Study of Tax Impediments on the Growth of Leasing and Factoring Confidential
Study of Tax Impediments on the Growth of Leasing and Factoring in Malaysia
Request for Proposal (RFP)
Issuer
Bank Negara Malaysia
Jalan Dato’ Onn
50480 Kuala Lumpur
ISSUE DATE : 02 July 2015
CLOSING DATE/TIME : 16 July 2015/ 12.00 noon
1. REQUEST FOR PROPOSAL
The purpose of this Request for Proposal (RFP) document is for Bank Negara Malaysia (BNM) to invite Tenderers to submit a proposal to conduct a study on tax impediments that can unreasonably hamper the growth of leasing and factoring activities.
2. BACKGROUND OF PROPOSAL
2.1 BNM is looking at strengthening the offering of leasing and factoring as an alternative form of financing particularly to small and medium enterprises (SMEs) and startups. This is in line with Recommendation 2.1.1 (ii) of the Financial Sector Blueprint 2011-2020.
2.2 Through our engagement with relevant stakeholders, several issues on unfavourable tax treatment were highlighted, among others are:
2.2.1 High stamp duty cost due to ad-valorem rate on leasing documentation;
2.2.2 High effective tax rates as a result of Income Tax Leasing Regulation’s requirement for leasing to be treated as distinct and separate business source;
2.2.3 Capital allowance claims on leased assets are quarantined to the leasing source and cannot be used to set off other business income; and
2.2.4 Capping on the deductible qualifying expenditure of RM100,000 for on-the-road motor vehicles price of RM150,000 or less and RM50,000 for motor vehicle price above RM150,000.
2.3 In this regard, several recommendations were proposed to address the issues highlighted, namely:
2.3.1 Reduction in stamp duty ad-valorem rate or stamp duty is to be on nominal basis;
2.3.2 Leasing business to be regarded as the same source with other financing business of the company;
2.3.3 Removal of the quarantine of capital allowance on leased assets;
2.3.4 Removal of capping on RM50,000 on deductible qualifying expenditure or increase the capping to RM150,000 on all motor vehicles; or
2.3.5 Reintroduction of accelerated capital allowance (ACA) to make it an attractive form of asset financing.
2.4 Furthermore, with the implementation of Goods and Services Tax on 1 April 2015, 6% tax expense is to be imposed on the periodic payments of operating leased asset.
2.5 For factoring business, cost of stamp duty was highlighted as one of the issues affecting the growth of factoring business in Malaysia.
3. SUBMISSION OF PROPOSAL
3.1 The Tenderers are invited to submit a proposal to provide tax consultancy services on the impact of these tax impediments to the industry and proposed for the best recommendations in solving these issues in the form of presentation of 15 to 20 slides including description of the proposed methodology of the study
3.2 The objective of this study is to provide sufficient impact analysis and sustainable recommendation from an independent and professional viewpoint, with necessary consultation with relevant industry stakeholders (i.e. financial institutions, factors, lessors, SMEs, Inland Revenue Board etc.)
3.3 Tenderers should build on the observations highlighted in Section 2 above.
3.4 The scope of the proposal may include, but not limited to, the following subject matters:
3.4.1 Validate on the tax impediment issues on leasing business as highlighted in Item 2.2;
3.4.2 Highlight any new tax impediment issues affecting the growth of leasing business;
3.4.3 Identify the tax impediment issues affecting the growth of factoring business;
3.4.4 Undertake a stock take/ environmental scanning to identify potential gaps other than tax that are impeding the overall growth of factoring and leasing business;
3.4.5 Identify any issues that are impeding the SMEs and startups from getting factoring and leasing;
3.4.6 Propose tax recommendations including tax incentives for leasing and factoring activities that will expedite the growth of these financing in Malaysia with appropriate international benchmarks;
3.4.7 Provide cost and benefit analysis on the impact of these recommendations in terms of reduction of the cost of financing to customers (i.e. borrowers) in addition to impact analysis on government tax revenue. In this regard, Tenderers should describe the methodology to be used to analyse/estimate the impact; and
3.4.8 Participate in the discussion on these tax recommendations with ministries/tax authorities and other various stakeholders post-reporting.
3.5 The appointed tax consultant is expected to present an interim report on the progress of the study.
3.6 The proposal should include the estimated total cost of the consultation and the time taken to complete the work.
3.7 This RFP and the response from the Tenderers shall be treated with confidentiality.
3.8 The completed proposal must be received by the stipulated RFP closing date and time.
4.0 CLOSING DATE AND VALIDITY PERIOD OF PROPOSAL
4.1 The closing date and time of this RFP is Thursday, 16 July 2015 at 12:00 noon.
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