Closed-Ended Finance Lease

Under a closed-ended finance lease, once the leased asset has been handed over to the customer, an invoice is issued for the entire principal under the repayment schedule in the lease agreement and the associated VAT. The lessee must pay the VAT on that invoice immediately after it is issued, while the taxable amount of the invoice is repaid in instalments under the repayment schedule. No VAT is charged on the interest included in the monthly instalments under the repayment schedule. Once all obligations under the lease agreement have been paid in full, the asset becomes the customer's property; until then it is legally owned by the lessor and registered in the lessor's name. Once the asset has been handed over, an invoice is issued for the entire principal under the repayment schedule and the associated VAT, which is payable immediately after issue.