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Understanding Tax Treatment for Specialist Doctors in Private Hospitals-IRBM Guidelines
The Inland Revenue Board of Malaysia (IRBM) has issued specific guidance on how income earned by Specialist Doctors in private hospitals should be taxed. According to the IRBM Guidelines dated 16 March 2022, titled “Garis Panduan Layanan Cukai Ke Atas Pendapatan Pengamal Perubatan (Doktor Pakar) Di Hospital Swasta Sama Ada Ditaksir Di Bawah Individu Atau Syarikat”, the nature of the income is assessed based on the actual services rendered by the doctor—not solely on the contractual structure or the entity used to receive the income.
Key Points from the Guidelines
The IRBM outlines that when a Specialist Doctor provides medical services such as consultations, treatments, or surgeries in a private hospital, and the hospital collects the payment for these services, the income is considered the personal business income of the doctor.
This applies even if:
- The hospital has signed a service agreement with a company owned by the doctor.
- The doctor provides services through a company that holds a contract with the hospital.
- The doctor is a shareholder or director of the hospital or a company that manages the services.
The core principle is that the doctor is the individual performing the services. Therefore, the income is attributable directly to them, regardless of the company structure used.
Tax Implications
Income earned under these circumstances should be reported as business income under Section 4(a) of the Income Tax Act 1967. It must be declared using Form B (for individual taxpayers).
However, if the doctor also earns income through other business activities—such as operating a medical supply company or other unrelated medical businesses—those incomes may be assessed separately under the company and reported via Form C.
Exceptions to the Rule
There are cases where the income may be considered employment income instead. This occurs when:
- The doctor is employed by the hospital under a contract of service, meaning there is a formal employer-employee relationship.
In such situations, the income must be declared as employment income and taxed accordingly.
This clarification by IRBM is significant for Specialist Doctors practicing in private hospitals, as it emphasizes the importance of how services are rendered over the business structure used. Doctors should review their service agreements and tax filing practices to ensure full compliance with the latest guidelines. For further assistance, consulting a licensed tax agent is advisable.
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