What is redemption payments

To understand what the concept of "redemption payments" means, it is necessary to refer to the term "leasing", understand its meaning. Leasing payment - the total amount paid in the end of the leasing recipient for the leasing services for the right to use property. Leasing payments are performed by individual contributions. At the end of the Agreement, the recipient has the opportunity to redeem the leasing object in full property, if it is spelled out in the contract. Payments can be performed both in cash and in the form of products or in the form of providing services to the lessor, in a mixed form.

The recipient of leasing when signing the contract takes a long-term rental of property necessary for his business. At the same time, it acquires the right to tax benefits and the right to redeem the received property, order. The contract will then indicate the amount of redemption payment.

In the contracts of leasing companies for mutual agreement between both parties, one of the methods for determining the redemption price of the leased object can be specified:

The "Fixed Payment" method is the final amount of the redemption payment is absent, it is distributed as separate leasing payments in equal shares for the entire period of the contract period.
The method "with advance" - the lease recipient pays an advance to the lessor, the amount of the advance is determined by agreement by the participants of the contract, the remaining amount of the redemption payment equal to the parties is distributed during the actions of the leasing contract, similar to the "Fixed payment" method.
The method of "minimum payments" - in the final amount of payment includes the cost of depreciation of the leased object for the entire time of the contract, compensation for the use of the leaser borrowed funds, the Commission, payment of the auxiliary services, which provided the lessor, the value of the property paid for use, if it is spelled out in the contract In case of its redemption. All specified calculated values \u200b\u200bare summarized and receive the total amount of redemption, which is then distributed at the entire period of the contract operation time.

The frequency of payments is prescribed in the contract. They can be entered annually, quarterly, monthly, weekly or at a certain agreement of the number of month.

The final amount of redemption is not every lease payment for the period specified in the contract, the period of use of leasing property is the final amount paid by the lessee during the design of property in its full property.

If the term of the contract is completed, then the lessee can redeem the assigned property on the balance of its value. A new contract for the purchase and sale of the repurchased property will be concluded by the lessor and the lessee.

The final redemption cost may be absent in the contract when leasing payments are included in the redemption payments for the period of all the time of the contract. Payments are counted, taxed. Leasing property automatically becomes the property of the lessee when repaying the entire amount of leasing payments. Tax authorities always control the value of the transaction, if the payment price is underestimated, take advantage of the right to recalculate the tax liabilities of the leased participants.