Should Doctors Incorporate in Singapore? IRAS Rules (2026)

By Lucas Seah, Founder of Excellence Singapore Group | Last Updated: October 2026

A doctor can run a practice through a private limited company in Singapore, and for a clinic with staff, premises and equipment a company often makes sense. The limit comes from IRAS, which accepts that choosing a structure is the taxpayer’s prerogative but says “obtaining a tax advantage cannot be one of the main purposes of the chosen arrangement”. Its e-Tax Guide on incorporation by medical professionals, published on 9 September 2024, expects the doctor to be paid an arm’s length remuneration for all the work they do for the practice, taxed at personal rates, with the company keeping a return that matches what it actually does. So incorporation for doctors turns on two questions: does the company have real commercial reasons, and is the doctor paid what the work is worth?

Worried about the recent cases? Jump to what IRAS has done about doctors’ tax.

Key Takeaways

• A company suits a practice that employs staff, runs premises, holds equipment and carries business risks. A one-person company that only receives a locum’s or visiting specialist’s fees usually fails IRAS’s test.
• IRAS’s cost-plus method lets the company keep its costs plus 10% (specialist practices) or 15% (GP and dental practices) and treats the rest as the doctor’s pay. Other justifiable mark-ups are accepted.
• Once you are paid properly, dividends from the company are not taxed in your hands. The problem cases paired a low salary with large tax-exempt dividends or interest-free shareholder loans.
• Under section 33, IRAS can disregard the company, merge companies or raise your pay, and from YA 2023 it adds a surcharge of 50% of the extra tax.
• In the doctors’ cases that reached the High Court in 2020 and 2026, the court upheld IRAS.

When does a company make sense for a doctor?

IRAS looks at what the company does, not what it is called. In a review, it asks why the company was incorporated, what functions it performs and who performs them, whether it is well capitalised and uses substantial assets, what risks it bears, and whether the doctor was paid at arm’s length. Going by IRAS’s own examples, a company is more likely to hold up when it:

• employs staff, and so carries the employer’s duties under the Employment Act and the Workplace Safety and Health Act;
• runs the clinic premises, owns equipment, manages inventory and handles the practice’s contracts;
• runs more than one clinic, each with its own premises, staff and equipment; or
• keeps profits to open or buy more clinics, while still paying its doctors market rates.

A company is at risk of being disregarded when its income comes mainly from the doctor’s personal services and it shows one or more of these signs: no real function beyond receiving fees, minimal assets, no staff in the day-to-day work, no premises of its own, or little risk of its own. One reason IRAS rejects outright is protection from malpractice claims: the guide says a company “does not help to assume litigation risks of a medical nature on behalf of the medical practitioner”, because doctors stay personally accountable for the care they give.

A useful test before you incorporate: what would the company still do if personal and corporate tax rates were the same? If the honest answer is “receive my fees”, the structure is unlikely to survive a review. Substance is only half of it: in IRAS’s worked example below, a specialist clinic with a nurse and a receptionist still had the doctor’s pay recomputed.

Sole proprietorship, partnership, LLP or Pte Ltd?

ACRA’s business structure guide sets out the legal differences; for a doctor, the tax and CPF rows matter as much.

Swipe sideways to see the full table →

Sources: ACRA business structure guide; IRAS self-employed guide and tax rates; CPF Board, October 2026. The CPF row applies to Singapore citizens and PRs.

Limited liability protects you from business debts, not from your own professional conduct: even in an LLP, ACRA notes that each partner stays liable for debts from their own wrongful actions. Our guide to choosing a business structure compares the options for any business, and how to register a company covers the Bizfile steps.

What does IRAS’s e-Tax Guide say?

The guide replaced an e-Circular from November 2019, and IRAS had already set out the main rules in an article it wrote for SMA News in November 2018. It rests on section 33 of the Income Tax Act, the general anti-avoidance provision: where the purpose or effect of an arrangement is to reduce tax, the Comptroller must disregard or vary it to counteract the tax advantage. The exception covers an arrangement “carried out for bona fide commercial reasons” that “had not as one of its main purposes the avoidance or reduction of tax”. Both conditions must be met.

The guide groups the arrangements IRAS treats as avoidance into four kinds:

1. Shifting personal-service income to a company. An anaesthetist who invoices clinics and hospitals through his own company, with no staff, is taxed on all of it personally. So is a dentist whose share of a dental group’s profit is paid to her company.
2. Splitting one practice across several companies. Consultations, medicine sales and surgery booked in three companies that share one nurse and receptionist are consolidated into one company. Two clinics that genuinely run separately are acceptable.
3. Re-incorporating to restart the start-up exemption. Moving the same practice into a new company after three years does not earn a second round of the start-up tax exemption.
4. Profit splits that ignore economic reality. A nominal salary with most of the earnings kept in the company leads IRAS to recompute the doctor’s pay, as in the worked example below.

When IRAS applies section 33, it can tax the company’s income as yours (crediting the company’s tax against your bill), merge the companies’ income, or raise your pay with a matching deduction for the company. From YA 2023, section 33A adds a surcharge of 50% of the extra tax, payable within one month of the notice even if you object. IRAS also warns that merging companies can change their GST position and that grants paid to them may be reviewed.

How do you pay yourself at arm’s length?

IRAS describes an arm’s length remuneration as one that “adequately rewards you for all your contributions to the business”, in the way you would pay a third party for the same services. It offers two ways to get there:

• Market salary benchmarking: pay based on your specialty, experience, roles (doctor, director, marketer, the reputation you lend the practice) and what similar services fetch.
• The cost-plus method: because benchmarking a specialist is hard, the company is treated as a support provider. It keeps its costs plus a mark-up, and the rest of the profit is the doctor’s.

The guide’s mark-ups come from industry benchmarks, and IRAS says it “will accept other justifiable mark-up margins or basis of apportionment”:

Source: IRAS e-Tax Guide, 9 September 2024, paragraph 7.33.

In IRAS’s worked example, a specialist’s clinic company, which employs a nurse and a receptionist, earns S$1,000,000 with S$300,000 of costs, including the doctor’s nominal S$15,000 salary, and pays him a S$400,000 tax-exempt dividend.

So the doctor is taxed on S$685,000 at personal rates, and the company deducts the extra S$670,000. The gap between the top personal rate of 24% and the 17% corporate rate is the tax advantage the guide describes. Our income tax calculator and corporate tax calculator show both sides for your own figures.

IRAS answers two common objections. A new GP practice that is losing money can pay a low salary if it can show the cause is cash flow, not tax, but once income stabilises the salary should move to arm’s length. And funding expansion does not justify a nominal salary: pay yourself properly first, then put what remains into the business.

Annex A of the e-Tax Guide includes an IRAS calculator for the cost-plus figure. The judgment lies in the inputs: which costs belong in the company’s cost base, which mark-up your practice can justify, and a written record of why. When we keep a clinic company’s books and prepare its tax return, our tax team can work through IRAS’s guide with you using your clinic’s own figures, so the salary you set has a clear basis and a record you can show IRAS if it asks. IRAS decides each case on its own facts.

Salary, director’s fees, dividends and CPF

IRAS gives a direct answer for the common set-up: a doctor who is the sole shareholder, provides most of the services, has one or two staff and runs his own clinic should receive most of the income as employment income, and the profits left in the company can then be paid out as dividends.

• Salary and bonus are taxed at your personal rates, and CPF is payable on them if you are employed under a contract of service.
• Director’s fees are taxable in the year you become entitled to them, usually when the AGM or the board approves them (IRAS), and CPF is not payable on directors’ fees voted at a general meeting.
• Dividends from a Singapore resident company are not taxable in your hands under the one-tier system, because the company’s tax is final.
• Shareholder loans need the most care. In a parliamentary reply on 7 July 2026, the government said IRAS invoked its anti-avoidance powers 124 times from 2021 to 2025 (across all taxpayers) and assessed S$49 million in additional tax, S$48 million of it recovered so far. All but one of the cases “involved taxpayers extracting profits as tax-exempt dividends or interest-free shareholder loans”.

For a doctor, the salary test comes first: set the salary at arm’s length, then pay dividends from what remains. Our payroll service, from S$30 per employee a month, runs the clinic’s monthly payroll and CPF; year-end IR8A filing and IR21 tax clearance are charged separately, per employee.

Locum doctors: why a one-person company rarely works

Locum fees are trade income. IRAS has told doctors to report them as such, and the seminar slides for medical practitioners on its industry guidance page list unreported locum income among the common errors it finds. A self-employed locum declares the fees in Form B and pays MediSave as a self-employed person; a doctor with a salaried job and locum sessions on the side is both an employee and self-employed and reports each income in its own section.

The e-Tax Guide’s locum example is blunt. A locum earning S$400,000 a year from several GP clinics incorporated a company, paid himself only a nominal salary and cited malpractice protection as the reason. The company had no premises, one computer and no staff. IRAS disregarded it, taxed the fees in his own name and credited the corporate tax already paid.

For 2026, MediSave for self-employed Singapore citizens and PRs applies once net trade income exceeds S$6,000. Above S$18,000, the rate is 8% (capped at S$7,680) below age 35, rising to 10.5% (capped at S$10,080) at 50 and above, and mandatory contributions get full tax relief. Our guides to employee versus contractor status, filing personal income tax and personal tax reliefs cover the rest.

What has IRAS done about doctors’ tax?

IRAS separates the two tracks: audits for taxpayers who may have been negligent, and investigations for “the small group of errant taxpayers who deliberately evade taxes”. It names doctors and dentists among the self-employed groups its compliance work focuses on, and says it sees “a growing trend of high-income individuals seeking to avoid taxes through corporatisation” (IRAS). The e-Tax Guide opens by saying that, through its audits, IRAS “has encountered medical practices with business arrangements which IRAS has assessed to be set-up for tax avoidance”. Three published decisions show how doctors’ challenges have gone:

• 2020, a dentist (High Court). After incorporating, the dentist treated the same clinic’s patients as before, but the clinic paid his company instead of him, and his pay from the company was well below what he had earned directly. The court upheld IRAS, while noting that doctors who set up companies “with a compendium of purposes such as delegating the management of the business and limiting the liability of the doctors are not the sort of arrangements contemplated in s 33”.
• 2024, a medical practitioner (Income Tax Board of Review). The doctor conceded that the tax saving was a “good by-product” of his arrangement, which helped the Board find that avoiding tax was one of its main purposes.
• June 2026, three specialists (High Court). The doctors paid themselves monthly salaries of S$5,000 to S$6,000 while drawing large tax-exempt dividends and interest-free loans from a group of companies. An expert report putting their salaries, bonuses and directors’ fees within an arm’s length range did not explain those dividends and loans, and the court dismissed their challenge to IRAS’s reassessments for YA 2013 to 2018. For the main clinic company, IRAS had used the cost-plus 10% method and taxed the remaining profit as the doctors’ employment income.

Prosecutions are a separate track from section 33. In 2020, for example, IRAS reported that a dental surgeon who directed a dental practice company was convicted of abetting it in making an incorrect tax return without reasonable excuse, leaving out S$175,701 of business income that included Community Health Assist Scheme reimbursements, and of failing to tell IRAS in time that the company had to register for GST (it registered more than a year late). Fines and penalties came to S$40,716.

The civil cases share a pattern: pay set well below what the work earns, profits taken out as tax-exempt dividends or loans, and companies with little substance. A practice that pays its doctors properly and gives its company a real role is not what these cases are about.

What if IRAS reviews your practice company?

IRAS gathers information by letter, phone call or interview, starting with the questions above. It then applies the Court of Appeal’s three-step test: is there a tax advantage; if so, does the arrangement meet both the commercial-reasons and main-purpose conditions; and if not, did the advantage come from a provision Parliament intended it to use. When it finishes, it sends a letter of completion of review.

• Gather the evidence of substance: employment contracts and payroll records, tenancy and supplier contracts, board minutes on salary decisions, and the basis for the doctors’ pay.
• Keep filing. IRAS says you may continue to file as before during a review, but the surcharge applies if it makes a section 33 adjustment.
• Correct what is wrong early. Errors outside the scope of IRAS’s query can still qualify for reduced penalties under its voluntary disclosure programme, and our guide to IRAS audit letters explains each type of letter.
• Consider reporting the income yourself. IRAS says you can keep the company to sign contracts, declare the practice income as trade income in Form B, and apply to waive the company’s Form C if that is its only income and it holds no investments.

Our tax team, which brings accreditation from the Singapore Chartered Tax Professionals (SCTP) in both income tax and GST, handles IRAS letters and reviews for companies and individuals. Fees are quoted after we review the notice.

Running a clinic company properly

• Company secretary: the office must not be left vacant for more than six months, and a sole director cannot also be the company secretary (section 171 of the Companies Act). Our company secretary service covers the AGM, annual return and registers.
• Tax filings: Estimated Chargeable Income within three months of the financial year end unless waived, and Form C-S or Form C by 30 November each year.
• Accounts and audit: a small private company is exempt from audit if it meets at least two of three limits for the past two financial years: revenue of S$10 million or less, total assets of S$10 million or less, and 50 employees or fewer. Our audit exemption guide explains the test; where an audit is needed, we prepare the accounts and work with your appointed audit firm.
• GST: medical services are not on IRAS’s list of exempt supplies, so a GST-registered clinic charges GST on them, and registration is compulsory once taxable turnover exceeds S$1 million (our GST threshold guide).

The errors IRAS keeps finding in medical practices are bookkeeping errors: consultation fees and medicine sales not reported in full; lab and X-ray fees recorded as a margin instead of gross revenue; private expenses such as family holidays claimed against the practice; E- and S-plate car costs, which are not deductible even when the car is used for the practice; family members paid out of line with their work; and records thrown away before the five years required. Our accounting service handles monthly bookkeeping from S$200 per month, so the clinic’s figures are ready when you set your salary and file the tax return.

Frequently Asked Questions

Is it legal for a doctor to set up a company?

Yes. IRAS says choosing a business structure is the taxpayer’s prerogative. What it challenges under section 33 is an arrangement with few or no commercial reasons where cutting tax is one of the main purposes. A company that runs a clinic with staff and premises is a different thing from one that does nothing except receive a doctor’s personal fees.

How much salary should a doctor take from their company?

Enough to reward all your work at what the company would pay an outsider for it. Under IRAS’s cost-plus method, the company keeps its costs plus 10% (specialist) or 15% (GP and dental) and the rest is your pay; other justifiable mark-ups are accepted. IRAS accepts a low salary while a new practice is genuinely short of cash, but expects it to rise once income is steady.

Are dividends from my clinic company taxable?

Not in your hands. Dividends from a Singapore resident company are tax-exempt for shareholders under the one-tier system, because the company’s tax is final. The risk lies in paying dividends instead of a proper salary: in the section 33 cases on doctors, IRAS taxed the practice’s profits in the doctors’ own names. For YA 2023 onwards, a 50% surcharge applies on top.

Does a company protect me from malpractice claims?

No. IRAS’s guide says medical professionals stay personally accountable for the services they provide, so a company does not take on litigation risks of a medical nature, and IRAS does not accept malpractice protection as a commercial reason for incorporating. A company can still carry real business risks, such as employing staff and running premises, and IRAS does count those.

Is tax avoidance the same as tax evasion?

No. IRAS defines tax evasion as cutting tax by illegal means, such as claiming fictitious expenses or not declaring income. It is a criminal offence, with penalties of up to four times the tax underpaid. Avoidance is an arrangement that is artificial or lacks commercial substance and is designed for a tax advantage Parliament did not intend. IRAS counters it under section 33 instead.

Is my accountant responsible if IRAS disagrees?

Not in IRAS’s view. Its guide says every individual is personally responsible for his own tax affairs, and a company director for the company’s tax matters, so you need to evaluate the advice you accept. IRAS adds that it will consider action against a tax agent who abetted a taxpayer to avoid tax. Keep the advice and the basis for your salary in writing.

Thinking about incorporating your practice?

Incorporation for doctors works well when the company has a real job to do and the doctors are paid properly for theirs. Excellence Singapore Group can incorporate the company, act as company secretary, keep the books, work through IRAS’s salary guide with you, run payroll and CPF, and file the company’s and your personal tax returns. If IRAS has written to you about your practice, or you want your current structure checked before it does, talk to us.