Leasing in the Democratic Republic of Congo: Regulatory Pitfalls and Adjustments Needed for Sound Accounting Practice
Jean-Marie Tumba Kabalambi
SUMMARY
This expert analysis identifies several factors that may, from a regulatory standpoint, explain why banking institutions do not resort to leasing, even though a law and an implementing instruction from the Central Bank of Congo, intended to allow this means of financing to flourish in the Democratic Republic of Congo, exist. First, there is fiscal insecurity arising from a contradiction between the law and the instruction, which makes the application of the tax on profits and gains as well as VAT uncertain. It is shown that, with regard to fiscal insecurity, the contradictions mentioned do not constitute an absolute obstacle, given the existing hierarchy between a regional law and a national law. Nevertheless, regulatory ambiguities remain potential obstacles. Next, the paper highlights insufficient assurance regarding the forced repossession of leased assets, which may make a banking institution reluctant to offer this type of financing. A proposal is made on the desirable regulatory adjustments.
Keywords: Leasing, Banking, DRC
JEL codes: G21, G38, K23
ABSTRACT
This expert analysis identifies a few factors that could, at the regulatory level, explain the lack of recourse to leasing by banking institutions, notwithstanding the existence of a law and an implementing instruction from the Central Bank of Congo, which are supposed to allow this means of financing to flourish in the Democratic Republic of Congo. Firstly, there is a lack of fiscal security due to a contradiction between the law and the instruction, making the application of Corporate and Profit Tax and VAT uncertain. It is demonstrated that, as far as fiscal insecurity is concerned, the contradiction mentioned do not constitute an absolute blockage, given the existing hierarchy between regional and national laws. Nevertheless, regulatory ambiguities remain potential obstacles. Secondly, there is no certainty regarding the forced repossession of leased assets, which may make a banking institution reluctant to offer this type of funding. A proposal is made on desirable regulatory adjustments.
Keywords : Leasing, Banking, DRC
JEL Codes : G21, G38, K23