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In Malaysia, inheritance tax is not imposed on individuals. However, the Malaysian government imposes a stamp duty on the transfer of property or assets to beneficiaries after the death of the owner. This stamp duty is known as the “Estate Duty” and is levied on the net value of the estate. 

How much do Malaysians have to pay for estate duty? 

In Malaysia, the estate duty is calculated based on the net value of the estate. How you will calculate the estate duty is the total value of the assets minus any liabilities at the time of death. 

Basically, if you have any outstanding debts or unpaid amounts owing to debtors, then the executor will use monies from your assets to pay for it. Your assets may be sold if the monies are not taken from your bank account. 

For example, you may have RM1 million in assets’ worth and monies in your bank account. If you are owing anything, the executor will first use the money in your bank account to pay it off. If it is still not enough to cover, then they may choose to have your other assets sold and try to cover the debts. If there are any leftover assets and monies after paying off the debts, only then will they be distributed among your named beneficiaries. 

As for now, estates valued at RM2.5 million and below are exempted from paying estate duty. For estates valued above RM2.5 million, the estate duty rate is 10%. 

It is important to note that there are exemptions and reliefs available which may reduce the estate duty liability. For example, assets passing to the surviving spouse, children, or parents are exempted from estate duty. Additionally, certain business assets and agricultural land may also be exempted. 

The rate of estate duty in Malaysia varies based on the value of the estate. For estates valued at RM2.5 million and below, there is no estate duty. For estates valued above RM2.5 million, the estate duty rate is 10%. However, there are exemptions and reliefs available, which may reduce the estate duty liability. 

Who is liable to pay for estate duty for inheritance and are foreigners included? 

In Malaysia, the estate duty is the responsibility of the executor or administrator of the deceased person’s estate. The executor or administrator is the person appointed to manage and distribute the assets of the deceased person according to their will or the rules of intestacy. 

The executor or administrator is required to file an estate duty return with the Inland Revenue Board of Malaysia (IRB) within six months from the date of death of the deceased person. The return must include a complete statement of all assets and liabilities of the estate, as well as any claims for exemptions and reliefs. 

The estate duty must be paid before the distribution of the assets to the beneficiaries. If the estate duty is not paid within six months of the date of death, the IRB may charge penalties and interest on the outstanding amount. 

It is important to note that if there is no executor or administrator appointed, the beneficiaries of the estate may be required to apply for a grant of representation to manage and distribute the assets of the deceased person. The grant of representation may be obtained from the High Court of Malaysia. 

In short, estate duty is only payable if the deceased person was a Malaysian citizen or permanent resident at the time of death, and the assets are located in Malaysia. If the deceased person was a foreigner or the assets are located outside of Malaysia, then estate duty is not payable. 

If you are a foreigner who so happened to be a Malaysian citizen or a permanent resident of Malaysia at the time of death, and the assets are located in Malaysia, then yes you are liable to pay for estate duty as per Malaysian laws. 

However, if you are a foreigner, estate duty is not payable, even if the assets are located in Malaysia. The estate may still be subject to other taxes, such as income tax or capital gains tax, depending on the nature of the assets and the source of income. 

It is important to note that foreign beneficiaries who receive assets from an estate in Malaysia may be subject to Malaysian income tax on the income derived from those assets. The tax rate and rules will depend on the type of income and the tax treaty, if any, between Malaysia and the country of residence of the beneficiary

Bottom Line 

Conclusively, it all boils down to how much your properties are worth at the point of your death and whether if you are a Malaysian citizen or a foreigner. If you need any help with tax implications and property inheritance in Malaysia, feel free to reach out to us for further assistance. We will be more than happy to help you. 

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