InfoCompanies Romania business guide: Leasing operations

InfoBusiness Romania - online guide

The legal regime of leasing operations

• Legal background

Leasing operations carried out on Romanian territory, the types of leasing operations as well as the authorizing and functioning of leasing companies, are all regulated by Government Ordinance no. 51/1997, as republished.

• Leasing companies

Leasing operations may be carried out in Romania by joint stock companies Romanian legal entities established and functioning according to the provisions of company Law no. 31/1990, as republished.

The leasing companies' object of activity must include carrying out leasing activities and they must have a minimum share capital, fully subscribed and paid in upon establishment, in a value of ROL 500 million.

• Leasing operations: forms

The mechanism of leasing operations implies a tripartite structure: the lessor/sponsor, the user and the supplier, representing an alternative to the classical method of sale of goods with the payment of the price in installments. Therefore, the lessor/sponsor transfers to the user, upon the request of the same, for a definite period, the right of use upon a good the owner of which the lessor/sponsor is, in exchange for a periodical payment (leasing rate). Under a contract, the lessor/sponsor undertakes that at the end of the leasing period, it shall comply with the user's right to opt for one of the following:

- the acquisition of the good;

- the extension of the leasing contract;

- the termination of the contractual relations.

In the event that the user should choose to acquire the good that was the object of the leasing operation, upon the expiration of the leasing contract the transfer of the right of ownership shall be made in exchange for a cash amount called residual value.

A particular form of leasing is the leaseback or sale and leaseback method. This leasing form implies the leasing by a company of industrial equipment that it owns, to a leasing company, to use the same in a leasing system, with the obligation to later redeem such equipment.

Leasing operations may have as their object immovable goods, as well as movable goods for long-term use, including in the civil circuit, with the exception of audio and video recordings, theatre plays, manuscripts, patents and copyrights.

Ordinance no. 51/1997, as republished, regulates two categories of leasing operations: financial leasing and operational leasing.

To be included in the category of financial leasing, a leasing operation must meet the following requirements:

- The risks and benefits related to the ownership right pass on to the user at the conclusion of the leasing contract.

- The parties expressly provide that upon expiration of the leasing contract the right of ownership over the good shall be transferred to the user.

- The user may choose to purchase the good, and the purchase price shall represent a maximum of 50 percent of the value of entrance (market) that the same has as of the date when the option may be expressed.

The period of use of the good in a leasing system covers at least 75 percent of the normal duration of use of the good, even if the right of ownership over the good is not ultimately transferred.

By comparison, an operational leasing arrangement meets none of the above-mentioned requirements.

• Currency and fiscal aspects

Financial leasing operations concluded between residents and non-residents must be notified to the National Bank of Romania, according to the provisions of the currency Regulation no. 3/1997, with its subsequent amendments.

Movable goods brought by users, that may be either Romanian individuals or Romanian legal entities, into the country, on the basis of leasing contracts concluded with leasing companies that are foreign legal entities, fit into the framework of the customs regime of temporary admission for the entire duration of the leasing contract, with total exoneration from payment of amounts related to the import rights, including customs securities.

Movable goods that are brought into the country by leasing companies that are Romanian legal entities, on the basis of contracts concluded with users that are either Romanian individuals or Romanian legal entities fit into the framework of the import customs regime, with an exemption from the payment of the amounts related to all import rights.

In the event of the acquisition of goods brought into the country by one of the two methods set forth above, the users are obligated to pay the customs fee calculated at the residual value of the good at the time of conclusion of the sale-purchase contract, which may not be less than 20 percent of the good's value of entrance.

The subsystems and parts brought into the country by leasing companies for purposes of manufacturing goods that are to be the object of leasing contracts are exempted from the payment of customs fees and the value added tax.