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Operating lease in Hungary is governed by the country’s civil code, its law on value-added tax and the law on corporate tax, as well as the decisions of the Hungarian tax authorities.

As of accounting rules, this construction is mostly similar to rental transactions.

• The leased- / rental object is owned by SG Eszközlízing Magyarország Kft. (Party to set up the object in the books as asset)
• The leased- / rental object is used by the lessee (rental fee may be set off as costs)
• VAT is paid monthly after the rental fee
• After the agreed basic lease term has expired, the lessee has the option to buy the leased asset at its market value. The residual value is calculated based on the expected market value at the end of the lease. In case if the actual market value should be higher (over 10%) than expected, the residual value shall be recalculated, respectively, the original value shall be confirmed by an expert’s opinion. Hungarian law does not allow assets to be purchased at their residual value.

The leased object shall be returned to the lessor in case if the client does not want to make use of the call option. The term of the operating lease may be extended.

Advantages of this construction:

The lessee

• Will not set up the leased object as asset in his/her books and will not have to depreciate same
• Keeps the leased object out of his/her balance which will thus not appear as long-term debt – the lessee can improve the figures of his/her balance
• May set off the rental fee as costs
• Will not pay the VAT in a lump sum but in instalments after the rental fee
• May appoint third parties as potential buyers of the leased object at the end of the term
• The scope of coverage is more preferable for the lessee as in case of a credit transaction.

Financial leasing is governed by the Act on Credit Institutions and Financial Enterprises. With this construction, the lessee may acquire ownership rights to the leased object by means of a closed-end or an open-end (with call option) financial leasing.

The essential elements of finance leasing are:
The leased object must be capitalised on the balance sheet of the lessee and a corresponding liability reported for the payment of future instalments. Furthermore, the lessee depreciates the assets in its accounts. The lessor retains title to the leased object. The lessee is the beneficial owner of the leased object, including all pertinent rights and obligations. At the end of the lease, either an unconditional hand-over (with or without residual value) or a handover option with a residual value can be agreed. To conduct financial leasing, the lessor must be a PLtd (public limited company) and needs authorisation from the PSZÁF (Hungarian state supervisory authority for banks and financial institutions).

• The leased object is owned by SG Eszközfinanszírozás Zrt.
• The leased object is used by the lessee (the rental fee consists of capital and interest; interests may be set off as costs)
• Payment of VAT:
  • in a lump sum in case of a closed-end financial leasing (but may be reclaimed upon the capital invoice)
  • in case of an open-end financial leasing, VAT will be paid monthly after capital instalment (such monthly VAT sum may be reclaimed)
• At the end of the term, with the payment of the last rental instalment, the lessee will automatically acquire ownership title to the leased object (only in case of having fulfilled all contractual obligations). In case of an open-end financial leasing, the calculated residual value shall match the estimated market value.

Advantages of this construction:

The lessee:

• will set up the leased object in his/her books as asset and depreciate same, thus gaining tax benefits (for investment)
• records the leased object in his/her balance as tangible asset which is then deemed to be an investment and results in tax benefits
  records the financing transaction as long-term debt which provides better transparency
• may set off the interests as costs
• pays VAT in a lump sum in advance but may reclaim such VAT amount in his/her next tax return
• has the leased object at his/her disposal at the end of the term and may sell or otherwise charge same.
• Similarly to credit transactions, this construction includes the lowest interest.

Capital investment loan is governed by the Act on Credit Institutions and Financial Enterprises. With this construction the acquisition of means of production shall be financed, eventually by means of a tender, obtaining tax benefits.

With capital investment loan, the sale and purchase agreement concluded by the supplier and the client will be financed and thus the purchase price of the leased object will be paid to the supplier by the financing institution instead of the client. The leased object will be set up in the books of the debtor (= client) as asset together with the capital owed, i.e. the equipment will be written off in the books of the debtor. The debtor is owner of the leased object but the creditor has mortgage on the same until the credit is totally paid by the debtor. The debtor is beneficial user of the leased object having the whole scale of rights and obligations connected. The debtor will pay the rental instalments to the creditor during the term of the credit. After termination, the creditor will withdraw the mortgage from the leased object. Capital investment loan may only be granted by an incorporated company operating under permission granted by the HSFA (Hungarian Financial Supervisory Authority). 

• The leased object is owned by the debtor / client
• The leased object is used by the debtor / client (the instalment is made up of capital and interest; the interest may be written off as expenses)
• VAT will be paid in a lump sum in advance (the already paid VAT may be reclaimed upon the capital account issued by the supplier)
• After termination at the end of the term, upon payment of the last rental instalment, the creditor quits the mortgage and the leased object may be sold or otherwise charged (only in case of having fulfilled all contractual obligations)

Advantages of this construction

The buyer of the leased object / debtor: 

• sets the leased object up as an asset in his/her books and counts for amortisation, thus gaining tax benefits (for investment)
• records the leased object in his/her balance as tangible asset which is then deemed to be an investment and results in tax benefit
• becomes owner of the leased object and thus may apply for state subsidy
• records the financing transaction as long-term debt which provides better transparency
• may set off the interests as costs
• pays VAT in a lump sum in advance but may reclaim such VAT amount in his/her next tax return
• has the leased object at his/her disposal at the end of the term and may sell or otherwise charge same
• this construction includes the lowest interest

We offer factoring to suppliers for long-term claims, within the framework of international vendor contracts.