Directors' + Shareholders' Liability for Company's Tax
Who is liable to pay tax liabilities of a Company, if the Company fails to pay its corporate tax and Monthly Tax Deductions as an employer?
According to Income Tax Act 1967 (ITA), Section 75A, "a director" of a Company is liable.
What is meant by "a director" by the Act?
Meaning of a Director
The meaning of “A Director” as provided under S75A(2) are summarised below:
A person holding the post of “a director” or by whatever name it is called AND holding at least 20% of the ordinary share capital of a Company.
A person holding at least 20% of the ordinary share capital of a Company, whether directly or indirectly.
A person holding at least 20% of the ordinary share capital of a Company, indirectly through its "Associate".
A Big Change
It is worth to note that prior to 24.1.2014, the ordinary share capital requirement was more than 50%.
Meaning of Associate
"Associate" in relation to a person for the above purpose are very broad, as follows:
(a) A person in any of the following relationships to that person, that is to say, husband or wife, parent or remoter forebear, child or remoter issue, brother, sister and partner; or
(b) Where that person is interested in any shares or obligations of a Company which are subject to any trust or are part of the estate of a deceased person, any other person interested therein.
Company Directors Who are Liable
A company director who is liable under S75A is a person who is:
(a) a director during the period in which tax was due and payable by the Company.
(b) a director during the period in which the debt (relating to MTD) is liable to be paid by the company.
Reference
hasil.gov.my>>>legislation>>>public rulings>>>2/2019 (14 March 2019)
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