Law 179 of November 2020, which regulates the financial leasing of fixed assets.

Financial leasing is a service provided by a financial institution to offer a client property for lease with an option to purchase in the medium or long term. At the end of the lease term, the customer can choose whether to renew the lease, purchase the asset, or return the asset to the financial institution.

Law 179 of 2020 was an electoral proposal of President Cortizo Cohen and establishes the Superintendency of Banks as the regulator of all companies that offer financial leasing services. This same entity is in charge of setting the rules and criteria for the classification of risks, coverage reserves, and procedures with respect to the accounting of companies that provide financial leasing.

Likewise, it states that financial lessors and tenants may deduct as expenses for the payment of income tax, part of the rents paid, and one hundred percent of the interest charged thereon.

In addition, it is considered that the law is mainly aimed at benefiting the youngest segment of the country’s society since it offers young couples the possibility of purchasing real estate when renting a house or apartment. Another benefit is the exoneration of the payment of the Real Estate Transfer Tax (ITBMS) and the Special Interest Compensation Fund (FECI) in some transactions.

Legal entities authorized to engage in the leasing business

Provided they comply with the law, the following legal entities may engage in the business of financial leasing of fixed assets:

  • Banks
  • Trust companies
  • Legal entities authorized by the Superintendency of Banks.

Description of the scope of financial leasing

A financial leasing transaction of fixed assets must have the following characteristics:

  • Have as its object existing or future property.
  • The acquisition of fixed assets is the responsibility of the financial lessor.
  • It must establish the maximum price to be paid for the property.
  • The lease may be for housing, commercial or industrial premises, including warehouses and office space.
  • In the case of rents, these will be calculated taking into account the amortization of all or a large part of the purchase price of the real estate and the financial costs related to the management of the property

To read law 179 of 2020 on financial leasing and other provisions see here:

Law 179 of 2020

Related pages:

Published November 20th, 2020, as Laws on by Johana Sum