INCOME TAX ACT 1967 (ACT 53) PART III - ASCERTAINMENT OF CHARGEABLE INCOME Chapter 8-Special cases
Section 62. Discretionary trusts.
(1) Where there is a discretionary trust, section 61 shall apply to the trust but shall be modified in its application by the following subsections.
(2) Subject to the following subsections, whether or not the trust body of a discretionary trust is resident for the basis year for a year of assessment-
[Am. Act A226:s.22]
(a) subject to paragraph (b), the total of all sums received in Malaysia by a particular beneficiary of the trust (being sums of an income nature in his hands) in that basis year from the trust body of the trust or the total income of that body for that year of assessment, whichever is the less, shall be deemed to be the amount of that particular beneficiary's share of that total income; and
(b) where-
(i) that particular beneficiary is one of a class of beneficiaries of the trust;
(ii) that particular beneficiary has received in Malaysia and any other beneficiary or beneficiaries of that class has or have received in Malaysia any sum or sums of that nature in that basis year from the trust body of the trust; and
(iii) the aggregate of all sums so received exceeds the total income of that body for that year of assessment,
paragraph (a) shall not apply to that particular beneficiary in relation to that discretionary trust for that year of assessment and a sum bearing the same proportion to that total income as the total of all sums so received by that particular beneficiary bears to that aggregate shall be deemed to be the amount of that particular beneficiary's share of that total income.
(3) Where a trust is such that with respect to some of the distributable income from the trust for the basis year for a year of assessment (in this subsection referred to as the discretionary portion) a discretionary power of the trustees applies and with respect to some of the distributable income from that trust for that basis year (in this subsection referred to as the non-discretionary portion) either a beneficiary is entitled to the whole thereof or there are beneficiaries entitled to particular fraction thereof-
(a) the total income of the trust body of the trust for that year of assessment shall be divided into a discretionary part and a non-discretionary part, the amount of the discretionary part being a sum which bears the same proportion to that total income as the discretionary portion bears to the distributable income from the trust for that basis year and the amount of the non-discretionary part being a sum which bears the same proportion to that total income as the non-discretionary portion bears to the distributable income from the trust for that basis year;
(b) subject to paragraph (c)-
(i) subsection (2) shall apply in relation to the trust body and that part of the trust relating to the discretionary portion as if the amount of the discretionary part were the total income of the trust body for that year of assessment;
(ii) in the application of subsection 61 (5) in relation to the trust body and that part of the trust relating to the discretionary portion, the amount of the discretionary part shall be treated as the total income of the trust body for that year of assessment; and
(iii) in the application of subsections 61 (4) and (5) in relation to the trust body and that part of the trust relating to the non-discretionary portion, the amount of the non-discretionary part shall be treated as the total income of the trust body for that year of assessment;
(c) where in consequence of the application of paragraph (b) a beneficiary of the trust has a share of the discretionary part and a share of the non-discretionary part, the aggregate of the amounts of those shares shall be deemed to be the amount of his statutory income from his ordinary source in relation to the trust for that year of assessment, and if the total of-
(i) all sums received in Malaysia from the trust body of the trust by him (being sums of an income nature in his hands) in the basis year for a year of assessment; and
(ii) all sums received by him outside Malaysia from the trust body of the trust in any year (being sums of an income nature in his hands) and remitted to Malaysia in the basis year for a year of assessment,
exceeds that aggregate, that excess shall be deemed to be his further source within the meaning of subsection 61(5).
(4) Where subsection (2) or (3) applies in relation to a trust (in this subsection referred to as the principal trust) and a year of assessment, then, if any part of the income from the principal trust for the basis year for that year of assessment is subject to a trust for accumulation, the reference in subsection (2) or paragraph (3) (a) to total income shall be construed as a reference to a sum which bears the same proportion to that total income as the part of the income from the principal trust not so subject to that trust for accumulation bears to the income from the principal trust.
