Updated: Nov 18
Section 61(1) reads as follows: So long as a trust subsists—
(a) the trustees for the time being shall be known as the trust body and the trust body shall be treated as a person for the purposes of all the provisions of this Act except Part VIII (other than section 122);
(b) for the purposes of this Act— (i) any source forming part of the property of the trust; (ii) any source of a trustee of the trust, being a source of his by virtue of sections 55 to 58; and (iii) any income from any such source, shall be treated as the source and income of the trust body of the trust:
Provided that in the case of a unit trust, gains arising from the realisation of investments shall not be treated as income of the trust body of the trust; (c) subject to subsections (4) and (5), the entitlement of a beneficiary at any time and from time to time to any income from the trust shall be deemed to be a source (in this section and section 62 referred to as his ordinary source) of his in relation to the trust, and the amount, ascertained under this section, of any share of his of any total income of the trust body of the trust for a year of assessment shall be deemed to be his statutory income from his ordinary source for that year; and
(d) a beneficiary of the trust shall be assessed and charged to tax in respect of any income of his from his ordinary source or from his further source within the meaning of subsection (5) in relation to the trust:
Provided that paragraphs (c) and (d) and subsection (5) shall not apply to a person in respect of any amount which by virtue of paragraph 13(1)(d) falls to be included in the gross income of that person in respect of gains or profits from an employment.
Paragraph 61(1)(b) of the Income Tax Act 1967 is amended by substituting for the proviso the following provisos:
“Provided that in the case of a unit trust, gains arising from the realisation of investments shall be treated as income of the trust body of the trust under paragraph 4(aa):
Provided further that where such realisation of investments relates to real property as defined in the Real Property Gains Tax Act 1976, the gains shall not be treated as income of the trust body of the trust;”.
The proposed amendment to Section 61(1)(b) of the Income Tax Act introduces changes to the treatment of gains arising from realising investments for unit trusts, particularly those related to real property, as defined in the Real Property Gains Tax Act 1976.
The amendment replaces the existing proviso with two new provisos.
The first proviso states that gains arising from the realisation of investments for a unit trust will be treated as income of the trust body of the trust under paragraph 4(aa).
This implies that such gains will be considered part of the trust's income for tax purposes.
The second proviso adds a specific condition related to gains from realising investments involving real property as defined in the Real Property Gains Tax Act 1976.
According to this condition, if the gains are related to real property, they will not be treated as income of the trust body of the trust.
Let's consider a unit trust that holds various investments, including real property. Under the current provision, gains from realising these investments, including real property, are generally not treated as income for the trust, as specified in the existing proviso.
However, the proposed amendment introduces a distinction. If the gains arise from realising real property as defined in the Real Property Gains Tax Act 1976, they will not be considered part of the trust's income.
The tax impact of this proposal is significant for unit trusts with real property investments.
Gains from the realisation of real property investments will be excluded from the trust's taxable income under paragraph 4(aa).
This can have implications for the overall tax liability of the unit trust, potentially reducing the amount subject to taxation.
It's crucial for trustees, beneficiaries, and other relevant parties to carefully assess the nature of the trust's investments, particularly those related to real property, to understand the potential tax implications under the proposed amendment.
Finance (No.2) Bill 2023 - https://www.ccs-co.com/post/finance-no-2-bill-2023
Finance (No. 2) Bill 2023: Amendment of section 2 - https://www.ccs-co.com/post/finance-no-2-bill-2023-amendment-of-section-2
Budget 2024: Further Tax Deduction For Voluntary Carbon Market (VCM) - https://www.ccs-co.com/post/budget-2024-further-tax-deduction-for-voluntary-carbon-market-vcm
Amendment to Section 4 of the ITA 1967 - Gains from the Disposal of Capital Asset - https://www.ccs-co.com/post/amendment-to-section-4-of-the-ita-1967-gains-from-the-disposal-of-capital-asset
Amendment to Section 4B of the ITA 1967 - Extension of the Scope of the Non-Business Income - https://www.ccs-co.com/post/____a
Amendment to Section 6: Income Tax Rates on Capital Asset Disposals - https://www.ccs-co.com/post/amendment-to-section-6-income-tax-rates-on-capital-asset-disposals
New Section 15C of ITA: Tax of Disposal Gains from Foreign Companies with Malaysian Real Property - https://www.ccs-co.com/post/new-section-15c-of-ita-tax-of-disposal-gains-from-foreign-companies-with-malaysian-real-property Amendment to Section 44(7A): Expanded Business Allocation for Charitable Entities - https://www.ccs-co.com/post/amendment-to-section-44-7a-expanded-business-allocation-for-charitable-entities
Evaluating the Impact: Section 61 Amendment on Trust Taxation - https://www.ccs-co.com/post/evaluating-the-impact-section-61-amendment-on-trust-taxation
Amendment to S 77A: New Reporting Rules on Capital Asset Disposal - The Impact of Section 77A(1B) - https://www.ccs-co.com/post/amendment-to-s-77a-new-reporting-rules-on-capital-asset-disposal-the-impact-of-section-77a-1b
Amendment to S 77B: Understanding Section 77B's Latest Facets - Impact on Amendment of Tax Return - https://www.ccs-co.com/post/amendment-to-s-77b-understanding-section-77b-s-latest-facets-impact-on-amendment-of-tax-return
Evolution of Record-Keeping: Amendments to Section 82 - https://www.ccs-co.com/post/evolution-of-record-keeping-amendments-to-section-82
Transformative Tax Compliance in the Digital Era: Insights into Malaysia's New Sections 82B and 82C - https://www.ccs-co.com/post/transformative-tax-compliance-in-the-digital-era-insights-into-malaysia-s-new-sections-82b-and-82c