IRB’s proposed tax regulations in medical line a blanket ban for specialist doctors to run medical practices through incorporated companies

The MCA Youth Young Professionals and Varsity Students Affairs Bureau (“the Bureau”) has been informed that there is a recent proposal by the Inland Revenue Board (“IRB”) to reassess the tax treatment of specialist doctors practising in the private hospitals.

At the moment, many of these specialist doctors are running their medical practices through incorporated companies. The benefits of such practice is that these specialist doctors will be protected by having limited liability, a protection which is afforded to all companies incorporated in Malaysia, as well as lower tax rates which is available to corporations as compared to the highest tax brackets chargeable on personal income.

However, it appears that the IRB has proposed to change the tax treatment of these specialist doctors whereby they shall be treated as sole proprietors and be taxed on the basis of individual income, thereby no longer enjoy the lower tax rates available to these specialist doctors who have been practising under the name and style of incorporated companies.

Retrospective application of proposed new tax regulations an injustice to specialist doctors

In addition to that, it also appears that the IRB is proposing to impose this new tax treatment on specialist doctors not only for the assessment year of 2016, but also for the previous assessment years of 2010 to 2015.

The Bureau has been made to understand that this proposed new tax treatment on the specialist doctors is due to some instances where the existing tax system was abused by certain quarters. For instance, there were claims that there were specialist doctors who have incorporated their companies together with their family members and pay their family members unjustifiably high directors’ fees in order to avoid paying more taxes. There were also allegations that some have claimed tax deductions for the travelling expenses of these family members who are directors of the incorporated companies to run their medical practices.

Whilst the Bureau fully understands the role of IRB to enforce taxation laws and to ensure all taxpayers pay their fair share of taxes, the Bureau is of the view that such proposed new tax treatment will result in an indirect blanket ban and prohibition on specialist doctors to run their medical practices through incorporated companies.

Further, by allowing the IRB to apply such new tax treatment on previous assessment years will mean that the IRB will be able to enforce the laws retrospectively, thereby causing injustice and unfairness to these specialist doctors.

In view of these circumstances, the Bureau is of the view that the IRB should review its own proposal where the IRB should not impose such regulation across the board against specialist doctors but to audit the accounts of each specialist doctor individually and to enforce the laws strictly only against those who have abused the existing system. Only the culprits, not all specialist doctors, should be penalised. The Bureau would also like to take this opportunity to urge the IRB to not implement any new regulation retrospectively as this will lead to severe injustice and unfairness.

CHOO WEI SERN (ERIC)
MCA Youth Young Professionals and Varsity Students Affairs Bureau Chairman
MCA Youth Central Committee Member 

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