Leasing in Italy

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Recent additions:

1998 has been an extremely good year for the Italian leasing industry. Between January to Nov. 1998, members of Assilea recorded a volume jump of 40%. Real estate leasing registered highest increase.

State of the market:

The Italian market is dominated by bank-owned leasing companies The other major players in the market are manufacturers who use leasing as a sales-aid.

The leasing association has about 100 members.

Law and regulations relating to leasing:

Civil law does not provide a specific definition of leasing. The principle of contractual autonomy enables lessors and lessees to determine the contents of a contract within the limits imposed by law. Article 83 of the Unified Text contains definitions of financial and operating leasing. The characteristics of Finance Lease and Operating Lease are as follows:

• "Locazione Finanziaria" is the leasing of movable or immovable assets for a specified period of time, at the termination of which the lessee has a purchase option at a predetermined price. The lessor purchases the assets in accordance with the specifications of the lessee who assumes all the risks involved;
• "Locazione Operativa" is the leasing of movable assets for a specified short period of time, at the termination of which the lessee has no purchase option. Usually the lessor is the manufacturer of the equipment, who also provides other services.

 

Leasing companies are regulated by the central bank, Bank of Italy. Leasing companies must register themselves under a law of 1991. There are provisions regarding registration of all major lease transactions also. Leasing companies registered with the Bank exceeded 2000 some years back, but the number is expected to drop with consolidation, mergers and acquisitions.

There is a law of 1992 that requires disclosure of true leasing costs.

Accounting

Capitalisation of leased assets is based on legal ownership. Economic ownership is not relevant. In all cases the lessor as legal owner is entitled to capitalisation and depreciation. Lease payments are fully tax deductible for the lessee (provided the minimum lease period of a Finance Lease excees half of the fiscal life of the asset). Under a Finance Lease, the period of depreciation is the term of the lease and the depreciable amount is the cost of the leased asset less the value of the purchase option. Assets are depreciated on a financial basis. Under an Operating Lease, assets are depreciated on a straight-line basis over the Fiscal Tax Life of the asset. The official depreciation rates are prescribed and fixed by the Ministry of Finance for individual classes of assets. For depreciation purposes, fractions of a year are considered as whole years. Accelerated depreciation is not allowed for lessors in contrast with other owners of assets.

Taxation

In Italy there is a substantial relationship between the "civil" accounts and the fiscal balance. Nevertheless the treatment of income and expenses in the P & L account of the civil balance does not always mirror the tax treatment applied for determining the taxable profits. Consequently, though not to the same degree as in some other countries, it is sometimes necessary to adjust commercial profits to compute tax profit.

The standard rate of V.A.T. on both the acquisition of the asset by the lessor and the lease rentals to be paid by the lessee is 20%. V.A.T. is, generally speaking, fully recoverable. In the car sector, only a few categories (for instance commercial agents and taxi drivers) are in the position to recuperate V.A.T..

Market peculiarities

The Italian market is dominated by bank-owned leasing companies on the one hand, and captive leasing companies on the other hand. Whereas the bank-owned lessors are not specialised in particular sectors, the captives are mainly active in the automobile and computer industry. As far as distribution of the product is concerned, independent agents and broker companies play an important role.

Leasing associations:

Associazione Italiana Leasing (Assilea)
4 Piazza de Priscilla, I -00199 Rome, Italy

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