ESTATES UNDER ADMINISTRATION

Introduction

 A deceased individual cannot escape from

paying tax
 Where a will exists (dies testate), the
executor will handle his affairs.
 Otherwise, where no will exists (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”.
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
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 (if executor failed to
withhold the tax, he will be jointly and severally
liable to pay the amounts of tax to which the
failure relates)
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 (if necessary)
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
 Tax Computation
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)
 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
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.
Interestwhich matures after the date of death is
assessed on the executor.
 Summary of Tax Computation

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
 Others....

 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.

 Annuity payable is assessed as s 4(e) source in the hands

of beneficiary as it is deemed to be derived from Malaysia
(payable basis).
Tax Rates & Reliefs of Executor

Deceased person died

domiciled in
Malaysia?

Yes No

• Scaled rate 0-30% • Flat rate -24%

• RM 9,000 special relief from (Effective YA2016)
total income (w.e.f YA 2009)

*Domiciled of a person is defined as the country in which the person

has his permanent home
 Example
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
 DeceasedExecutor/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
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.
Tax administration

 The executor or administrator has to file

the Form B 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.