1) When an individual dies, an executor or administrator is responsible for settling debts, paying taxes, and distributing the estate's assets according to the will or intestacy laws.
2) The executor or administrator is assessed and charged for tax on the income of the deceased's estate during the period of administration.
3) Income received by the deceased prior to death is taxed against the deceased, while income received after death is taxed against the executor on behalf of the estate. Various types of income are apportioned between the two tax computations based on when they were received.
2. Introduction
A deceased individual cannot escape from
paying tax
Where a will exists (dies testate), the
executor will handle his affairs.
Otherwise (dies intestate), an
administrator shall be appointed by court
to deal with his affairs.
The wealth that a person beneficially
owned at the time of death is known as
his “estate”.
3. Introduction
The executor or administrator’s duties
include the settlement of any debts,
payment of tax and distribution of the
residue of estate to the beneficiaries
according to will or with the Distribution
(Amendment) Act 1997.
S 2 of the Act, states that the above
person administers or manage the estate
of the deceased
4. Responsibility
An executor is only assessable and
chargeable to tax on income of the
estate of the deceased.
Failing which, he will be jointly and
severally liable to pay a penalty =
amount of tax unpaid
Eg: RM100k of unpaid tax
5. Basis of assessment (s74)
Where an individual dies in the basis
year for a YA, the executor is assessable
and chargeable to tax on the chargeable
income of the deceased
a. For the basis year in which he died
b. For the next succeeding basis year
c. For the previous years
6. Period of administration
Period commencing on the date of
death to the date of last distribution of
assets to the beneficiary
During this period, the executor or
administrator would be liable for
income tax liability on income accrued
or derived from Malaysia
7. INTRODUCTION
For the basis year in which the individual died, there are
2 tax computations.
Income up to the date of death is assessable on the
deceased person. All reliefs will be available to him. No
apportionment of relief.
Income after the date of death is assessed on the
executor of the estate and only RM 9,000 (w.e.f. YA 2009)
of special relief is available ( if individual died domicile in
Malaysia)
8. ALLOCATION OF INCOME
Income Apportionment
Business income/(loss) Time basis at statutory
income
Interest Assessed on a receipt basis
Dividends (Single-tier) Tax exempt
Rental income Time basis
Foreign income Tax exempt – para 28, Sch 6
9. APPORTIONMENT OF INCOME
For dividends, any income paid, credited or distributed in
the basis period when the individual was alive, is to be
treated as the deceased individual’s income. Interest income
received by individual is exempted if received from approved
financial institutions w.e.f YA 2008.
Interest which matures after the date of death is assessed
on the executor.
10. TAX COMPUTATION RULES
In arriving at the Total Income of the Executor of
the Estate, the following deductions shall be made
from the aggregate income in the following order:
1. Current year business loss -- Time basis
2. Abortive prospective expenditure -- Time basis
3. Annuity payable
4. Approved donations -- Date of payment
(restricted to 10 % of aggregate income )
11. TAX COMPUTATION RULES
Administration expenses related to the estate are not
deductible as incurred after the production of income
or related to the assets held by the executor.
Any remuneration paid to the executor for the
administrative work is not allowed as a deduction
unless the executor is given the authority to carry on
the business of the deceased individual.
12. TAX RATES & RELIEFS OF
EXECUTOR
Deceased person died
domiciled in Malaysia?
•Scaled rate 0-
30% RM 9,000
special relief from
total income (w.e.f
YA 2009)
•Flat rate -24%
(Effective
YA2016)
Yes No
Domiciled of a person is defined as the
country in which the person has his
permanent home
13. Tax computation for a deceased person and executor (YA 2021)
Deceased Executor
1 Jan to Date of death
date of death to 31 Dec
Statutory Business income Time Time
Rental income Time Time
Interest Receipt Receipt
Dividends Exempt Exempt
Foreign source Exempt Exempt
Aggregate income (AI) xx xx
Less: CY loss (Time) (Time)
Less: Annuity payable - xx
Less: Donation Date of payment Date of payment
Less: Relief 9,000 (resident) 9,000(domiciled)
Chargeable income xx xx
14. Mable died domiciled in Malaysia on 30th Sept 2021.
Assume that she is only eligible for personal relief. Details of
her income are:
Adjusted income/(loss) RM
Business I 200,000
Business II (100,000)
Income of foreign source
(only 3,000 was remitted) 22,000
Dividend income (single tier)
Received on 1st March 2021 9,000
Received on 1st Dec 2021 12,000
Rental income 40,000
Annuities payable (paid 3,000) 5,000
Approved donation (paid on 30th Dec 2021) 3,000
15. Deceased Executor/Estate
RM’000 RM’000
Business I (statutory) 150 50
Foreign source Exempt Exempt
Dividend income (single tier) Exempt Exempt
Rental income 30 10
Aggregate income 180 60
Less:
CY loss (75) (25)
Annuities payable ( 5)
Approved donation __ (3)
Total income 105 27
Less: Relief ( 9) (9)
Chargeable income 96 18
16. Distribution of income s64(5)
A beneficiary would only be liable to
tax on annuity payment received from
the executor. S64(3)
Any other payment received from the
executor are mere gifts and not income
in nature.
17. Tax administration
The executor or administrator has to file
the Form B or Form BE for the deceased
individual. It covers period from 1 Jan to
the date of death.
Form TP will be filed in the same year to
account for the income of the deceased
from date of death to 31 Dec. It will be
assessed on the executor on behalf of the
deceased.
