EC Approves New Finance Lease Scheme for Spain ? World ...

Dec 12, 2012

EC Approves New Finance Lease Scheme for Spain

The European Commission (EC) has approved a tax scheme that can potentially see early aircraft depreciation in Spain. The new Spanish scheme for the early depreciation of assets acquired via finance leases will allow lessors to deduct for tax purposes the cost of certain assets acquired through leasing as soon as their production begins, instead of having to wait for them to enter into commercial use.

?Following a long discussion, we have been able to approve a new finance lease scheme that is compatible with EU state aid rules on the basis of the latest proposals submitted by the Spanish authorities.?This new, non-selective scheme will, as an example, make it possible to address the concerns of the Spanish shipbuilding sector without distorting competition in the EU Single Market,? says Joaqu?n Almunia, Commission Vice-President in charge of competition policy.
The early depreciation was initially meant to apply for the shipping sector only, but was later updated to apply for all assets acquired through finance leases that meet three main criteria:
1. the contractual fees have largely settled before the completion of the construction of the asset i.e. that are under pre delivery payment (PDP) financing
2. the construction of the asset takes at least 12 months
3. the asset meets unique technical and design criteria and could not have been mass produced, i.e. they are manufactured according to the purchaser?s technical specifications.

According to Luis Soto, tax partner at the Madrid office of law firm Watson, Farley & Williams, the new scheme would apply for aircraft that meet all the criteria.
?The new scheme should be applicable for all material capital assets that comply with these requirements. In the case of airplanes, as for any other asset, it must be analysed on a case by case basis whether they meet such unique technical and design criteria, so they can benefit from the early depreciation scheme,? Soto says.

Soto explains that the early depreciation scheme is usually most beneficial for Spanish lessors that acquire aircraft on a finance lease and then sublease them on an operating lease to an airline. Such leasing companies usually belong to banks. This gives them the capacity to take advantage of this accelerated depreciation scheme and get a financial advantage that can be passed partially on to the airline which will eventually pay less interest.

Until now the scheme allowed the accelerated tax depreciation to begin only after the aircraft had started operating. The new amendment may be a good advantage both for Spanish banks, as it may allow them to make more attractive offers, and for the airlines, as they may get better financial conditions.

The scheme is expected to be applicable from the beginning of 2013.

SOURCE:?http://www.airfinancejournal.com/Article/3130308/Search/Results/EC-approves-new-finance-lease-scheme-for-Spain.html?ArticleID=3130308&Type=Search&ID=Results&Keywords=aircraft+depreciation

Source: http://www.worldleasingnews.com/news/ec-approves-new-finance-lease-scheme-for-spain/

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