Estate taxes & considerations

Income tax:

The executor of a deceased shall be assessable and chargeable for tax for the year of assessment and for any previous year of assessment in respect of the chargeable income of that individual and, where they are so assessable and chargeable, they shall be assessable and chargeable to tax in like manner and to the like amount as the individual would be assessed and charged to tax if he had not died (Income Tax Act 1967 – Sect 74(1)). “Executor” includes a person who is administering or managing the estate of the deceased person and such person is assessable and chargeable to tax (Kerajaan Malaysia v Yong Siew Choon [2006]1 MLJ 1).

Any tax payable by the executors of a deceased individual, including penalties for late payment shall be a debt due from and payable out of the estate of the deceased (Income Tax Act 1967 – Sect 73(4)).

The executor of a deceased individual shall not distribute any of the assets of the estate unless they have made provision for the full payment of the tax (Income Tax Act 1967 – Sect 73(5)).

Real property gains tax:

Tax on capital gains is confined to gains from disposals of immovable properties or shares in real property companies under the Real Property Gains Tax Act 1976 (“RPGT”).

In cases where the assets of a deceased devolved on the executor or legatee under a will or intestacy or on the trustees of a trust created under the will, there is no chargeable gain. In these cases, the disposal price is deemed to be equal to the acquisition price (RPGT - Schedule 2 item 3(a)).

Where the assets of a deceased person are disposed of (otherwise than to a legatee), the assets are deemed to have been acquired on the date of death of the deceased (RPGT - Schedule 2 item 15B(1). The acquisition price is the price equal to the market value of the asset as at the date of death. If any compensation, insurance monies or deposit forfeited have been received in respect of the asset, such sums are deducted from the acquisition price. The capital gain will be the difference between the disposal price and the acquisition price.

Where a legatee accepts an asset in place of a money legacy, there is deemed an acquisition of the asset by the legatee at an acquisition price equal to the amount of the legacy or the market value of the asset as at the date of transfer of ownership of the asset to the legatee, whichever is the ((RPGT - Schedule 2 item 19(2)). If any compensation, insurance monies or deposit forfeited have been received in respect of the asset, such sums are deducted from the acquisition price. Similarly the capital gain will be the difference between the disposal price and the acquisition price.

Capital gains tax is payable on the capital gain.

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