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Leasing in Ukraine, Rent in Ukraine Leasing in Ukraine, Rent in Ukraine

Leasing (rent) is an enterprise activity which is directed on investment of own or involved financial assets and consists in granting by lesser in exclusive use for certain term to lessee of owned property under condition of payment of periodic leasing (rent) payments. Leasing is a long-term rent of property which as a rule exceeds 1 year.

Object of leasing (rent) can be any immovable and a personal estate which can be carried to a fixed capital according to the legislation, including production made by the state enterprises (cars, equipment, vehicles, computing and other equipment, telecommunication systems, etc.), not forbidden to a free circulation in the market and concerning which there are no restrictions on its transfer to leasing (rent).

Subjects of leasing (rent) can be:
lessor - the subject of enterprise activity, including bank or non-bank financial institution which transfers in use objects of leasing (rent) under the contract of leasing (rent);
lessee - the subject of enterprise activity which receives in use objects of leasing (rent) under the contract of leasing (rent);
The seller of leasing (rent) property (further - the seller) - the subject of enterprise activity who produces property (cars, equipment, etc.) and-or sells own property which is object of leasing (rent).

The contract of leasing (rent) is entered into in the form of the multilateral agreement with participation of lessor, lessee, the seller or a bilateral agreement between lessor and lessee. The contract of leasing (rent) should be concluded in writing and meet the requirements of the legislation of Ukraine.

Types of leasing (rent) contracts are the following:
1. Financial leasing (rent) is contract of leasing (rent) as a result of which lessee receives in paid use from lessor object of leasing (rent) for term which 60 percent of a project cost of the leasing (rent) defined in day of the conclusion of the contract will be depreciated.
The sum of compensation of a project cost of leasing (rent) as a part of leasing (rent) payments for the period of action of the contract of financial leasing (rent) should include not less than 60 percent of a project cost of the leasing (rent) defined in day of the conclusion of the contract.
2. Operative leasing (rent) is contract of leasing (rent) as a result of which lessee under receives in paid use from lessor object of leasing (rent) for term for which 90 percent of a project cost of the leasing (rent) defined in day of the conclusion of the contract will be depreciated.

After the termination of contract of operative leasing (rent) it can be continued or the object of leasing (rent) is subject to returning to lessor and can be repeatedly be transferred in use to another lessee under the contract of leasing (rent).

Forms of the leasing (rent) contracts are the following:
1. Return leasing (rent) is the contract of leasing (rent), which provides acquisition by lessor of property at the proprietor and transfer of this property to it (to this proprietor) in leasing (rent): operative or financial;
2. Share leasing (rent) is a realization of leasing (rent) with participation of subjects of leasing (rent) on the basis of the conclusion of the multilateral contract and attraction of one or several creditors which take part in realization of leasing (rent), investing. Thus the sum invested by creditors of means cannot make more than 80 percent of cost of the property got for leasing (rent);
3. The international leasing (rent) is contract of leasing (rent) which is carried out by subjects of the leasing (rent), different states being under jurisdiction or in a case if the property or payments cross frontiers.

Taxation of leasing (rent) operations
According to article 20 of the Law of Ukraine "On financial leasing" from 16.12.97 N 723/97- the customs duties, the value-added tax and the duty at realization of operations of the international leasing (rent) are paid according to the legislation of Ukraine.

Laws of Ukraine concerning the taxation establish the following order of the taxation of the goods which are imported (are sent) on customs territory of Ukraine:
It agree articles 4 of the Law of Ukraine from 05.02.92 N 2097-XII "On Uniform custom tariff" the goods and other subjects which are imported on customs territory of Ukraine, are subject to taxation by the customs duties (only for objects of rent (leasing), which are made out according to a customs regime of import (release in the free circulation), and excisable goods - irrespective of customs cost and the import purpose on customs territory of Ukraine;
article 1 of the Decree of the Cabinet of Ukraine "On excise duty" from 26.12.92 N 18-92 duty is an indirect tax on consumers of the separate goods defined by the law as excisable, which is raised by importation (import, transfer) these goods (production) on customs territory of Ukraine (it is raised at customs registration of objects of rent (leasing) which are made out according to a customs regime of import and temporary import.
According to law of Ukraine from April, 3rd, 1997 N 168/97- "On VAT" object of the taxation of the VAT are operations on import (transfer) of the goods on customs territory of Ukraine and to reception of works (services) which are given by non-residents for their use or consumption in customs territory of Ukraine, including operation on import property (transfer) under contracts of rent (leasing), pledge and mortgage.

Thus, object of the taxation of the VAT under the rate of 20 percent is the property which is imported (is sent) on customs territory of Ukraine under contracts of rent (leasing), pledge and mortgage and is made out in the customs relation for the purpose of temporary import under the obligation of return export throughout 1st year (the cargo customs declaration of type "I31"), and also made out in free circulation in territory of Ukraine (the cargo customs declaration of type "I40").

Thus, the sum of the VAT, paid during customs registration of such goods, including by registration of the tax bill, according to pthe law of Ukraine from 03.04.97 N 168/97- "On VAT" it is compensated at the expense of corresponding sources and in structure of the tax credit. Operations on payment of rent (leasing) payments under treaty provisions of financial rent (leasing) are not object of VAT. In case of cancellation of the contract of financial leasing (rent) the property given in rent, comes back to lesser and remains at its possession.

Import of objects of leasing (rent) on the territory of Ukraine
For crossing of customs border by the goods which cross customs border of Ukraine as objects of leasing (rent) lessee in which address these goods arrive should according to Position about a procedure of the control over delivery of cargoes in customs of the appointment, issue in customs in a place of the state registration one of documents under the control over delivery of cargoes in appointment customs, namely:
1. The preliminary notification; or
2. Preliminary declaration.

Customs clearance of objects of financial or operative leasing (rent) during their import on customs territory of Ukraine is carried out according to a customs regime of import (release for free circulation) with payment of taxes (obligatory payments), namely:
Customs charges;
Customs duties;
Excise;
VAT.

After release for a free circulation in customs territory of Ukraine objects of leasing (rent) are not under customs control. Renewal of cargo customs declarations for any reasons is not carried out.

Customs clearance of objects of the international leasing which come back to Ukrainian lessees from abroad Ukraine, is carried out on the basis of the cargo customs declaration according to a customs regime of release for the free circulation (import) with collection of the above-stated (obligatory payments), custom charges, as import of the Ukrainian goods, without application of measures of non-tariff regulation under condition of representation to customs body during registration returning of object of leasing of a copy of the cargo customs declaration to its export.

Customs clearance of objects of the international leasing (rent) which are taken out of customs territory of Ukraine under corresponding contracts is carried out on the basis of the cargo customs declaration according to a customs regime of export. The goods which are delivered as leasing payments under contracts of barter and compensatory forms of leasing, are subject to customs clearance when due hereunder according to a customs regime of export.

Should you need any help on import or export of any product from/into Ukraine or conducting any leasing transactions, feel free to contact us through our web site www.kpl.net.ua Our professional managers are always ready to assist you. Because we perfectly know Ukrainian market, we can save you a great deal of time and money, help you to make right decision and prevent fraud.

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The Law of Ukraine On Financial Leasing

This Act determines the general legal and economic principles of financial leasing.

Article 1. Definition of financial leasing
1. Financial leasing (hereinafter - leasing) shall mean a type of civil and legal relations arising from a financial leasing contract.
2. Under a financial leasing contract (hereinafter - leasing contract) the lessor shall be obliged to acquire an object into ownership from a seller (supplier) pursuant to specifications and conditions established by the lessee, and transfer it into use to the lessee for a specified term of not less than one year for an established fee (lease payments).

Article 2. Financial leasing legislation
1. Relations arising in relation to a financial leasing contract shall governed by provisions of the Civil Code of Ukraine on leasing, rent, purchase and sale, supply taking into account specifics established by this Act.
2. Relations arising with regard to acquisition of the economic administration right to the object of a leasing contract shall be governed by the rules established to regulate relations arising from the ownership right to the object of a leasing contract, except for the right to dispose of the leasing object.

Article 3. Leasing object
1. An object of a lease contract (hereinafter - leasing object) may be an inconsumable thing defined by individual features and classified by valid legislation as fixed assets.
2. Land plots and other natural objects, integral property complexes of enterprises and their separated entities (subdivisions, affiliates, shops, branches) may not be leasing objects.
3. State or municipal property not prohibited for transfer into use and/or possession may be transferred for leasing in the order established by this Act.

Article 4. Leasing subjects
The following entities may be leasing subjects:
a lessor - a legal entity that transfers to the lessee the right to possess and use the leasing object;
a lessee - a legal entity or an individual that accepts from the lessor the right to possess and use the leasing object;
a seller (supplier) - a legal entity or an individual from whom a lessor acquires a thing that in future shall be transferred to a lessee as a leasing object; other legal entities or individuals which are parties to a multilateral leasing agreement.

Article 5. Subleasing
1. Subleasing shall be a type of sublease of the leasing object, according to which the lessee transfers the leasing object to third persons (the lessees under a sublease contract) for an agreed term and into use pursuant to the sublease contract, after this leasing object was received earlier from the lessor under a leasing contract.
When the object is subleased, the legal claim with regard to the seller (supplier) shall be transferred to the lessee under a sublease contract.
2. Written consent of the lessor under a leasing contract that agrees to the subleasing of the object shall be a mandatory requirement for a sublease contract.
3. Provisions of the lease contract shall be applicable to the sublease contract, unless otherwise established by a leasing contract.

Article 6. Leasing contract
1. A leasing contract shall be concluded in writing.
2. The following shall be essential clauses of a leasing contract:
leasing object; term of entitlement of the right to the lessee to possess and use the leasing object (lease term);
amount of leasing payments;
other provisions to be agreed upon an application by at least one party.
3. The leasing term shall be established by the parties to the leasing contract pursuant to the requirements of this Act.

Article 7. Refusal of leasing contract
1. The lessee shall be entitled to unilaterally refuse a leasing contract by written notification thereof to the lessor in the event of a delay of over 30 days in the transfer of the leasing object, unless another term is stipulated by the leasing contract.
The lessee shall be entitled to claim reimbursement for losses, including return of payments paid to the lessor prior to such refusal.
2. The lessor shall be entitled to refuse a leasing contract and to claim return of the leasing object from the lessee in the order of the indisputable procedure on the grounds of a notary's executive writ, provided that the lessee did not effect one of the leasing payments in part or in full and the delinquency is over 30 days.
Collection under the notary's executive writ shall be effected in the order stipulated by the On Judicial Enforcement Act of Ukraine.
3. The leasing contract shall be regarded as refused from the moment that the other party learned or could learn about such refusal.

Article 8. Right of ownership to the leasing object.
Procedure of settlements in case the ownership right is transferred to the lessee 1. In the event of transfer of the right of ownership to the leasing object from the lessor to the other person, the lessor's respective rights and obligations under the leasing contract shall be transferred to the new owner of the leasing object.
2. In the event that the parties to the lease contract concluded a purchase and sale agreement for the leasing object, the right to ownership of the leasing object shall be transferred to the lessee provided and from the moment he paid the price established by the contract, unless otherwise envisaged by the contract.
3. The leasing object may not be confiscated or seized due to any actions or inaction on the part of the lessee.

Article 9. Protection of the lessee's right to the leasing object
1. The lessee (sublessee) shall be ensured protection of his rights to the leasing object equal to protection of ownership rights established by legislation.
2. The lessee (sub-lessee) shall be entitled to claim, including from the lessor, removal of any violations of his rights to the leasing object.

Article 10. Rights and obligations of the lessor
1. The lessor shall have the right to:
1) invest his own funds as well as attracted finances and loan funds into acquiring the leasing object;
2) inspect observation by the lessee of the conditions for the use and maintenance of the leasing object;
3) refuse the lease contract in cases stipulated by the leasing contract or the law;
4) demand termination of the contract and return of the leasing object in cases stipulated by the leasing contract and legislation;
5) collect outstanding debt from the lessee in the order of the indisputable procedure based on the notary's executive writ;
6) claim reimbursement from the lessee for losses pursuant to legislation and the contract;
7) demand the return of the leasing object and fulfillment of monetary obligations under a sublease contract directly to the lessor in the event of non-fulfillment or delay of fulfillment of the lessee's monetary obligations under a leasing contract.
2. The lessor shall be obliged to:
1) within the term stipulated by the contract to transfer to the lessee the leasing object in the condition corresponding to its designation and contractual provisions;
2) notify the lessee about specific features and defects of the leasing object known to him that may pose a hazard to life, health and property of the lessee or other persons, or may result in damage of the leasing object itself during its use;
3) pursuant to the contract provisions, fulfill the obligation maintenance of the leasing object in time and in its entirety;
4) reimburse the lessee for expenses to improve the leasing object, to maintain it or to eliminate defects in the order and in cases envisaged by the Act and/or the contract;
5) accept the leasing object in the event of the contract's early termination or in the event of expiry of the term of use of the leasing object.
3. The lessor may also have other rights and obligations pursuant to the provisions of the leasing contract, this Act, and other regulations.

Article 11. Rights and obligations of the lessee
1. The lessee shall have the right to:
1) choose the leasing object and the seller or determine specification of the leasing object and assign selection to the lessor;
2) refuse acceptance of the leasing object that does not correspond its designation and/or the contract's provisions/specifications;
3) demand termination or refusal of the leasing contract in stipulated by the Act and the leasing contract;
4) claim reimbursement from the lessor for losses inflicted by non-fulfillment or undue fulfillment of the provisions set out in the leasing contract.
2. The lessee shall be obliged to:
1) accept and use the leasing object pursuant to its designation and contractual provisions;
2) pursuant to the contract provisions fulfill the obligation on the maintenance of the leasing object in time and in its entirety, maintain it in working order;
3) make leasing payments in a timely manner;
4) ensure access for the lessor to the leasing object and the possibility to verify the conditions of its use and maintenance;
5) inform the lessor in writing and the seller of the object during the warranty period about all cases of trouble-shooting, breakdowns or errors in operation regarding the leasing object;
6) inform in writing about violation of terms or delay in carrying out current or seasonal technical maintenance and any other circumstances that may adversely affect the condition of the leasing object - immediately, but in any case not later than on the second business day following the day of the above events or facts, unless otherwise established by the contract;
7) in the event of expiry of the leasing term and early termination of the leasing contract and in other cases of pre-schedule return of the leasing object - return the leasing object in the condition it was accepted for holding, taking into consideration its normal depreciation or in the condition stipulated by the contract.
3. Conditions for repair and technical maintenance of the leasing object may be established by a separate contract.
4. The lessee may also have other rights and obligations in accordance with the provisions of the leasing, this Act and regulations.

Article 12. Registration of the leasing object
The leasing object shall be subject to registration in cases and in the order envisaged by this Act.

Article 13. Risk of accidental destruction or damage of the leasing object and its insurance the required expenses to be reimbursed or for their value to be offset against leasing payments.
1. The risk of accidental destruction or damage of the leasing object shall rest with the lessee from the time the leasing object is transferred to the lessee's possession, unless otherwise stipulated by the contract.
2. The leasing object and/or the risks connected with fulfillment of the leasing contract shall be subject to insurance provided it is mandatory in accordance with the law or the contract. Insurance expenses under a lease contract shall be borne by the lessee, unless otherwise established by the contract.

Article 14. Maintenance of the leasing object
1. The lessee shall keep the leasing object in working condition during the entire period of leasing.
2. During the leasing period the lessee shall bear expenses for maintaining the leasing object connected with its operation, technical maintenance and repair, unless otherwise stipulated by the contract or the Act.

Article 15. Legal consequences of the leasing object's improvement by the lessee
1. The lessee shall be entitled to improve the object of the leasing contract upon the lessor's consent only.
2. In the event that the leasing object is improved without the lessor's permission, the lessee shall be entitled to withdraw the improvements made by him, provided such improvements may be separated from the leasing object without damage being suffered by it.
3. In the event that improvements to the object were made with the lessor's consent, the lessee shall have the right for the value.

Article 16. Leasing payments
1. Leasing payments shall be made in the order established by the contract.
2. A leasing payment can include:
a) an amount that compensates a part of the value of the leasing object;
b) payment as a fee to the lessor for the property obtained on lease;
c) reimbursement for interest on a loan;
d) other lessor's expenses that are connected directly with fulfillment of the leasing contract.

Article 17. Dispute resolution
1. Disputes arising during conclusion and execution of leasing contracts shall be resolved pursuant to legislation.
2. Disputes arising from international leasing contracts shall be resolved taking into account provisions for consideration of disputes and their resolution established by such contracts.

Article 18. Depreciation charges
1. Leasing depreciation charges shall be calculated pursuant to the Act.
2. Pursuant to legislation, a leasing contract may envisage accelerated depreciation of the leasing object.

Article 19. Final provisions
1. This Act shall come into effect from the day of its publication.
2. The acts and other regulations, approved before this Act comes into effect, shall be valid in so far as they do not contradict this Act.
3. The Cabinet of Ministers of Ukraine shall, within one month from the time this Act comes into effect:
prepare and submit to the Ukrainian Parliament proposals on changes to the legislation resulting from this Act;
bring their regulatory acts into compliance with this Act;
develop regulations envisaged by this Act;
ensure approval by ministries and other state executive bodies of Ukraine of the regulations stipulated by this Act and bring them into compliance with this Act.

   
 
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