Tax Code Assignment for Medical Expenses - … Code Assignment...FOMEMA (Foreign Workers ...

Author: Stanley K Wong | [email protected] Title: Tax Code Assignment for Medical Expenses | Published: 12/02/2016

© SW Project Consulting Sdn Bhd 2016

Tax Code Assignment for Medical Expenses Introduction

Even though it is not an offence or seriouswrong doing by using different tax code formedical expenses, I would rather follow thefacts stated in the Act, regulations, guidelinesand DG’s decisions to assign proper tax codefor medical expenses.

For medical expenses, it shall involve usingthe following five tax codes, generally:

1. EP – Exempt Purchase 2. NR – Not Registered Businesses 3. BL – Block Medical Expenses 4. ZP – Zero Rated Medication 5. OP – Out of Scope by Government

Hospital

I observe that many businesses andorganizations use different tax codes formedical expenses due to their nature for GSTpurpose. The following figure shows that businessesare usually assigning EP – Exempt Purchaseor NR – Not Registered for clinic medicalexpenses. Actually, there are facts to supporton when we use the correct tax code (EP orNR) for the clinic medical fee. You may readthe summary below.

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General Tax Code Matrix for Different Medical Establishments

Type of Healthcare Businesses Tax Code

Document

Clinic EP Cash bill, receipt, invoice Government Hospitals OP

Herbal Shop Sdn Bhd Traditional Medicine Practitioners (Not GST Registered)

NR

Clinic Sdn Bhd BL

EP

Tax invoice, Simplified Tax Invoice & Invoice

Medical Sdn Bhd or Bhd BL

Private Hospitals BL

EP

Pharmacy Sdn Bhd BL

ZP

Tax Invoice or Simplified Tax Invoice Herbal Shop Sdn Bhd

Traditional Medicine Practitioners (GST Registered)

Summary of Tax Code Assignment for Medical Expenses

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Tax Code

Type of Healthcare Businesses Description Document Reference

BL

Clinic XYZ Sdn Bhd Medical clinic which provides mixed supplies and incorporated

Invoice and Tax Invoice

1;2;4;6;7;8;10 & 12

FOMEMA (Foreign Workers Medical Examination Monitoring Agency ) by Unitab Medic Sdn. Bhd. (312291‐

X) FOMEMA Web

Medical establishments which provide medical and other services Other services such as registration fee, administration fee and non‐medical related service fee

Qualitas Medical Group Sdn Bhd (449628‐P) or medical groups

Pantai Hospitals Sdn Bhd (466313‐V) or private hospitals

Other private healthcare establishments which are incorporated and GST registrants

XYZ Pharmacy Sdn Bhd Medicine from pharmacy which is standard rated

Tax Invoice or STI

EP

Clinic ABC Clinic provides medical services Clinic is not required to register for GST

Cash bill, receipt, invoice

1;2;3;5;9

Private hospitals Provides medical services

Sells medicine to its own patient and staff

OP Government hospitals Provides medical services

Sells medicine to anyone

Cash bill, receipt

13

ZP Private pharmacy National Essential Medicine Tax Invoice or STI

10

NR Any businesses Traditional Medicine Practitioners

Herbal Shop, Acupuncture, orthopaedics and etc

Any medical businesses not liable to register

Invoice, cash bill, receipt

4

TX General insurance company Foreign workers’ compensation scheme

Tax Invoice 11

Summary of Tax Code Assignment for Medical Expenses

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Supporting References for Tax Code Assignment – Medical Expenses

Reference 1: Definition of healthcare Services GST Exempt Order Gazette 2014 Paragraph 18

DG Decision Item 2 – 3/2015

Guide on Healthcare Services [03112015]

Reference 2: Definition of exempt supply

Supporting References for Tax Code Assignment for Medical Expenses

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Reference 3: Non Registration of a person who make wholly exempt

supplies

Guide on Registration [13012016]


Reference 5: Non Registration of a private healthcare facility

Reference 4: Registration of a person who make taxable suppliesGuide on Registration [13012016]

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Reference 7: Registration Fee, Administration Fee,

Examination Fee and Miscellaneous Fee and Charges are subject to GST


Reference 6: Registration of a private healthcare facility which is mixed supplier


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Reference 8: Medicine from Pharmacy is Block Q3

Reference 9: Medicine from hospital and private healthcare

establishment through prescription is exempted – Q4

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Reference 10: Medicine from Pharmacy is Zero Rated if it is

National Essential Medicine List

GST Zero Rated Order Gazette 2014 & Amendments in 2015

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Reference 11: Disallowance of Input Tax Credit on Insurance and Takaful Contracts

Guide on Input Tax Credit [29122015]

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Reference 12: Disallowance of Input Tax Credit on Medical

Expenses

Guide on Input Tax Credit [29122015] Regulation 36, GST Act 2014 (f)

Reference 13: Medical Treatment by Government Hospitals

is Out of Scope


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Tax Code Chart of Accounts

BL

Medical Fee; Medical Expenses Hospitalization Surgical Accident Insurance & Takaful Scheme Medicine (Pharmacy) Staff and Foreign Workers’ Benefits GST Block

TX Foreign Workers’ Expense Foreign Worker Compensation Scheme*

EP Medical Fee; Medicine Expenses (Private Clinic)

OP Medical Fee; Medicine Expenses (Government Hospitals)

ZP Medical Expenses (NEM)

NR

Medical Expenses (Traditional medicine practitioners**) Medical Expenses (Acupuncture; orthopaedics & etc)

*It is part of obligation under Section 26(2) Workmen’s Compensation Act 1952

**If the traditional medicine practitioner is GST registrant, then it is BL

Businesses need not to disclose adjustments in 6a – Standard Rated Acquisition 6b – Input Tax:

Medical expenses value

Block input tax

Other GST Impacts

Conclusion

Upcoming Event You may be interested in the following event:

Preparation for GST Audit

Avenue Business Centre Phileo Damansara 1

February 26, 9:30 A.M. ~ 5:30 P.M.

Training Fee: RM689.00 Inclusive 6% GST

Please contact Stanley Wong for registration at

Tel: 603-27247183 Mobile: 012-3052908

The following accounting code may need to keep the records:

GST Accounting GST-03 Submission

Proper Records Keeping Even though it is not a wrong doing by assigning other tax code to medical expenses, I emphasize on the maintenance of accounting records is necessary to be accurate. GST Compliance As the Act, regulation, guidelines and DG’s decision mentioned about the proper classification of medical supplies, I would comply with those facts for GST tax code assignment purpose.

Disclaimer:

This Article has been prepared by Stanley Wong, SW Project Consulting Sdn Bhd (SWPC).This Article is meant solely for use by its readers and is not for physical circulation in public. This Articleconstitutes a personal view and interpretation on tax code assignment for medical expenses that is givenunder GST Act 2014 in Malaysia. This Article is based on information that we consider reliable, opinionsexpressed are our current opinions as of the date appearing on this Article. While all efforts have been takento check the accuracy of the information provided herein, we do not warrant that is free from any technicalinaccuracies or typographical errors. Stanley Wong and SW Project Consulting Sdn Bhd shall not be liable fordamages of any kind arising out of or in connection with the use of the information in this Article.

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Tax Code Assignment for Medical Expenses - … Code Assignment...FOMEMA (Foreign Workers ...

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