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Market participant: Azerbaijan’s leasing sector has enough potential

Business Materials 29 December 2010 16:56 (UTC +04:00)

Azerbaijan, Baku, Dec.29 / Trend U. Ismayilova /

Azerbaijan's leasing sector has enough potential, including in those spheres of activity where it hasn't yet to find its use, starting with very simple equipment and ending with the most complex production line, the general director of the largest leasing company, Join Leasing, and the head of the Azerbaijan Leasing Companies Association (ALCA), Elchin Ahmedov, believe.

"The legislation regulating leasing activity has weak links. Therefore, we raised issues to improve leasing legislation. Unfortunately, these issues have yet to be resolved. Imperfect legislation is "a stumbling block," hindering the development of the leasing sector," Ahmedov said.

According to him, because of constraints in the legislation, development in this sphere is very limited, except for a few segments. One of the moments of imperfection in the legislation is the absence of the law "On Leasing." Those points of the Azerbaijani Civil Code, which are related to leasing activity, do not reflect a range of possible types of leasing that could apply to Azerbaijan.

ALCA prepared a draft law "On Leasing", which was developed with the participation of international organizations and financial institutions, including the International Finance Corporation, USAID and others.

"The next stage is the submission of the draft to the appropriate structures," Ahmedov said.

The ALCA head also observed that along with this, it is necessary to note the inadequate mechanism of the VAT tax (18 percent). It is well known that until January 2008, VAT was not imposed on goods imported under lease agreements, but later these benefits were canceled. In this case, the mechanism for levying VAT on leasing has not been systematized. Consequently, when rendering leasing services deals become more expensive today.  

"Therefore we propose a clear systematic system of VAT, in order to establish a working mechanism in this sphere," Ahmedov said.

According to him, in such circumstances, leasing companies lose their obvious advantage in comparison with bank loans or the purchase of equipment for cash. And in current conditions, only leasing can become the necessary mechanism for companies, including in connection with the lack of requirement of additional collateral security.

The Association was established on Oct. 27, 2004 by the companies Ataleasing, Unileasing, and Muganleasing under the IFC's project on technical assistance to leasing development in Azerbaijan.

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