What is cross border leasing

					Cross border leasing is a special form of leasing a structured financing, that involves a lessor
and lessee based different countries. There are various contracts to be concluded within the
framework of an overall plan together and are only comprehensible as a whole.
The tax rules permit long-term rental of property and often the proprietor of an asset is not
subject to tax commitments and thus cannot claim depreciation. But, as of 2004 cross border
leasing has been rendered unprofitable by the enactment of the JOBS ACT of 2004

In some countries, the lessee can activate an object when the lease period is less than 40% or
more than 90% in tenure, while in other places this can be otherwise regulated, so that there
may also allow the lessor the same.

Both tenants and owner can therefore write off tax commitments in the construct of the leased
asset, and thus generate tax-deductible expense. Leasing methods have been employed as
regards financing aims for a number of years in the U.S, the exercise originated as a technique
of funding aircraft.

In the past prominent banks would purchase aircraft and lease them to the airline businesses,
the airlines did not require the depreciation deductions yielded by their aircraft and were keen
on bringing down their operating cost.

On the other hand, the bank was in a position to lay claim on depreciation deductions for the
aircraft, and also offer lease rates relatively lower than the interest payments which airlines paid
on an aircraft purchase loan. In America, this expansion into leasing assets around different
cities and governmental departments later developed into cross-border leasing.

In essence, cross border leasing is regarded as an investment which allows for depreciation. A
municipality can rent a given facility for short duration and is given the opportunity to redeem its
facility after the expiry of the lease term. It can therefore be seen as a special form of
sale-lease-back financing (for municipalities), which makes it possible to convert existing assets
into working capital without giving up the use of the facility.

And the payments to the municipalities allows them in the short to medium term to restructure
their budgets, in a favorable fashion.

The leasing industry evolved through collateralization measures of lease obligations in
sale-lease-back transactions. For instance, a city could sell an asset to a financial institution and
in turn the bank claims lease payments and grant the municipality an option to repurchase the
asset.

The city can be in a position to fund the lease obligations and also pay for the redemption of the
asset by fixing the majority but not all of the sale takings in an account. This translates to the
municipality having pre-funded its entire lease obligations together with its alternative to buy
back the asset from the financial institution for lower than the total obtained in the initial sale of
the asset.

				
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posted:1/23/2013
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