What Is Sale and Rent Back?

Sale-leaseback is the sale of self-made or purchased assets and leased back to the buyer for use. Leaseback is when the lessee sells the items it owns to the lessor, and then leases the item back from the lessor. This type of lease is called leaseback. Adopting this leasing method allows the lessee to quickly recover the funds for the purchase of goods and accelerate the capital turnover. The leaseback objects are mostly used items.

Sale and leaseback

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Sale-leaseback is the sale of self-made or purchased assets and leased back to the buyer for use. Leaseback is when the lessee sells what he owns to

It enables equipment manufacturers or asset owners (lessees) to obtain the required funds while retaining the right to use the assets, while at the same time providing profitable investment opportunities for lessors.

1. During the sale and leaseback transaction, the seller / lessee can use the assets without interruption;

2. The sale price and rent of an asset are interrelated, and the sale profit or loss of the asset is usually not allowed.

Since the sale and leaseback of assets are essentially the same business, the sale price of the asset and the funds need to be calculated together. From the perspective of the lessee (seller), if the lease meets a certain condition of the financial lease, the leaseback should be treated as a financial lease, otherwise it will be treated as an operating lease. When treated as a finance lease, the profit on the sale of assets should be deferred and apportioned in proportion to the depreciation of the assets. If a transaction occurs, the

Sale and leaseback is a special form that integrates sales and financing. It is a new method for companies to raise funds. It usually refers to the financing method in which an enterprise sells existing assets to other companies and then leases back. One of the financing methods. In the sale-and-leaseback transaction, both the lessee and the lessor have dual identities and conduct dual transactions to form a discrete phenomenon of asset value and use value, which is specifically manifested in the following aspects:

(I) Duality of transaction business

Both parties in the sale and leaseback transaction have dual identities in business, so there is overlap in business processing. One,

Sale and leaseback income tax

According to the State Administration of Taxation's Reply on the Income Tax Treatment of Sale and Lease Business of Foreign-Invested Enterprises Engaged in Real Estate Development (Guo Shui Han [2007] No. 603), foreign-invested enterprises engaged in real estate development and operation transfer their production and development through sales. Real estate such as houses, buildings, etc., and leased back the asset from the buyer through leasing. Regardless of the leasing method adopted by the enterprise, the sale and leaseback business should be decomposed into two businesses: sales and lease. The difference between the income from the sale or transfer of ownership of the real property and the costs and expenses associated with the ownership of the transferred real property shall be included in the current profit and loss of the business and included in the current taxable income.

The "Reply" also stipulates that in the process of tax treatment in accordance with the provisions of the reply, if tax supplementation or refund is involved, it shall be handled in accordance with the relevant provisions of the Tax Collection Law and its detailed implementation rules.

Sale and leaseback case

Case : Company A pays 1.8 million yuan of rent at the beginning of each year, the lease period of the equipment is 6 years, and the total rent is 10.8 million yuan. After the lease expires, Company A pays another 500,000 yuan to recover the ownership of the equipment.

Company A made a comprehensive investigation and understanding of the new equipment to be invested and decided to use the 8 million yuan to purchase one domestic equipment that meets the requirements of the technological transformation project.

The new equipment can be put into use without installation. The estimated useful life is 8 years. Depreciation is calculated on a straight-line basis. There is no residual value at the end of the period. Before the new equipment was purchased, Company A's pre-tax profit before depreciation was 10 million yuan. After purchasing the equipment, it is estimated that an annual pre-tax depreciation profit of 3 million yuan can be added.

In order to simplify the accounting, it is assumed that after the purchase of equipment, the profit level of Company A is stable, and the pre-tax profit before depreciation is balanced every year.

First year: 990,000 tax savings

First of all, company A can still depreciate the old equipment after sale and leaseback.

The "Enterprise Accounting System" stipulates that when fixed assets are financed to lease, the lease period can be reasonably determined, and the leased asset ownership will be acquired upon expiry, and depreciation should be provided within the useful life of the leased asset; Where ownership of leased assets can be obtained, depreciation shall be accrued over the shorter of the lease term and the useful life of the leased asset.

After the lease term expires, Company A can obtain the ownership of the financial leased asset. Depreciation can be made according to the useful life of the equipment for 6 years. The annual depreciation cost is 1.8 million yuan (1080 ÷ 6).

At the same time, the new equipment can also add 1 million yuan (800 ÷ 8) in depreciation costs each year. Company A can increase the pre-tax deduction cost by 1 million yuan each year, reduce the amount of income tax payable, and save 330,000 yuan (100 × 33%) in corporate income tax.

Taxable income before sale and leaseback equipment = 1000-1000 ÷ 10 = 900 (ten thousand yuan);

Enterprise income tax payable = 900 × 33% = 297 (10,000 yuan), profit after tax = 900-297 = 603 (10,000 yuan);

Taxable income in the first year after the sale and leaseback of equipment = 1000 + 300-100-100 = 1100 (ten thousand yuan);

The payable corporate income tax = 1100 × 33% = 363 (ten thousand yuan).

Secondly, the new equipment purchased by Company A is eligible for tax credits for investment credits. According to the above calculation results, the company's equipment purchase in the current year increased 660,000 yuan (363-297) in corporate income tax over the previous year.

The tax law stipulates that the amount of corporate income tax deductible for an enterprise's investment in each year must not exceed the amount of corporate income tax newly added by the enterprise in that year compared to the year before the equipment purchase. However, the company's investment credit is 3.2 million yuan (800 × 40%), which is greater than 660,000 yuan. Therefore, the newly added corporate income tax of 660,000 yuan in that year can be used for full investment credit. The actual enterprise income paid in that year was still 2.97 million yuan, and the after-tax profit was 8.03 million yuan (1100-297).

After-sales and leaseback, the company's after-tax profit increased by 2 million yuan (803-603), and the deduction of depreciation expenses and investment tax credits saved A company a total of 990,000 yuan in income tax (33 + 66).

The company's calculation of the amount of income tax and after-tax profits and tax savings for the second, third and fourth years are the same as in the first year.

Because the tax law stipulates that if the newly-added corporate income tax amount of the current year is insufficient for the credit, the uncredited investment amount can be used to extend the corporate income tax credit of the company in the following year compared to the year before the equipment purchase. It must not exceed 5 years.

The taxable income in the fifth year is still 11 million yuan, the payable corporate income tax is 3.63 million yuan, and the additional corporate income tax is 660,000 yuan. In this year, Company A still had an uncredited corporate income tax of RMB 560,000 (800 × 40% -66 × 4), which was less than RMB 660,000, and an investment credit of RMB 560,000 was available. The actual corporate income tax paid was 3.07 million yuan (363-56), the after-tax profit was 7.93 million yuan (1100-307), the after-tax profit increased by 1.9 million yuan (793-603), and the corporate income tax was saved by 890,000 yuan (33 +56).

Sixth year: profit after tax increases by 1.34 million

The sixth year's taxable income is still 11 million yuan, payable corporate income tax is 3.63 million yuan, profit after tax is 7.37 million yuan (1100-363), and profit after tax is 1.34 million yuan higher than before planning (737-603). ). The saving of income tax reflects the deduction effect of 330,000 yuan brought by depreciation expenses.

The calculation of the payable income tax and profit after tax for the seventh and eighth years is the same as the sixth year.

Year 8: Profit after tax of 13.92 million

In the eight years, Company A saved a total of 5.84 million yuan in corporate income tax (99 × 4 + 89 + 33 × 3) and increased profit after tax by 13.92 million yuan (200 × 4 + 190 + 134 × 3).

It can be known from this that the combined use of after-sale leaseback leases and tax credits for investment credits will increase the after-tax profits of the lessees and allow them to obtain more income from corporate income tax.

In this regard, when planning the taxation of the sale and leaseback financing leasing business, enterprises should comprehensively consider factors such as the company's own production and operation needs, capital structure, and capital status, and make full use of the current tax incentives to obtain the maximum tax benefits. In addition, in actual operation, enterprises should also consider the differences in cash flow, time value of money, and cost of funds for sale and leaseback financing leases, and choose a financing method favorably based on the comparison of tax burden and income.

Sale and leaseback tax treatment

(1) Treatment of VAT and sales tax by the seller (lessee)

Announcement of the State Administration of Taxation on Tax Issues Concerning the Sale of Assets by Lessees in Financing Sale and Leaseback Operations (SAT Announcement 2010 No. 13) stipulates that: "According to the relevant current VAT and business tax regulations, financing In the sale and leaseback business, the sale of assets by the lessee is not included in the scope of value-added tax and business tax, and is not levied. "

(2) Treatment of VAT and business tax of the assignee (lessor)

According to the State Administration of Taxation's Announcement on Tax Issues Regarding the Sale of Assets by Lessees in Financing Sale and Leaseback Business (SAT Announcement 2010 No. 13), when the lessee sells assets in the financing sale and leaseback business , Asset ownership and all rewards and risks associated with asset ownership have not been completely transferred. In the past, the behavior of leaseback after sale for sale was changed in the past, and the sale and leaseback of assets were regarded as the same transaction. Therefore, the tax treatment is no longer decomposed into two businesses of sale and lease, which is not included in the scope of value-added tax and business tax collection. However, the non-levy of VAT and sales tax is relative to the seller (lessee), and the transferee (lessor) should still collect sales tax and value-added tax in accordance with the relevant financial lease business.

(3) Treatment of corporate income tax by the seller (lessee)

Announcement of the State Administration of Taxation on Tax Issues Concerning the Sale of Assets by Lessees in Financing Sale and Leaseback Operations (State Administration of Taxation Announcement 2010 No. 13) stipulates that: "According to the current corporate income tax law and relevant income determination rules, In the financing sale and leaseback business, the lessee's sale of assets is not recognized as sales income. The assets of the financing lease are still depreciated based on the taxpayer's original book value before the sale. During the lease, the lessee The portion of interest paid for financing is deducted before tax as corporate financial expenses. "

Based on this regulation, the financing after-sale and leaseback industry conducts corporate income tax treatment according to the following three situations:

First, since the lessee sells the assets, the asset ownership and all the rewards and risks related to the asset ownership have not been completely transferred. According to the current corporate income tax law and relevant income determination rules, the lessee sells assets in the financing sale and leaseback business. The behavior does not meet the conditions for revenue recognition, so it is not recognized as sales revenue.

Second, the seller (lessee) still uses the original book value before the sale as the basis for tax calculation, that is, the depreciation treatment is the same as that for its own assets, and the depreciation continues.

Third, the interest expense on financial leases is deducted as financial expenses.

Article 58 of the "Implementation Regulations of the Enterprise Income Tax Law" stipulates that fixed assets financed by lease shall be taxed on the basis of the total payment agreed in the lease contract and the relevant expenses incurred by the lessee during the signing of the lease contract; For the total payment, the tax is based on the fair value of the asset and the related expenses incurred by the lessee in signing the lease contract. Article 47 stipulates that the lease expenses incurred for leasing fixed assets by means of financing leases shall be deducted from depreciation expenses and shall be deducted in installments in accordance with the provisions that constitute the value of fixed assets under financing leases. The tax law adopts a relatively simplified treatment method for the integration of fixed assets. The lease payment or fair value stipulated in the contract is used as the booked value of the fixed assets. The unrealized financing expenses recognized in the accounting standards are directly included in the original value of the fixed assets, and then instaled Depreciation. It can be seen that the pre-tax deduction policy for financing sale and leaseback is different from the pre-tax deduction policy for financing leases.

Sale and leaseback latest policy

According to the provisions of Caishui [2012] No. 82 ^[1] , the deed tax policy on financing after sale and leaseback is as follows:

According to the notice, the following conditions are exempted or not deducted:

If the financial leasing company develops after-sales leaseback business and bears the lessee's house and land ownership, it shall be taxed in accordance with the regulations. If the leaseback contract expires, the lessee will be exempted from deed tax if the lessee buys back the original house and land ownership.

Units and individuals increase their capital with assets other than houses and land and correspondingly increase their shareholdings in the investee company. Regardless of whether the investee company changes its industrial and commercial registration, its ownership of houses and land will not be transferred and deed tax will not be levied.

The operator of the individual industrial and commercial household transfers the ownership of the house and land in his personal name to the individual industrial and commercial household, or the individual industrial and commercial household transfers the ownership of the house and land in his own name to the original name of the original operator, Exemption from deed tax.

The partners of a partnership enterprise transfer the ownership of the house and land to the name of the partnership enterprise, or the partnership enterprise transfers the title of the house and land to the name of the original partner, which is exempt from deed tax.

The notice stated that the people's governments at the city and county levels expropriated residential houses in accordance with the relevant provisions of the "Regulations on the Collection and Compensation of Houses on State-owned Land." The deed tax is waived on newly purchased houses; if the transaction price exceeds the monetary compensation, the deed tax is levied on the difference. Residents who choose to exchange property rights due to the expropriation of their own houses, and do not pay the difference in property rights, will be exempted from deed tax on new houses; if they pay the difference in property rights, deed tax will be levied on the difference.

The notice pointed out that if the state-owned land use right is transferred by way of bidding, auction, auction, the taxpayer is the land-use right bearer who finally signed the transfer contract with the land management department. Where an enterprise bears land use rights for real estate development and builds affordable housing on behalf of the government on that land, the taxable price shall be the transaction price for obtaining all the land use rights.

According to reports, this notice will be implemented from the date of issue. Article 2 of the "Notice of the State Administration of Taxation of the Ministry of Finance on Relevant Tax Policies for Urban House Demolition" shall be repealed simultaneously.