Introduction
Under the Malaysia Trust Taxation framework, a trust is treated as a separate chargeable entity under the Income Tax Act 1967.
The trustees are collectively responsible for managing the trust’s income, submitting tax returns, and paying taxes due — but only up to the funds held in the trust.
This guide explains how trusts are assessed, their residence status, basis period, taxable income scope, and applicable tax rates in Malaysia.
1️⃣ Chargeable Person
A trust body is considered a chargeable person for income tax purposes.
It is assessed separately from the income of its beneficiaries, even if the beneficiary is also a trustee.
Trustees collectively form the trust body and are jointly and severally responsible for fulfilling obligations under the Income Tax Act 1967, including:
- Keeping proper accounting and tax records.
- Submitting annual tax returns.
- Paying tax due to the government.
📌 Note: Trustees are only responsible up to the accessible money from the trust fund — they are not personally liable for any shortfall beyond trust assets.
2️⃣ Residence Status of a Trust
A trust’s residence status affects how its income is taxed.
| Type | Conditions | Tax Significance |
| Resident Trust | At least one trustee is resident in Malaysia during the year. | Can deduct income or annuity distributed to beneficiaries. |
| Non-Resident Trust | Created outside Malaysia by non-citizens, administered wholly outside Malaysia, income derived abroad, and at least half the trustees are non-residents. | Treated as a non-resident for tax purposes. |
If a trust pays annuity income to a beneficiary, that annuity is deemed Malaysian-sourced, even if the trust itself has no income in that year.
3️⃣ Basis Period
A trust may adopt either:
- The calendar year (ending 31 December), or
- A financial year-end on any other date — similar to a company or LLP.
This determines the basis period for income assessment under the Act.
4️⃣ Scope of Charge
Trusts are taxable only on income derived from Malaysia.
Foreign-sourced income is exempt from Malaysian tax, even when remitted to Malaysia (except where legislative changes specify otherwise).
Examples of taxable Malaysian income:
- Rental from Malaysian property.
- Interest or dividend from Malaysian companies.
- Business income generated locally.
5️⃣ Sources of Income of a Trust
A trust may earn income from the following sources:
| Source Type | Examples |
| Trust Property or Assets | Business profits, rental income, interest, and dividends. |
| Partnership Income | If the trust body is a partner, its share of partnership income is taxable under the trust. |
6️⃣ Tax Rates
Under Schedule 1 of the Income Tax Act 1967, trusts are taxed at a flat rate of 24% on their chargeable income.
| Entity Type | Tax Rate | Remarks |
| Trust | 24% (flat rate) | No preferential small business rate. |
| Company (SME) | 17%–24% (tiered) | Lower rate available for small companies. |
| Individual | 0%–30% (progressive) | Enjoys personal reliefs and lower effective rate. |
📌 Unlike SMEs, trusts do not enjoy the reduced 17% rate — even if their asset value is small.
Key Takeaways
- A trust is a separate chargeable entity for tax purposes.
- Trustees are responsible for tax obligations only up to trust funds.
- Resident and non-resident trusts are taxed differently.
- Flat 24% tax rate applies, with no SME-style relief.
- Proper record-keeping ensures compliance under the Income Tax Act 1967.
ANC Group – Your Personal Tax Advisor
Tax consulting is the core service of ANC Group. Our tax professionals provide clients with comprehensive tax support and guidance. We offer tax consulting and compliance services for expatriates, entrepreneurs, and listed and non-listed companies.
Our tax consulting services include business tax, transaction tax, personal tax, and corporate income tax. We don’t just guide you in interpreting and applying complicated taxation rules, but to explore new opportunities and business trends.
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If you need professional tax advisory services regarding the Malaysia Income Tax Act 1967, our team is ready to assist you. Contact us here to discuss how we can support your business.
