In the business world, innovation and technology are key to the success of any company. However, many startups and small companies may find it difficult to finance their technology projects due to a lack of financial resources. This is where technology sponsorship or tax leasing can be an attractive option for these companies.
In a previous article, we talked about the tax incentives that can benefit companies that invest in technology. Today, we will delve into something a bit more complicated: the operation of technological patronage or tax lease, a financing alternative that allows companies to obtain equipment and technology through a financial lease with significant tax advantages.
Read on to learn more about tax leasing and how it can benefit your company!
What is a tax incentive?
Tax incentives are tools used by the government to encourage investment and economic growth in its territory. These incentives come in the form of tax exemptions, tax credits, tax deductions, or other forms of incentives that reduce investment costs and improve the profitability of projects.
These incentives can be granted to companies, individuals and organizations in order to stimulate economic and social development. A common example of tax incentives is tax exemptions granted to companies investing in research and development, or investing in special economic zones.
Therefore, we see that tax incentives are important tools to encourage investment and economic growth in a region. If you are thinking of investing in a project, it is important that you investigate the tax incentives available to maximize your benefits and improve the profitability of your investment, if you consider that these issues are beyond your knowledge, do not hesitate to contact us, at The Startup CFO we will be happy to help you and solve all your doubts.
How tax leases work
We have already mentioned that the high cost of investment in technology can be an obstacle for many companies, especially small and medium-sized companies.
In this sense, the tax lease can be an interesting alternative to finance projects, allowing for the recovery of an important part of the R&D expenditure. This financing instrument is based on the lease of an asset with a purchase option, allowing the company to enjoy the benefits of the leased asset without having to purchase it immediately.
As we discussed in our post on tax incentives, the tax lease is a very interesting tool, since it allows the recovery of part of the R&D expenditure through the deduction of interest and amortization of the leased asset. In this way, it is possible to reduce the tax burden and, at the same time, finance technological projects that can improve the company’s competitiveness.
In addition, tax leasing is an alternative or substitute for tax deductions. Unlike tax deductions, which reduce the corporate tax base, tax leases allow the interest and depreciation of the leased asset to be deducted from the full corporate tax liability.
On the other hand, a tax lease is compatible with tax credits and other tax incentives that may be available in the region where the company is located. In this way, tax savings can be maximized and technology investment costs can be reduced.
Advantages of tax leasing
The following are the main advantages of tax leasing:
Earlier monetization of R&D spending
One of the main advantages of the tax lease is that it allows companies to monetize part of the R&D expenditure from previous years, receiving cash quickly. This means that the company does not have to wait for the benefits of the innovation or technology project to materialize to get a return on investment.
In addition, when the tax lease is applied, there is a percentage that is doubled, even reaching 24% or 25%. This means that the company can recover a greater amount of money, which translates into a significant reduction in financing costs and an improvement in cash flow.
No penalty and counts as a turnover
By applying the tax lease, the company suffers no penalties and in addition, it counts as invoicing at the account level. This is especially interesting for companies that need to improve their financial situation and meet turnover targets.
In short, tax leasing is a very interesting financing tool for companies. If you are thinking of investing in technology, tax leasing can be an attractive option to improve the competitiveness and growth of your company.
We hope this article has been useful to understand tax leases, a very interesting financing alternative.
At The Startup CFO, we understand that tax leasing can be a complicated issue and that is why we want to offer you our help. If after reading this article, you still have doubts about how to apply the tax lease in your company, do not hesitate to contact us. We will be happy to talk to you and help you get the most out of this financing tool. We are here to help you!