advanced taxation estate under administration

1. ESTATES UNDER
ADMINISTRATION

2. 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”.

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 (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)

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 (if necessary)

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. 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)

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. 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

11. 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).

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. 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
Example

14. 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

15. 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.

16. 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.