Hong Kong has taken bold steps in introducing a new taxation regime in the aviation and financial industries. Undoubtedly the transformation paves the way for Hong Kong to establish itself to be one of the leading aviation leasing and financing hubs. We expect more aviation financiers to emerge from Hong Kong and mainland China to capture this potentially lucrative business.
* Source: HK Financial Services Development Council – Recommendations for Development Hong Kong as an Aircraft Leasing and Financial Hub Paper No. 31.
Tax advisor to ICBC Financial Leasing, Operating Lease Award of the Year 2017 at Airfinance Journal’s Inaugural China Award
Aircraft Lessor, JOLCO Finance Deal of the Year in Global Transport Finance Gala Awards 2016.
The new accounting standard has an impact on lessees and lessors in their financial statements, key financial indictors, business models and pricing strategies. Leasing companies will have to re-evaluate the efficacy of their operational and legal structure.
Our accounting advisory team has extensive experience with the aviation leasing and financing clients in dealing with a diverse array of projects from restructuring, public listing, acquisitions and reforms.
Aircraft leasing companies face a range of challenges and risks, including:
- compliance requirements by foreign regulatory bodies
- country and credit risk
- diverse source and terms in financing to reduce interest rate and exchange rate risk
- impairment of aircraft requires risk management and monitoring of financial accounts
- aircraft residual value and asset portfolio management
Our specialised consulting team has built and optimised risk management systems for leading and financing companies in China, such as pre-leasing scan of risks, analysis of stock assets. In addition, we actively cooperate with national organisations such as China Finance 40 Forum, China Leasing 30 Forum and local leasing associations.
Aircraft leasing arrangements are usually complex in nature and can involve multiple jurisdictions. Anti-avoidance is also becoming a major challenge for the aircraft leasing industry.
Our team is specialised in handling tax engagements for the aircraft leasing industry. We maintain close contact with the relevant government authorities and act as the communicator for market participants. The team has conducted tax planning and leasing structure projects for numerous sizeable aircraft leasing companies.
The new accounting standard poses new challenges to aircraft leasing arrangements and transaction structures. Relevant parties would have to assess the accounting, taxation and legal risks.
The team collaborates closely with Tiang & Partners*, which provides legal services. Tiang & Partners works closely with Chinese and foreign lenders, lessors and Chinese airlines on matters relating to aircraft, engines and other equipment, including sale and purchase, financing, leasing and dispute resolution. In the past, the team has been involved in various types of transactions such as JOLCO, US EXIM backed financing of Boeing aircraft, US tax leasing, ECA supported financing of Airbus aircraft, Export Development Canada (EDC) financed Bombardier aircraft, BNDES financed Embraer 190 aircraft, Chinese lessors’ cross-border leases and more.
* Tiang & Partners is an independent Hong Kong law firm that collaborates closely with the global PwC network.
Stella Fu
Central China Markets Leader, Aviation Business Services Leader, PwC China
Tel: +[86] (21) 2323 2907
