Content area
Full Text
Lease transactions enable entities to finance a wide array of assets, including aircraft, rail rolling stock, ships, and a variety of facilities. Potential beneficiaries of this type of transaction include those engaged in the provision of transportation services, communications or the production and/or distribution of a variety of products (electric power, paper, steel, etc). Lease transactions also provide funds for new ventures, companies emerging from financial difficulties and tax-exempt entities.
For the asset user or lessee, leases provide a capital infusion that may enable the company to retire debt or otherwise improve its financial situation. Additionally, if the asset user is experiencing financial losses and expects to do so for a number of years, or is classified as a tax-exempt entity, a tax-paying investor acting as a lessor may be able to use the depreciation benefits associated with ownership of the property more effectively and pass some portion of the benefit back to the owner of the asset.
While lease transactions can be structured in a myriad of different ways, US cross-border lease transactions are currently a popular transaction form with transportation equipment and facility users and investors alike.
A cross-border lease takes advantage of differences in the tax laws of the two countries involved. The realization of tax benefits from these differences can result in the lessee paying a lower rent than it would in a normal operating lease or any other type of financing.
Given the complexities of the tax and accounting systems in the US, coupled with the rules and regulations of the asset user's foreign tax jurisdiction, US cross-border lease transactions create a need for highly skilled financial advisers, tax counsel and appraisal professionals who possess in-depth knowledge of both the assets and the historical and current regulations governing U.S. cross-border lease transactions.
Assembling the various members of this specialized team is the first step in ensuring a solid tax and economic structure for the lease and a successful transaction for all parties.
A second step in receiving maximum benefit and ensuring a successful transaction is to gain a solid knowledge of the assets subject...