Effective 1 January 2015, the Income Tax Act no longer contains specific provisions on the assignment of leases when depreciating tangible assets acquired through finance leasing. The Income Tax Act was amended to treat “assignment” of leases after 1 January 2015 as if tangible assets were being purchased and sold.
To fulfil the legal conditions covering the minimum lease term, after 1 January 2015 any assignment of a lease needs to be referred to Sec. 532 of the Civil Code, which provides for no change in the obligation from a lease when it is assigned. That means that when a liability is assumed, in case that only the debtors are changed, then it is possible for tax purposes to accept compliance with the minimum lease term provided by law in the overall contract. When “assigning” a lease, the new lessee acquires the leased tangible asset as if they had purchased it, i.e. the new lessee recognises the finance lease in the same way as the first lessee. In terms of the Income Tax Act, when a tangible asset is acquired and put into use, the new lessee depreciates it as a newly-acquired tangible asset, over the depreciation period provided in the applicable depreciation group in which the tangible asset has been assigned.
