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Dear Friend, --Cross-border leasing is a leasing arrangement where lessor and lessee are situated in different countries. This presents significant additional issues related to tax avoidance and tax shelters. --A major objective of cross-border tax leases is to reduce the overall cost of financing through utilization by the lessor of tax depreciation allowances to reduce its taxable income. The tax savings are passed through to the lessee as a lower cost of finance. --Cross-border lease transactions are generally restricted to aircraft leasing, where this is the most popular means of financing, marine equipment and railroad. --The principal players are (i) one or more equity investors; (ii) A special purpose vehicle formed to acquire and own the equipment and act as the lessor; (iii) One or more lenders, and (iv) The lessee.
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Hii Roshni > Cross Border Leasing Cross Border Leasing In case of cross-border or international lease, the lessor and the lessee are situated in two different countries. Because the lease transaction takes place between parties of two or more countries, it is called cross-border lease. The basic prerequisites are relatively high tax rates in the lessor’s country, liberal depreciation rules and either very flexible or very formalistic rules governing tax ownership. Objective Of Cross Border Leasing : A major objective of cross-border leases is to reduce the overall cost of financing through utilization of tax depreciation allowances to reduce its taxable income. Other important objectives of cross border leasing include the following : (i) The lessor is often able to utilize nonrecourse debt to finance a substantial portion of the equipment cost. (ii) Also, depending on the structure, in some countries the lessor can utilize very favourable “leveraged lease” financial accounting treatment for the overall transaction. (iii) In some countries, it is easier for a lessor to repossess the leased equipment following a lessee default. (iv) Leasing provides the lessee with 100% financing. Principal Players Of Cross Border Lease- The principal players are (i) one or more equity investors; (ii) A special purpose vehicle formed to acquire and own the equipment and act as the lessor; (iii) One or more lenders, and (iv) The lessee. Thanks
Hie Roshni, **Definition of Cross Border Leasing :-** Cross-border leasing is a leasing transaction where the lessor and the lessee are based in different jurisdictions. The most complex cross-border leasing transactions may include an unlimited number of participating countries. The first cross-border leasing transactions were made by US companies in the 1950s, when various types of equipment were transported to other countries.