Leasing — Financial vs operating, tax treatment
Leasing is financing the acquisition of assets (vehicles, equipment, property) where the user pays monthly installments for use, and upon expiry can purchase the asset or return it.
Definition
Leasing is financing the acquisition of assets (vehicles, equipment, property) where the user pays monthly installments for use, and upon expiry can purchase the asset or return it.
Details
Financial lease: asset is on the user's balance sheet, depreciated, interest is expense. Operating lease: asset is on the lessor's balance sheet, the full installment is expense. VAT: financial — VAT on total value at inception; operating — VAT on each installment.
Example
Van lease: value 600K MKD, financial lease for 4 years. Monthly installment 14K MKD (interest ~2K + principal ~12K). Depreciation: 600K / 5 yrs = 120K MKD/year.