Cars and business: Armenia is developing an alternative to Bank loans

YEREVAN. Aug 6 – Sputnik. Changes in the legislation on leasing will make it more accessible for business and help create new jobs. This was stated at the online press conference at the international multimedia center Sputnik Armenia Deputy Minister of economy of the Republic of Naira Margaryan.

© Sputnik / Aram Nersesyan
Naira Margaryan at a press conference on the theme recent developments in the law on leasing (6 August 2020).

In April, the Georgian Parliament adopted a package of amendments to the Civil code, with the accompanying bills. The legal field of leasing moved from the regulations of the Central Bank in the legislative field.

This will help the leasing companies actively financed not only business, but also citizens, she added.

Now the total loan portfolio in Armenia is about 4 trillion AMD, of which the transaction for the purchase or lease of the property have 200-300 billion drams, But the overall portfolio of leasing transactions is only 20-30 billion AMD, that is, ten times less. Thus, ironically, the majority of transactions on the factory machines and production equipment, the tractors and the cars are still financed in the form of loans, not leases.

“The leasing has several advantages – in particular, it does not require a Deposit machine or machine that you get is the key. We want to make available these advantages”, — said Margaryan.

Now leasing is restricted by a number of procedural issues. In particular, if you receive the car, all the fines it come to a leasing company (or Bank issuing the lease), not the lessee (although the machine he uses). Besides, the Bank has to pay property tax with this car. These obligations are now assigned to actual users.

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In addition, it was not clarified in which cases the Bank may write off the depreciation of leased assets from the base of your income tax and when not. This delineated two types of leases: in one case the recipient is not only leasing the property, but receives it on its balance sheet, in other cases it will not. Accordingly, depreciation deductions makes the one who has the property is on the balance sheet.

Finally, leasing transactions are not exempt from VAT, unlike Bank loans. Now the rules are called: a leasing transaction is also exempt from VAT, said the consultant’s Office business support (BSO) Isabella Hovhannisyan.

© Sputnik / Aram Nersesyan
Isabella Hovhannisyan at a press conference on the theme recent developments in the law on leasing (6 August 2020). Yerevan

The changes also offer the opportunity of secondary leasing transactions. Now the car (or other property) to lease the whole period of its useful operation, and for a year or two, and then return it to the leasing company or Bank. They in turn can pass it on to others.

“So we have formed a secondary market of machinery and equipment, but transparent and clear”, – said General Director of the Armenian leasing Company Arsen Bazikyan.

Such queries often asked business, including work teams from the Russian Molokan (they are valued as good contractors, excavation). Sometimes one team might need new equipment, but for a year, and the other is just not very new. Now they can negotiate with each other, and from one brigade, the asset is transferred to another.

“Besides, now all parties will be able to monitor that equipment was operated with care so that no one received it in poor condition,” – said Bazikyan.

© Sputnik / Aram Nersesyan
Arsen Bazikyan at a press conference on the theme recent developments in the law on leasing (6 August 2020). Yerevan

Changes can help and local equipment manufacturers, including small. If they are working in a VAT, then big business is not profitable to buy their equipment (whether prefabricated refrigerators or dryers for fruits, or equipment, or something else). Buying items from the defaulter of the VAT, they couldn’t charge. This problem is resolved, because the supply of leasing will also be exempted from VAT.

Thus, suppliers for lease transactions will become even ordinary citizens, for example, want to lease their building or land. And in the long term the citizens want to offer deals on leasing cars from showrooms.

“If to speak about registered enterprises or private entrepreneurs, five years ago there were two or three, now – more than two dozen. From the new change they will definitely win”, – said Margaryan.

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Note, of the 17 banks and 32 credit organizations leasing services in Armeina provide eight companies. Mostly these services spetsializiruyutsya only one or two: on the largest company (ACBA Leasing) accounts for about 80% of the market.

Read original article in Russian language here.