Detailed explanation of the four pillars of the financial leasing industry

Financial leasing has four pillars：law、supervision、Accounting、tax。If people engaged in the financial leasing industry want to innovate business models，It is necessary to pay close attention to the development and changes of the four pillars of financial leasing.，In order to maintain constant control over the ever-changing。one、The legal transaction system mainly includes contract law、property law、judicial interpretation。There are only parallel "lease (i.e. traditional lease) contracts" and "finance lease contracts" in the law.，There is no "operating lease contract"。

"Operating lease" business should be regulated by "financial lease contract"。"Operating lease" is the accounting treatment method，But due to the growing market

Require

，The "operating lease" accounting method that leaves residual value risk in the accounting system regulations has an impact on the leasing market practice.，A new financial leasing industry has emerged，That is, an "operating lease" that has all the legal characteristics of a simple financial lease。

Differences from simple financial leasing，The key is to agree on the residual value disposal relationship。

The main laws based on：

1. 1999Chapter 13 Lease Contract and Chapter 14 Financial Lease Contract of the "China Contract Law" that came into effect on October 1, 2018 and their judicial interpretations；
2. 2007The Property Law came into effect on October 1；
3. "Regulations of the Supreme People's Court on Several Issues Concerning the Trial of Financial Lease Contract Dispute Cases"；
4. 2004Special Law on Financial Leasing Drafted in 2016。

two、Supervision system Financial leasing companies are under the responsibility of the China Banking Regulatory Commission；Foreign-invested leasing companies are under the responsibility of the Foreign Investment Department of the Ministry of Commerce；Domestic financial leasing companies are under the responsibility of the Market System Construction Department of the Ministry of Commerce and the State Administration of Taxation.。

1. The China Banking Regulatory Commission strictly supervises financial leasing companies with banks or other financial institutions as main investors in accordance with the "Administrative Measures for Financial Leasing Companies"。
2. Financial leasing companies should comply with the following regulatory indicators：
3. Capital adequacy ratio: The net capital of a financial leasing company shall not be less than 8% of risk-weighted assets.；
4. Single customer financing concentration: The financing balance of a financial leasing company to a single lessee shall not exceed 30% of the net capital.。

When calculating customer financing balance，The security deposit provided by the lessee in good faith can be deducted；

1. A single customer relatedness: a financial leasing company's financing balance to a related party shall not exceed 30% of the financial leasing company's net capital；
2. Group customer relatedness: The financing balance of a financial leasing company to all related parties shall not exceed 50% of the financial leasing company's net capital.；
3. Inter-bank lending ratio: The balance of inter-bank lending funds of a financial leasing company shall not exceed 100% of the financial leasing company's net capital.。
4. The Department of Foreign Trade of the Ministry of Commerce conducts appropriate supervision on Sino-foreign joint venture leasing companies or wholly foreign-owned leasing companies in accordance with the "Measures for the Administration of Foreign Investment in the Leasing Industry"。
5. The Market System Construction Department of the Ministry of Commerce issued the "Notice on Issues Concerning Engaging in Financial Leasing Business" in accordance with Shang Jian Jian、"Notice on Strengthening the Supervision of Domestic Financing Leasing Pilot Projects" provides appropriate supervision for domestic financial leasing pilot enterprises。

The risk assets of domestic financial leasing pilot enterprises shall not exceed 10 times the total capital.。The current minimum registered capital is RMB 170 million。

three、Accounting system 1、Under the substantive financial accounting system, simple finance leases require the lessee to include the assets in the balance sheet.，capitalize，Withdraw depreciation，On-balance sheet financing；Lease assets treated as operating leases are generally included in the lessor's balance sheet.，Capitalization of assets by lessor，Withdraw depreciation，Realized "off-balance sheet financing" for lessees。

Current development trends in lease financial accounting around the world，increasingly inclined to，And it has become substantial to a large extent。201970s and 1980s，Rental market booming，Benefited in part from accounting concessions related to leases。

Under the substance-oriented accounting approach，In accounting terms, finance leases are regarded as similar to ordinary financing arrangements.，Is a purchase made using a loan；An operating lease is a transaction that has the characteristics of a true lease，Treated as a traditional lease for accounting purposes。

1. Simple financial leases and operating leases are treated the same way under the formal financial accounting system.，The lessor capitalizes the leased asset and takes depreciation，This raises the issue of lessee's "off-balance sheet financing"。

The accounting treatment of this method is the same as that of traditional leases.，All leases include finance leases and operating leases、Ordinary rentals, etc. can be handled this way，However, the rights and obligations arising from the lease are rarely recognized as assets and liabilities on the lessee's balance sheet.。Four、The tax system from our country’s perspective，There are eight types of taxes closely related to financial leasing，Including tariffs, there are nine types。

Among them, the main impact is turnover tax (value-added tax).、consumption tax、and business tax) and income tax。Income tax involves taxation of earnings of business entities。Normally，The two basic types on which companies pay income tax are "simple financial leases" (fully repayable) and "operating leases" (not fully repayable).、pay off)。on income tax，Tax incentives for lessees mainly include investment tax credits、Pre-tax expenses

cost

and accelerated depreciation、Withholding income tax。

About Hong Kong Xintong

Hong Kong Xintong focuses onGuangdong and Hong Kong license plates、Shenzhen Hazardous Chemicals Business License、Shenzhen labor dispatch licenseandShenzhen Charity Foundationapplication services，Assist customers to applyShenzhen travel agency business license、Shenzhen pawn shop business license、Shenzhen auction house license and other mainstream domestic financial licenses，Support enterprises to achieve compliance expansion of cross-border financial business。Also availableODI overseas investment registration、International travel agency registration and other services，Help enterprises expand their presence in international markets。Provide one-stop compliance solutions for enterprises。To learn more，Please contactHong Kong Information Communications Consultant。