Lecture 3 Estate

TOPIC 2 (L3):
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 (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
He is responsible for settling the tax liability of the
deceased to the date of death
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
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
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 (YA 2009) 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 Assessed on a receipt basis
Rental income Time basis, receivable
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 wef YA 2008.
Interest which matures after the date of death is assessed on
the executor.
Executor who received interest income from the fixed deposit
in a financial institution would be assessed at either scaled
rate or flat rate of 24% (YA 2019).
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, YA2020 )
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.
TAX RATES & RELIEFS OF EXECUTOR
Deceased person died

domiciled
in Malaysia?
Yes No
•Scaled rate 0- •Reduced to

30% RM 9,000 24% (Effective
special relief from YA2016)
total income (YA
Domiciled of a person is defined as the
2020) country in which the person has his
permanent home or his choice
OTHER ISSUES
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 for the basis year
in which he died; for the next succeeding basis year;
and for the previous years.
The assessment or the additional assessment must be

raised within 3 years after the end of the Y/A for the
basis year in which the death occurred.
Tax computation for a deceased person and
executor (YA 2020)
Deceased Executor 1 Jan to
Date of death
date of death to 31 Dec
Statutory Business
income Time Time
Rental income Time Time
Interest / dividends Receipt (Exempt) Receipt
Foreign source Exempt Exempt
Aggregate income (AI) xx xx
Less: CY loss (xx) xx

Less: Annuity payable - xx
Less: Donation - xx (limits to 10% AI)
Less: Relief 9,000 (personal) 9,000(domiciled)
Chargeable income xx xx
Adele died domiciled in Malaysia on 30th Sept 2022.
Assume that she is only eligible for personal relief. Details
of her income are:
Adjusted income/(loss) RM’000

Business I 200,000
Business II (100,000)
Income of foreign source
(only 4,000 was remitted) 20,000
Dividend income (single tier)
Received on 1st Feb 2022 8,000
Received on 1st Nov 2022 10,000
Rental income 40,000
Annuities payable (paid 4,000) 5,000
Approved donation (paid on 30th Nov 2022) 4,000
Deceased 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 70
Less:
CY loss (75) (25)
Annuities payable - 5
Approved donation nil 4
Total income 105 36
Less: Relief 9 9
Chargeable income 96 27
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.
Executor leaving Malaysia
S104 prevents a taxpayer from leaving Malaysia if such
taxpayer has outstanding tax payable.
S104 cannot be invoked to an executor because the
outstanding amount is owed by the estate of the deceased
and not by the executor personally. (Ong Bee Yam v Pengarah
Hasil Dalam Negeri)
Leaving without payment of tax, S 115(1) – fine between RM200
and RM20,000 or imprisonment < 6 months or both
Tax administration
The executor or administrator has to file the Form B
for the deceased individual. It covers period from 1
Jan to date of death.
Form T 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.
Tax rates YA 2020
Resident individual (domicile) – scaled rates (0-30%)

Non resident individual – flat rate of 24 % (executor) &
30% (deceased person)
RPGT
The devolution of asset from a deceased person to the
executor would be treated as a no gain no loss to the
deceased person. Therefore, no RPGT is payable by the
deceased person.
An executor would be deemed to have acquired the
property at the market value at the date of death if the
executor plans to dispose the asset to third person

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TOPIC 2 (L3):

⮚Income after the date of death is assessed on the

Business income/(loss) Time basis at statutory income

For dividends, any income paid, credited or distributed in the

In arriving at the Total Income of the Executor of the

Administration expenses related to the estate are not

Any remuneration paid to the executor for the

Deceased person died

•Scaled rate 0- •Reduced to

Where an individual dies in the basis year for a YA, the

The assessment or the additional assessment must be

Less: CY loss (xx) xx

Adjusted income/(loss) RM’000

A beneficiary would only be liable to tax on annuity

Resident individual (domicile) – scaled rates (0-30%)

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