Inheritance & Tax: What Heirs Need to Know

There is no inheritance tax in Malaysia

Malaysia no longer imposes estate duty or inheritance tax. Estate duty was abolished effective 1 November 1991.

However, this does not mean estates are completely "tax-free". The key point to understand: estate assets (capital) are not taxed, but income derived from estate assets remains taxable under income tax rules. This article explains this distinction.

Source: HASiL — Public Ruling No. 9/2023 (Deceased Person Part I); HASiL — RPGT (see Official sources section).

Inheritance is not taxable income

Inherited assets — whether cash, shares, real estate or other assets — are not subject to income tax merely because they are transferred to heirs. Transferring assets to beneficiaries after estate administration is complete is not an income tax event.

But: after assets pass to a beneficiary, income generated by those assets (e.g. rent, dividends, interest) becomes the beneficiary's income and is taxed as usual.

Estate income after death: Form TP

For the period after death until estate administration is complete, income from estate sources is treated as estate income and is taxed on the executor/administrator via Form TP (Estate).

After administration is complete, income is treated as the beneficiary's income and is taxed on each beneficiary.

If the will establishes a trust body, estate income is the trust body's income — its tax affairs are separate (see trust forms).

Source: HASiL — Public Ruling No. 9/2023 (§10.5); Explanatory Notes Form TP; HASiL — e-Services (see Official sources section).

The deceased's tax liabilities

An estate cannot be distributed until all of the deceased's liabilities — including tax — are settled. Tax owed by the deceased is paid from the estate.

Source: HASiL — Public Ruling No. 9/2023; Income Tax Act 1967 (see Official sources section).

Notifying the death

The notification of the deceased's death to the IRB (LHDNM) is handled by the executor/heirs.

Source: HASiL — Public Ruling No. 9/2023 (§6) (see Official sources section).

RPGT: transfer to heirs and later sales

RPGT (Real Property Gains Tax) is a tax on property sale gains — not a tax on inheritance.

Transfer to executor/heirs: the transfer of the deceased's assets to an executor or legatee — the disposal price is deemed equal to the acquisition price. No gain is subject to tax, and no loss is allowed [subparagraph 3(1)(a), Schedule 2, Real Property Gains Tax Act 1976 (RPGTA 1976)].

Later sale: if the executor or heir later sells the inherited property, that sale is subject to RPGT under the RPGTA provisions.

Source: HASiL — RPGT: Disposal Price Deemed Equal to Acquisition Price; HASiL — RPGT: Transfer of Inherited Property (see Official sources section).

Stamp duty on transfer

Transfer of inherited property usually involves stamp duty on the transfer instrument.

Note: this matter involves LHDNM (stamp duty) and land authorities — verify current rates with the relevant parties before making any claim.

Remember

• No inheritance tax in Malaysia (abolished 1 November 1991), but income from estate assets remains taxed.
• Distinguish assets (capital) from income — this is the key point.
• RPGT is a tax on property sale gains, not a tax on inheritance.
• Estate distribution involves parties beyond LHDNM — keep this article's scope to tax treatment and refer to the relevant authorities.

Frequently Asked Questions (FAQ)

Q. Is inheritance subject to inheritance tax in Malaysia? A. No — estate duty was abolished effective 1 November 1991. But income derived from estate assets remains taxed.

Q. Who reports estate income? A. The executor/administrator, via Form TP, until administration is complete. After that, income is taxed on the beneficiaries.

Q. I inherited a house. Do I pay tax for inheriting it? A. No — receiving an inheritance is not taxable income. If you later sell the house, the sale gain may be subject to RPGT.

Q. What is the difference between inheritance tax and RPGT? A. Inheritance tax (abolished) applied to the value of inherited property. RPGT is a tax on property sale gains.

Q. Is stamp duty charged on estate transfers? A. This item still awaits official confirmation from HASiL — check again with HASiL before deciding. — stamp duty rates/exemptions for estate transfers were not verified from official sources in this review; do not publish rates.

Glossary

• Estate — the deceased's property inherited by heirs.
• Heir — an individual entitled to inherit the deceased's property.
• Executor/Administrator — the party administering the estate until administration is complete.
• Form TP — Estate return form (e-Filing).
• Beneficiary — a recipient of the estate's benefits.
• RPGT — Real Property Gains Tax.
• RPGTA 1976 — Real Property Gains Tax Act 1976.
• Legatee — a person to whom property is bequeathed.
• Stamp duty — a tax on certain instruments (e.g. transfer).