The Chartered Tax Institute of Malaysia (CTIM) met with the Inland Revenue Board (IRB) regarding the issues arising from the tax audit cases on specialist doctors.

The Chartered Tax Institute of Malaysia (CTIM) met with the Inland Revenue Board (IRB) regarding the issues arising from the tax audit cases on specialist doctors.

Based on the contracts audited, the risks and rewards for undertaking the services lie with the doctors and not their companies. Therefore, the Director General has statutory powers under the ITA 1967 to disregard the doctors’ treatment of reporting the income under their company and assess the income under the doctors individually.

The IRB has offered a concession whereby the doctors are required to voluntarily disclose the following by 15 December 2016 to avail themselves of the IRB’s penalty reduction programme:

• The consultant fees received from hospitals which were declared as income of the doctors’ companies for YAs 2013 to 2015.

• Any other income (ie other than the consultant’s fee) for YAs 2013 to 2015.

• Any income not declared prior to YA 2013.

The doctors are required to submit copies of the contracts with the hospitals for the IRB’s review, tax returns for the years of assessment with undeclared income and a letter acknowledging that the doctor would be voluntarily disclosing the information stated above.

Penalties will be imposed according to the guidelines regarding the offer for reduction of penalty and the waiver of increase in tax [No 1/2016 (amended)] dated 1 August 2016. The penalty will be imposed on the additional tax in the individual taxpayer file, and not the gross amount.

The IRB has stated that the tax treatment is applicable for consultant fees derived from YA 2013 onwards and will not reassess the fees earned prior to that. However, if it detects any under-declaration or nondeclaration of income in years of assessment prior to 2013, the IRB may audit those years of assessment.

The IRB also stated that it will not be issuing any guidelines with regard to the tax treatment of doctor’s income as there are too many situations to consider. The tax treatment will be considered on a case-by-case basis with reliance on the ITA 1967.

Kindly visit the CTIM website for further details.

Source: CTIM website, 13 October 2016