Financial leasing in Turkey is important for traders and companies wanting to expand their businesses. In this article, we will examine what financial leasing in Turkey is, what regulations it is subject to in Turkey, types of financial leasing, and its advantages and disadvantages.
What is Financial Leasing in Turkey?
Financial leasing in Turkey is a loan in which you do not initially own the product you use, but you acquire ownership of this product by paying rent over time. It is generally used for investments with high costs. If the tenant needs more capital to invest, or if they have capital but want to utilize it in other areas, they choose financial leasing in Turkey. In this type of loan, the tenant chooses the product they wish to lease. The tenant makes a preliminary agreement with the seller firm on this product's price and delivery conditions. Afterward, the tenant applies to a financial leasing company to provide the necessary financing for this project.
The tenant submits the necessary documents to the financial leasing company during the application. The financial leasing company pays the cost of the goods to the seller company if it finds it appropriate after conducting its inspections. Thereupon, ownership of the goods passes to the financial leasing company. The financial leasing company delivers the goods subject to the contract to the tenant. The tenant pays the rental fee specified in the financial leasing agreement to the financial leasing company and starts using the property.
After the goods subject to the contract are delivered to the tenant, the tenant starts using the goods. After the contract period ends, if the tenant has made all payments, the tenant takes over the ownership of the property from the financial leasing company. This way, the tenant can benefit from using the property, even though they do not have the financial power to purchase it in the first place, with a very high sales price. The tenant also has the opportunity to acquire ownership upon the expiry of the contract period. As can be seen, financial leasing in Turkey is a very technical process that must be carried out with lawyers who are experts in their field. As a Turkish law firm, we provide services as a tenant lawyer in Turkey.
Legal Framework of Financial Leasing in Turkey
Financial leasing in Turkey has a history of approximately 50 years. The first law regarding this was enacted in 1985. This law is the Financial Leasing Law No. 3226. Later, this law had to be renewed to meet changing and developing needs. For this reason, Law on Financial Leasing, Factoring and Financing Companies Nr. 6361 was enacted in 2012. The purpose of enacting this law is to regulate financial leasing and the operating principles of leasing in Turkey.
Knowing Turkish corporate law and contracts is necessary to become a financial lease lawyer in Turkey. Because this subject concerns many different branches of law, most financial leasing products in Turkey are imported abroad. For this reason, it is important to have good English-speaking lawyers in Turkey. As a Turkish law firm, we have Turkish contract lawyers who are experts in financial leasing in Turkey.
Types of Financial Lease
Financial leasing types are generally divided into two. The first and most commonly used type of these is financial leasing. The second is the operating lease. Below, we will give detailed explanations about these two types of financial leasing:
- Operating Lease
- Financial Lease
1. Operating Lease
An operating lease is a type of financial leasing system. In operating leasing, the tenant can use the rented property only during the contract period. Unlike financial leasing, the tenant does not take ownership of the goods they use when the contract expires. When the rental period ends, or the tenant wishes, they can cancel this contract. After the contract is canceled, the tenant returns the used goods to the lessor. In this way, the tenant can use an old product for a few years. In an Operating lease, the tenant is responsible for expenses such as property maintenance, repair, and insurance only during the lease period. The tenant is not responsible for any wear and tear on the property on the return date. This responsibility belongs to the lessor. Operating lease came to Turkey with the Law on Financial Leasing, Factoring and Financing Companies Nr. 6361. However, it still needs to be a widely used lease type in this field.
2. Financial lease
Financial Leasing, Factoring and Financing Companies Law Nr. 6361 explains financial leasing in Turkey. According to the law, it is a rental transaction in which the ownership of the goods is transferred from the lessor to the lessee at the end of the lease period, based on a financial leasing agreement. In financial leasing in Turkey, the contract period is much longer than an Operating lease. Again, in financial leasing, ownership of the goods passes to the lessee at the end of the contract period; In an Operating lease, the goods are returned to the lessor.
Advantages and Disadvantages of Leasing
Financial leasing in Turkey has some pros and cons if you think of it. Some advantages of financial leasing in Turkey are stated below:
- The tenant who needs more capital to purchase the product they will lease can rent it immediately through financial leasing without waiting until they accumulate the product's sales price. In this way, the tenant can immediately benefit from the property and start making a profit.
- The tenant, whose capital is sufficient to purchase only one good, can rent more than one good simultaneously with this capital, as the financial leasing price is much lower than the purchase price. In this way, they can grow their business quickly.
- The value of the goods to be rented is calculated by estimating the market value at the end of the rental period at the contract establishment stage. As a result of the calculation, the monthly rental fee is determined according to the rental period. However, in high inflation, the rent paid at the end of the lease period may remain very low. This way, the tenants can profit greatly from the property they rent.
Disadvantages of financial leasing in Turkey:
- When purchased through financial leasing, the sales price of the property rented by the tenant increases significantly compared to the cash price since it is divided into long terms.
Requirements for Financial Lease Agreements
All kinds of companies and freelancers can do financial leasing in Turkey. Any type of movable or immovable property can be subject to financial leasing. The important thing is that the property subject to financial leasing is independent and can be depreciated.
Current Regulations for Cross-Border Financial Leases
It is a type of leasing made by companies established in Turkey from financial leasing companies established abroad. The current conditions for this type of leasing are regulated in the Circular on the Registration of Contracts Concerning Financial Lease Transactions to be Conducted Abroad, dated 25.07.2013. If you want to make a financial lease, we, as a Turkish law firm, will gladly serve you with our financial leasing lawyers.
Writed by Attorney Enes Erdoğan
You can reach our previous article from https://istanbullawyerfirm.com/blog/eviction-of-tenants-under-turkish-law
- When purchased through financial leasing, the sales price of the property rented by the tenant increases significantly compared to the cash price since it is divided into long terms.