Crowe Chat Vol.3/2022

The IRBM has recently issued the Guidelines on the Tax Treatment of Income of Specialist Doctors in Private Hospitals (available in Bahasa Malaysia only) to explain the tax treatment of income received by specialist doctors in private hospitals – whether the income should be assessed as the business income of the specialist doctors in their personal capacity or as the income of the company set up by the specialist doctor.

Based on the Guidelines, the IRBM has issued a letter to the Malaysian Medical Association (MMA) on 28 June 2018 stating that, effective from the year of assessment (YA) 2017, income received by specialist doctors will be treated as the individual business income of the specialist doctor. 

Details of the Guidelines

Income to be Assessed as a Business Income of the Specialist Doctor

• If a Specialist Doctor sets up a company and enters into an agreement with a private hospital to provide specialist services to patients, the consultation fee and any other form of payment received from the private hospital will be treated as a business income of the Specialist Doctor.
  *The principle of tax treatment is the same regardless whether the agreement entered into with a private hospital is in the name of the Specialist Doctor or the Company.
  

• If several Specialist Doctors establish a Company and the Company enters into an agreement with a private hospital to provide specialist services to patients, the consultation fees and other fees received from such a private hospital are still considered as business income of the Specialist Doctors in their personal capacity.

In the following situations where a doctor owns a Specialist Clinic located in the premises of the private hospital, consultancy fees and any other forms of payment received are treated as business income of the doctor:

• Patients go to private hospitals for treatment. The patient is referred to a Specialist Doctor who owns a clinic at the hospital to receive appropriate treatment. After the treatment, the patient obtains the medicine from the hospital pharmacy and makes the payment at the hospital payment counter.

• Patients come directly to the Specialist Clinic to seek treatment from the Specialist Doctor and patients require surgery or further treatments using hospital facilities such as operating theaters or others.

Income to be Assessed as a Employment Income of the Specialist Doctor

• Consultancy fees and any other forms of payment received by a Specialist Doctor who is an employee (contract of service) of the Specialist Clinic either on a full or part time basis, will be treated as employment income of the Specialist Doctor.

• In the situation where a doctor is the shareholder and director of the Specialist Clinic, the director’s remuneration received is treated as employment income of the doctor.

• In the situation where a doctor is the shareholder and director of the Specialist Clinic, but the doctor is not a Specialist Doctor of that Specialist Clinic, the director’s remuneration received is treated as employment income of the doctor.

Income to be Assessed under the Company

The following are situations where consultation fees and other fees received are taxable as an income of the Company set up by the Specialist Doctors:

• If a doctor owns a Specialist Clinic in a private hospital premises and patients come directly to receive specialist treatment from the clinic without being referred by the private hospital and the doctor does not use any private hospital facilities in carrying out treatment to patients. 
• If the Specialist Clinic is not on the premises of a private hospital and the services provided to patients do not involve any private hospital.