LHDN Discontinues 2% Tax Deduction for Deceased Agents

Strategic Insights -

The Inland Revenue Board of Malaysia (LHDN) has announced that it will no longer accept the two percent tax deduction for resident individuals who have passed away, effective August 1. This decision aligns with the definition of an "individual" under Section 2 of the Income Tax Act 1967, which considers a living person or natural person. As a result, if an Enhanced Posed Person (EPP) has passed away, the executor, administrator, heir, or legal representative must manage the income and report it under the Deceased Person's Estate (TP) file. To comply with this ruling, the paying company, heirs' representatives, or estate administrators must register the TP file at an LHDN office by completing the Notification of Taxpayer's Demise (CP57) form and submitting supporting documents.

Key Takeaways:

  • The two percent tax deduction for deceased agents, dealers, or distributors (Resident Individuals) is discontinued, effective August 1.
  • The definition of an "individual" under Section 2 of the Income Tax Act 1967 does not apply to deceased individuals, who are categorized as Deceased Person's Estate (TP) files instead.
  • The executor, administrator, heir, or legal representative of the deceased must register the TP file at an LHDN office by completing the Notification of Taxpayer's Demise (CP57) form.
  • The paying company, heirs' representatives, or estate administrators must comply with this ruling and act accordingly in managing the deceased's income.
  • The LHDN has made Form CP57 available for download from its official portal at https://phl.hasil.gov.my/pdf/pdfborang/Borang_CP57_1.pdf.
  • Under Section 107D of the Income Tax Act 1967, companies are required to make a two percent tax deduction on cash payments to deceased EPPs.

Statistics:

  • Effective date: August 1
  • Two percent tax deduction discontinued for: deceased agents, dealers, or distributors (Resident Individuals)
  • TP file registration required for: executor, administrator, heir, or legal representative of the deceased
  • Supporting documents required for TP file registration: copy of death certificate and grant of probate or letter of administration
  • Form CP57 available for download from: https://phl.hasil.gov.my/pdf/pdfborang/Borang_CP57_1.pdf

Sources:

  • Inland Revenue Board of Malaysia (LHDN) statement
  • Income Tax Act 1967
  • https://phl.hasil.gov.my/pdf/pdfborang/Borang_CP57_1.pdf (Form CP57)