Leasing in Tanzania

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Corporate Finance Project Paper (CF 601)

Fixed Assets Leasing is an option for business financing. In view of this statement, evaluate this option of financing in relation to your country business environment. In evaluating you will need to discuss the types of leasing, regulatory framework and accounting treatments according to IFRS, benefits and disadvantages of leasing as well as what factors are to be considered before embarking to this option. Discuss the Challenges which leasing companies might experience as they try to offer the service to various clients.

Submitted to: Eastern and Southern Africa Management Institute Dar es Salaam, Tanzania Submitted by: Anganile Ntenga Dar es Salaam Submission date: 3 August 2011

Lecturer LY

Fixed Assets Leasing as an option for business financing

ii

Contents
1. 1.1 Introduction .................................................................................................................................... 1 The applicable leasing structure .......................................................................................................... 1 1.1.1 1.1.2 Financing Leases ................................................................................................................................ 1 Operating Leases ................................................................................................................................ 1

2. 2.1 3.

Background ..................................................................................................................................... 3 Leasing History in Tanzania ............................................................................................................... 3 Regulatory Framework and Accounting Treatment ......................................................................... 5 3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 Regulatory Framework in Tanzania ...................................................................................................... 5 The Financial Leasing Act, 2008 .......................................................................................................... 5 Leasing and the Income Tax Act 2004 .................................................................................................. 6 Leasing and the VAT Act 1997 and its following amendments ................................................................ 6 Accounting treatment according to IFRS – IAS 17 ................................................................................. 6

4. 4.1 4.2 5. 6. 6.1 6.2 6.3 7. 7.1 7.2

Advantages and disadvantages of Leasing ........................................................................................ 8 Reasons why leasing is a preferred method of financing ....................................................................... 8 Disadvantages of Leasing................................................................................................................... 9 Factors to be considered before embarking to leasing option ......................................................... 10 Challenges Leasing Company faces in offering the service and recommendation. .......................... 11 Funding 11 Legal and regulatory framework. ...................................................................................................... 11 Recommendation ............................................................................................................................ 12 Conclusion and reference ............................................................................................................... 13 Conclusion ..................................................................................................................................... 13 Reference ....................................................................................................................................... 13

Financial Management...
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