JOL & JOLCO Guide Request access

How Japanese operating leases actually work

A practitioner's guide to JOL and JOLCO for aircraft, ships and containers: the structure, the tax rules behind it, what makes a deal work, and what to check. Written by an arranger, shared on request.

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Japanese investors equity via TK Bank non-recourse loan Operator (SPC) owns the asset Airline or shipowner equity loan lease rent purchase option
The basic JOLCO structure. The guide walks through each flow and the rules that apply to it.

What the guide covers

  • Structure and partiesInvestors, the TK operator, lender and lessee, and how JOL differs from JOLCO.
  • Why it works for each sideWhere the lessee's cost saving and the investor's tax deferral come from.
  • Depreciation rulesJapanese useful lives and 200% declining balance, plus used assets and the simplified method.
  • Lease classificationThe Japanese tax tests, the new lease accounting standard and the lender's full-payout requirement.
  • Term, option and interest ratesHow the three conditions fit together and why higher rates change the structure.
  • Ships and containersFlag and ship type, special depreciation and the Japanese-yard requirement, and container sale-leasebacks.
  • Case law and reform historyThe 2005 aircraft lease cases, the 2015 Supreme Court ruling and the main tax reforms.
  • Risks and checklistThe points investors, lessees and arrangers should confirm on each deal.

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