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1. |
Classification of lease transactions |
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| Classification |
Accounting |
Taxation |
| Before revision |
After revision |
| Financing lease (*1) |
Transfer of title |
Sale and purchase |
Sale and purchase (Financing) |
Sale and purchase (Financing) |
| No transfer of title |
Sale and purchase |
Lease (Financing) |
Constructive sale and purchase (Financing) |
| Operating lease |
Lease |
Lease |
Lease |
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(*1) Lessee is unable to cancel the contract and substantially pays for the cost of the leased assets through lease payments. |
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2. |
Various tax treatments for finance lease without transfer of title |
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(1) |
Corporate income taxes |
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Taxation |
| Useful lives |
Lease term |
| Salvage value |
Zero |
| Depreciation method |
Straight-line |
| Allocation method of interest |
Effective interest method or straight-line |
| Small value leases (*1) |
Rent is depreciation expense |
| Short-term leases (*2) |
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(*1) Small value leases are lease agreement in which the total lease payments are less than 3 million yen in principle. |
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(*2) Short-term leases are lease agreement in which the lease term is shorter than one year in principle. |
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(2) |
Consumption taxes |
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Finance lease without transfer of title is regarded as a purchase and sale under Consumption Tax Laws.
Therefore, consumption tax paid (or consumption tax received) is recognized at the beginning date of the lease term. |
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(3) |
Property taxes |
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Finance lease without transfer of title was regarded as a purchase and sale with reservations under Local Tax Laws.
Therefore, the seller (lessor) and purchaser (lessee) are joint owners of the lease asset, however the lessor will continue to pay property taxes as a sole owner for property tax return purposes. |
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