Most directors in Malaysia assume that once a company winds down or they resign, the company's tax problems belong to the company. Section 75A of the Income Tax Act 1967 says otherwise, and many directors find this out only when LHDN issues a demand notice in their personal name.

Under Section 75A(1), any person who is a director of a company during the period in which tax is due and unpaid is jointly and severally liable for that tax. This applies to corporate income tax and to unpaid PCB, which is the monthly tax deduction the company is required to withhold from employee salaries and remit to LHDN. If the company fails to remit PCB, every qualifying director is personally on the hook.

The definition of director under Section 75A(2) is deliberately broad. It covers not only persons formally appointed as directors but also anyone involved in managing the company's business who owns or controls, directly or indirectly, at least 20 percent of the ordinary share capital. This means a working shareholder who has never held a formal director title can still be personally liable if their ownership meets the threshold.

There is no protection in resignation. If the tax liability arose during your tenure, LHDN can pursue you personally even after you have left the company. The liability does not expire with your directorship.

From a Companies Act perspective, Section 213 already requires every director to act with reasonable care and diligence. Allowing tax arrears to accumulate without remedial action is itself a breach of director duties, compounding the exposure further.

If you wish to focus on running and growing your business, our CFO advisory team can take care of your accounting, payroll, tax planning and compliance matters for you. Feel free to WhatsApp us at 010-246 2151.

Our Services: CFO Advisory | Financial Operations Support | Taxation | Payroll | Corporate Secretarial | e-stamping | e-invoice Training