A finance lease (also known as a capital lease or a sales lease) is a type of lease in which a finance company is typically the legal owner of the asset for the duration of the lease, while the lessee not only has operating control over the asset, but also some share of the economic risks and returns from the change in the valuation of the underlying asset.
UAE Federal Law No. 8 of 2018 on Financial Leasing (the “Law”) came into effect on 1 January 2019, with the aim of regulating the provision of leasing activities in the UAE.
In accordance to the information provided by the Ministry of Finance, United Arab Emirates with respect to Financial Leasing Law, The UAE Financial Leasing Law protects all parties by stipulating that companies providing “finance lease” activity must be licensed to do so by the UAE Central Bank, and finance lease contracts must be officially registered.
Asset leasing eases cash flow for SMES. The Federal Financial Leasing Law supports this by controlling leasing activities in the UAE. It ensures that:
a. Lease contracts must be registered (and)
b. Entities providing leasing must be licensed.
The Federal Financial Leasing Law impacts:
1. Vehicle & Equipment leasing
2. Aviation & Shipping sector
3. Real Estate
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