Outstanding income tax owed by a deceased Muslim must be settled using the estate left behind, according to a ruling by the National Council for Islamic Religious Affairs Malaysia.
The decision was reached by the council’s Muzakarah Committee during its 122nd meeting, following years of differing opinions among religious authorities on whether tax arrears remain enforceable after death.
Committee chairman Datuk Dr Nooh Gadut said the council concluded that unpaid income tax constitutes a debt that must be resolved before the estate can be distributed to heirs. The payment, however, must come strictly from the assets of the deceased, not from the personal funds of heirs.
The ruling aligns with Malaysia’s existing tax framework. Under Section 74 of the Income Tax Act 1967, unpaid income tax is not automatically written off upon death. Instead, it remains recorded within the Inland Revenue Board’s system until properly resolved.
In practice, this means that digital tax records linked to an individual’s identity continue to exist after death. The Inland Revenue Board will issue formal notices to the legal representative or estate administrator, requiring outstanding tax matters to be settled before estate administration can be completed.
At the time, then LHDN chief executive Datuk Dr Mohd Nizom Sairi explained that the authority is obligated to identify a lawful representative if assets exist, as tax arrears cannot be left unresolved within the system. Any write-off would only occur after all statutory procedures have been exhausted.
The issue had previously drawn mixed views from state muftis. Some held that tax arrears should be cleared before faraid distribution, while others argued that such obligations did not extend beyond death. These differences prompted the council to conduct a detailed syariah review and consult relevant stakeholders.
The October 2023 ruling now provides a unified position, reflecting how modern governance intersects with religious principles.
In an era where income reporting, tax assessments and enforcement are largely digitised, financial obligations increasingly persist as system records rather than informal claims.
For heirs and estate administrators, the decision highlights the importance of addressing digital tax liabilities early in the estate settlement process, alongside debts, wills and asset documentation.
