FINANCIAL LEASING
The most commonly used type of leasing is financial leasing, i.e. the investment activity when a lessor acquires from a seller the ownership of a leased item and transfers the same to a lessee, on a fee basis, for temporary possession and use on the terms and conditions set out in a lease agreement for a period of over one year.
A financial lease agreement must meet one or more of the following criteria:
1) the terms and conditions for transferring a leased item to the lessee's ownership and/or granting to the lessee the right to buy the leased item at a fixed price are determined by a lease agreement;
2) the term of leasing should exceed 75% of the service life of the leased item; or
3) the present (discounted) value of lease payments for the entire leasing term should exceed 90% of the value of the leased item to be transferred.
Types of financial leasing:
• leaseback – when a seller sells a leased item to a lessor, provided that the seller obtains such leased item under lease acting as the lessee;
• secondary lease – when, in the event of expiration or termination of a lease agreement, a leased item remaining in ownership of the lessor is leased out to another lessee;
• bank lease – the lessor is a bank;
• full lease – when technical maintenance of a leased item and its current repairs are performed by the lessor;
• sublease – when a lessee (sublessor) transfers the property (deemed as a leasing subject previously received from the lessor) to third parties (sublessees) under a lease agreement for temporary possession and use for a fee and for a term determined by a sublease agreement;
• net lease – when technical maintenance of a leased item and its current repairs are performed by the lessee; and
• Islamic lease – a type of lease provided by Islamic banks subject to a license issued by the Kazakhstan National Bank and by other non-banking legal entities incorporated in the form of a joint stock company.
A leasing license is required only for banks and other non-bank legal entities incorporated in the form of a joint stock company for the purpose of Islamic leasing.
Where provided by applicable Kazakhstan laws, a lease agreement creates an incentive for a lessee to seek tax preferences, e.g. reduction of taxable income or exemption from VAT on lease payments.