Unpaid Company Tax Alone Is Not Enough to Justify a Travel Ban

A recent High Court decision setting aside a Customs travel ban on three former directors was widely reported in the newspapers, and is easily read as a sign that directors can no longer be stopped from leaving Malaysia over company tax. The judgment is narrower than that.

The court did not question the power itself. Under the GST Act 2014, Customs may prevent a person from leaving Malaysia where it has reason to believe the person is about to or likely to leave without paying the tax owed. The court called it a clear provision that must be strictly complied with, because the freedom to travel is part of personal liberty under the Federal Constitution. The directors succeeded because four facts worked in their favour.

The first was timing, backed by evidence. The directors had resigned when the company's shares were sold, well before the disputed GST arose. SSM still listed them for months because the new management filed late, but an SSM record is only prima facie evidence and can be displaced. A share sale agreement and a letter from the company did exactly that. Even on the SSM date, the tax only arose after they had left. A director who held office while the tax built up would not have this point.

The second was the absence of any sign of flight. Reason to believe calls for solid, fact based grounds, such as the person's past travel record, yet Customs relied only on the company's arrears. By contrast, in an earlier income tax case, a restriction was upheld because the taxpayer had spent more time overseas than in Malaysia. The same tax debt can end differently when the travel pattern differs.

The third was the one trip relied upon. It was for business, and the directors did not know about the tax at the time, as the first bill was issued long after they had left. A person cannot be running from a tax debt they do not know exists.

The fourth was procedural. The notice must be served on the individual, personally or by registered post, but Customs sent it only to the company through MyGST.

Read together, the decision rests on a specific combination: departure before the tax arose, documents to prove it, no sign of flight, and a procedural error by Customs. Remove several of these, and the outcome becomes far less certain.

If you wish to get more details, you may refer to the case of Dato' Abdul Razak bin Abdul & 2 Ors v Ketua Pengarah Jabatan Kastam Diraja Malaysia, where the High Court set aside a GST travel ban on three former directors.

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