What Are the Differences Between an Operating and Capital Lease?

Operating lease (operating lease), also known as business lease, is a type of leasing business leased by the leasing department or professional leasing company of a large-scale manufacturing enterprise to users. The lessor generally owns its own rental warehouse, and once the lessee requests it, the equipment can be leased directly to the user. The user pays the rent according to the lease and returns the equipment after the lease expires. ^[1]

Operating lease

(1) Cancellable. During the contract,

Operating lease for

Lessee: Article 38 of the Pre-tax Deduction Measures for Corporate Income Tax stipulates that taxpayers acquire fixed assets from the lessor in the form of operating leases, and rents that meet the principle of independent taxpayer transactions can be deducted evenly based on the benefit time.

Lessor: Guoshuifa [1997] No. 191 stipulates that the leaser shall collect the rental fee in one installment based on the lease period stipulated in the contract.

According to the provisions of the Business Tax Law, rents collected by taxpayers should also pay business tax, urban maintenance and construction tax, and education surcharges in accordance with the "service industry-leasing." tax. All taxes and fees payable can be deducted before tax.