownership of the asset will be transferred to Lessee by a symbolic amount of money
  • Amortization of assets will be allocated by Lessee
  • Keep your available cash for other expenses and investment while KIC will finance your investment assets. The whole investment project (cost of assets+ VAT+ transportation+ custom+ instalments, etc.) can be financed by KIC if the client can met with curtain condition of KIC.
  • Customer is not required to allocate full amount of investment from the equity
  • To obtain long term finance from 3 years up to 5-7 years which requires special condition in banking and usually not available any time
  • Easily arrange your cash flow by utilizing leasing and having periodical curtain amount of repayment. In addition, if the curtain condition is being met by client Leasing Company may reconsider changing of repayment schedule to be in line with seasonal fluctuations, in the case of being changed of the market conditions, etc. 
  • Fix your condition for curtain period of time and be sure that condition will not change as long as you followed the deal / agreement
  • Professional assistance from well-organized services companies to provide all necessary services during the whole process under KIC expertise, such as; custom clearance, transportation, purchasing process, insurance, etc.
  • Off-Balance sheet arrangement during the lease term
  • To benefit the amortization and enable your company to re-evaluate leased assets any time
  • Article 78 of the Tax Code regulates tax accounting of financial leasing. According to the Tax Code, financial lease means transfer of assets under a leasing agreement for a period exceeding three years. For taxation purposes, the deal is recognized as the financial leasing if meets one of the following requirements:  
    • Transfer of assets’ ownership to the lessee and/or the granting of the right to the lessee to purchase the property at a fixed price specified in the lease agreement;
    • The period of a finance lease exceeds seventy-five percent of the useful life of the assets to be transferred under the finance lease;
    • Current (discounted) value of the lease payments over the life of the financial leasing exceeds ninety per cent of the value of the assets to be transferred under the finance lease.
  • Secondary leasing of leased property is also considered as financial leasing.
  • For taxation purposes transfer of properties on financial lease is considered as a sale of the property by a Lessor to a Lessee. The Lessee is considered as an owner of the leased item and the leasing payments are considered as payments on a loan to the Lessee.
  • The Lessee under the agreement and an act of acceptance of the property should reflect the property as assets and liabilities on finance lease in his balance sheet. Under the terms of the financial lease, the Lessee amortizes the value of leased assets. Depreciation expenses are deductible for taxation purposes.
  • The Lessee is the payer of tax on transport vehicles received under financial lease and of land tax in respect of a land plot received together with a real estate under financial lease.
  • If the Lessee is a VAT payer, the amount of VAT to be offset is the amount of tax payable as per the invoice issued by the Lessor. The taxable turnover should be calculated based on sum of all lease payments in accordance with the financial leasing agreement (except leaseback agreement).The amount of VAT to be offset should not be more than the amount of tax attributable to the size of the turnover of the Lessor, determined at the date of the turnover. The Lessor’s specifies in the invoice the amount of taxable turnover based on the total amount of all leasing payments in accordance with the financial lease agreement but not including the amounts of interest on the financial lease and value added tax.
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