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Bulgarian Leasing Market

BULGARIA. Leasing penetration ratio. Source: BAL for New bisuness, NSI for Investments ... Bulgaria introduced VAT in 1994. VAT Law changed dramatically in 2007, ...

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Bulgarian Leasing Market

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    1. Bulgarian Leasing Market Developments and Prospects

    A presentation by Teodor Marinov, Co-chairman of Bulgarian Association for Leasing

    2. Historic background – stages, milestones

    Until 1989 - the Bulgarleasing era 1990 - 1992 - start of transition to free market economy, establishment of the first private leasing companies 1993 - 1995 - small car leasing companies gather momentum 1996 - banking sector crisis, lack of refinancing and numerous bankruptcies 1997 - 2000 - first international players enter the market 2001 - rapid expansion phase starts 2002 - two leasing associations established 2003 - mass penetration by international banking groups starts 2005 - BNB commenced collecting and publishing leasing statistics 2006 - BAL established upon merger of the two leasing associations 2007 - Entry into the EU

    3. Measuring market growth - specifics

    BNB data available from 2005 Changes in sample New business measured by financed amounts BAL data: Principles of surveys Sample The combined approach: BNB data used for outstanding BAL data used for volumes

    4. Leasing market size, determined by outstanding net lease receivables at the end of the period (in EUR mln)

    Source: 2001 – 2004 - BAL data 2005 – 2007 - BNB data, for 2005 and 2006 historic figures used

    5. Leasing market size, determined by value of new business (in EUR mln)

    Source: BAL

    6. “New business” financial leasing

    Source: BAL data

    7. Share of machinery and industrial equipment in the part ”new business” - international comparison

    Source: Data from market survey of Leaseurope for 2006

    8. “New business” operating leasing

    Source: BAL data

    9. BULGARIA Leasing penetration ratio

    Source: BAL for New bisuness, NSI for Investments

    10. Ratio of leasing penetration- international comparison

    Sources: Data from market survey of Leaseurope for 2006, country statistics

    11. BULGARIA Ratio of net lease receivables to GDP

    Source: BAL for New bisuness, NSI for GDP

    12. Ratio of net lease receivables to GDP International comparison

    Sources: Data from market survey of Leaseurope for 2006

    13. Legal Framework for leasing

    No special leasing law. Main laws defining leasing activity are: Commercial Code, Law on Contracts, Accounting Law Leasing companies are not protected by Law from supplier default No restrictions on tenor, type of asset and amount Contracts are registered with Central Pledge Registry. Registration is a base for issuance of repossession writ of execution through out-of-court procedure. There is mixed experience in using of this procedure A certain practice among lessors is the notary endorsement of lease contracts. Such endorsement is used for obtaining of writ of execution for collection of the overdue amounts under out-of-court procedure. Unfortunately, experience in applying of such procedure is mixed While overall legal framework is adequate, there is much room for improvement in implementation

    14. NONE

    ACCOUNTING AND TAX ADVANTAGES OF FINANCIAL LEASES

    15. Accounting and profit taxation for leasing

    Taxation of financial and operating leases is based on accounting profits Companies may choose reporting standard between National Accounting Standards (NAS) and IFRS NAS converge towards IFRS (economic treatment of leasing transactions)

    16. VAT taxation for leasing in Bulgaria

    Bulgaria introduced VAT in 1994 VAT Law changed dramatically in 2007, reflecting EC’s 6th directive The General rate of 20% applies to capital payments under financial leases and rentals under operating leases Lessor may choose whether to charge VAT on interest; Right to VAT refund to lessees is allowed under the same criteria as if they were to acquire the asset There is special VAT refund regime for cars, depending on number of seats VAT is due upon delivery (close-end leases) or at installment (open-end leases) VAT refund period grew substantially upon EU accession

    17. Bulgarian leasing market: Challenges ahead

    Macroeconomic impacts Country risk and cost of funds – implication of the sub-prime lending crisis Liquidity impact – limited on banking groups, stronger on captives and severe on independents Eligibility for EU funded projects: Regional Competitiveness and Employment Program for development of the rural areas BASEL II – impact at Group level, implications on re-financing Maturing (?)

    18. Country risk - measurement

    Source: Reuteurs

    19. THANK YOU!

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