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Industry Guide:

Money Lending

 
Please click here to download complete guide.

 

FREQUENTLY ASKED QUESTIONS

Registration 

1. What supplies do I take into account for the purpose of GST registration? 

The supplies are: 

(a) Sales of security (where borrower default installment payment).

(b) Documentation fees (for statement of account and document related to loans)

(c) Other taxable supplies. 


Input Tax Credit 

2. To advertise my moneylending business, I incur GST on the advertisements made in the newspaper and internet. Can I recover this GST? 

No, you cannot claim GST incurred on the advertisement since it is an input directly attributable to the moneylending activities which is an exempt supply. 

3. Can I claim GST incurred on documentation execution fee i.e. charges for administration cost in executing legal documentation for security held for credit facilities?

No, you cannot claim GST incurred on the documentation execution fee since it is also an input directly attributable to the moneylending activities (an exempt supply). 

4. A moneylender sometimes undertakes appraisal tasks performed by professionals on collateral in relation to loans. Usually, appraisal fees are charged by engineers and surveyors on these tasks. Is GST incurred on this appraisal fees claimable?


Any GST incurred by the moneylenders that are directly attributable to the moneylending activities (an exempt supply) is not claimable. However if the appraisal activity is undertaken in relation to the security (collateral), the GST incurred is claimable in full since the sales of the security is a taxable supply.

5. Can I claim GST incurred on overhead expenses such as electricity and office rental?  

Since electricity and office rental are residual inputs, you are required to apportion these expenses by using the standard method since you are supplying both exempt and taxable supplies. Residual inputs are inputs which you cannot directly attribute to either taxable or exempt supplies

6. The moneylender incurs GST on auctioneer’s service fee. Can this service fee be claimed as input tax credit?  

Yes, you can claim GST on the auctioneer’s service fee because the auctioneer’s service fee is attributable to the sales of the security.


Loss on Disposal  

7. Sometimes the sales proceed of the security does not cover the value of the loan and interest and subsequently the moneylender suffers a loss. As a result of this loss, can the sales of the security be exempted from GST?

Any disposal of a security is a taxable supply irrespective of whether there is profit or loss. Therefore the sale will be subject to GST at a standard rate. If the moneylender is a taxable person, he accounts for GST. The auctioneer of the security charges and accounts for GST if he is a registered person.


Loan Conversion, Transfer, Renewal, Assignment   

8. Is loan conversion prior to disbursement and loan revision subject to GST?

Services of loan conversion where terms of loan (e.g. amount of loan) are being changed or loan revision (e.g. changing the original terms and conditions of loan) are out of scope supplies. Therefore, they are not subject to GST.

9. What is the GST treatment if a loan is transferred from one moneylender to another moneylender?  

The transfer of a loan from one moneylender to another moneylender is an out of scope supply. Therefore, it is not subject to GST.

10. What is the GST treatment on loan renewal i.e. granting of another loan after the maturity of the original loan is reached?  

The renewal of a loan is an exempt supply and therefore it is not subject to GST.

11. What is the GST treatment on loan/credit assignment where title to a security, rights or other interests are transferred to an assignee?  

Loan/credit assignment to another assignee is an out of scope supply and therefore it is not subject to GST.


Other Charges 

12. Is there any GST on the stamp duties and attestation fees on attesting the money-lending agreement by the lawyers?

The fee is not subject to GST as the service is regulatory in nature and is an out of scope supplies. However, GST should be imposed on the attestation fee by the attestor if he is a registered person.

13. As a moneylender, I charge RM3.00 for any request of statement of account on the state of loan by the borrower or RM 5.00 for a copy of any document relating to the loan or security. These charges are being legally prescribed by the Moneylenders Act 1951. Are these charges taxable under GST?  

Yes, they are standard rated supplies and therefore they are subject to GST. 
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