Changes to leasing legislation developed in Azerbaijan

Business Materials 25 June 2011 14:34 (UTC +04:00)

Azerbaijan, Baku, June 25 / corr Trend A.Akhundov /

The Associaton of Leasing Companies of Azerbaijan (ALCA) has developed proposals on injecting changes and supplements to the existing leasing legislation, and will submit them to state agencies, ALCA head Elchin Ahmedov told Trend.

ALCA met recently to discuss legislative issues, including changes to the Tax and Civil Codes.

The Civil Code (Chapter 38, Article 747-751) Tax Code (Article 140) regulates the leasing relations in Azerbaijan. By expanding the Code's Article on leasing, a separate law adopted in 1994 to regulate this sector was canceled.

"The legislation has some gaps," he said. "It, in particular, does not specify some types of leasing such as repeated and operational, reducing the scope of activities of leasing companies and treatises in two ways."

"It is necessary to review some items of the Civil Code regulating the leasing activities and expand them, or to design a special leasing law," Ahmedov underscored. "The Association has developed a draft law on leasing and we intend to solve it jointly. We will make proposals to the government. It will be a proposal on changes and supplements to the Civil Code or a special legislation."

According to Ahmedov, VAT remains the most topical issue for leasing companies. Although leasing payments are VAT-free, purchase and import of equipment are tax-liable [these tax privileges were active in the country by 2008]. Leasing companies cannot carry out mutual settlements on VAT and it leads to increase in the cost of equipment and leasing deals for beneficiary by minimum of 18 percent (current VAT rate in the country).

It gives to know while participating in a financing huge production project, when beneficiary prefers bank credit or acridities due to increase in project value by 18 percent.

According to Ahmedov, the meeting also discussed admission of Ansar leasing and MCB leasing into ALCA.

"The companies are discussing our proposals and we will determine their positions shortly," he added.

Ansar Leasing, established by the Islamic Corporation for Development of the Private Sector (ICD is a member of the Islamic Development Bank), began to operate on June 29, 2009. The company leases vehicles, construction machinery, equipment, and plans to expand its activities in the field of real estate leasing.

MCB Leasing was established in October 2009. The controlling shareholder of the company is a major Pakistani bank, MCB Bank Limited. The company is involved in the non-oil sector of the economy: transportation, trucks, food industry, processing, trade, telecommunications, tourism, agro-processing and construction

The association has nine full members and two member-observers.

The Association was established by Ataleasing, Unileasing and Muganleasing companies on Oct. 27, 2004, as part of the IFC project on technical assistance for Azerbaijan's leasing development. The Azerbaijani leasing market is represented by 22 lessors, but only 11 companies and banks providing leasing services are active in the market.

The Association members include the joint leasing company AG Leasing, AtaLeasing, DemirBank, Bank of Baku, Credagro, UniLeasing, Standard Leasing, Qafqaz Leasing and the observers ASB Bank and NIKOIL Leasing.