Second home: leasing beats mortgage

Leasing 'wrests' the primacy of convenience for the purchase of a second home from the bank loan. The overtaking is linked to resolution no. 119/E of 12 August with which the tax authorities recognized the deductibility of VAT paid by the leasing company that purchases properties for residential use, on behalf of the customer, to then proceed with the financial leasing. To get a concrete idea of ​​the new possibility of choosing between the two contracts (attention: not for the 'first home') please refer to the comparison of the relative costs, shown in the table below. Given the same financial plan, it is noted that the leasing contract is more convenient as the individual does not have to pay the 2% substitute tax on the loan and the annual Irpef on the income from the home.
The August resolution contains a very important clarification, since so far there have been few leasing companies that have deducted the tax for these purchases on the basis of a reading of letter i), paragraph 1, of Presidential Decree 633/72 which, however, has since proven incorrect. With the August resolution, the administration peacefully admitted that leasing companies can be assimilated to companies whose "exclusive or main object of their activity is the construction or resale of the aforementioned buildings or portions" and therefore can deduct the tax paid for the purchase of residential units. The Agency reached this conclusion taking into account the particular nature of real estate leasing highlighted by the unambiguous jurisprudence of the Court of Cassation (rulings 10482/93, 1731/94, 2743/94, 6034/97).
According to the judges, in the context of financial leasing, two types can be identified: enjoyment leasing and translation leasing, the latter being agreed "with reference to assets capable of maintaining at that expiry a residual value higher than the amount agreed for the option and against fees which also discount a portion of the price in anticipation of the subsequent purchase". In this passage (sentence no. 18229, Section III, 28 November 2003) the Supreme Court carefully specifies the discriminating elements between enjoyment leasing and translation leasing, also recalling that «the financing cause is present in every financial leasing, but obviously it is not the only one, since the lessor does not limit himself to lending money to the lessee. In fact, in obliging itself to purchase the ownership of an asset, the grantor adheres to a conventional destination agreement for the monetary provision and the methods of repayment of the loan identify whether the same also has the cause of enjoyment or translation".
Therefore, with the so-called translational financial leasing contract, typical of the real estate sector, the parties do not intend to carry out a rental, but rather a sale preceded by a financing operation by the future seller to the future potential buyer.
Therefore, if, as the Supreme Court has said, translational financial leasing is a sort of financed sale, it is clear that leasing companies purchase and 'sell' properties for residential purposes in line with what is indicated in their corporate purpose where, however, the activity of buying and selling properties is not explicitly mentioned.
- Numbers to the test
Comparing the leasing and bank loan costs for the purchase of a 200 thousand euro house
To make a comparison of the costs to be faced, let's take an example: value of the house 200 thousand euros, VAT rate 10%, notary fee 1,500 euros, land register tax, mortgage €504; in both cases we take into consideration an 80% loan, for which the maxi initial installment of the housing lease is calculated at 20%; the monthly installments are 120 (including leasing redemption). The monthly interest rate is 4% on an annual basis while on a monthly basis it is 0.327%. The preliminary investigation costs in both contracts are assumed to be one thousand euros, as is the fixed monthly installment of €1,614.49. An important difference concerns the notary fee: €2,500 is spent to take out the mortgage loan, while in leasing the cost is €1,500 for redemption at the end of the contract (plus another €504 for taxes). Last note: if you choose to purchase with a mortgage, the property will be subject to direct taxes (taxpayer's marginal Irpef rate of 39%) based on a presumed cadastral income of €1,200.
- GLOSSARY
FINANCIAL LEASING consists of the rental of movable or immovable assets built or purchased by the lessor (leasing company) upon choice and indication of the lessee (user company) who has the right to become owner of the leased assets at the end of the lease, after the payment of the redemption price
FINANCIAL LEASING OF ENJOYMENT is essentially characterized by the leasing of assets which are not suitable for maintaining a commercial value upon expiry of the contract; in fact its function is to provide financing for the enjoyment of the asset for the duration of the contract
TRANSLATIONAL FINANCIAL LEASING is mainly aimed at the final transfer of the leased asset which upon expiry retains an appreciable commercial value higher than the price of the redemption option

source: Real Estate Observatory