Authored by Dylan Chong. You can email him at

Credit to LHDN Guideline (PR 2/2019)

Jointly and Severally Liable

A director of a company (Sdn Bhd) can be exposed to tax liability under section 75A of the Income Tax Act 1967 (ITA 1967) for the unpaid taxes of a company. This includes shadow director. A shadow director is someone who control the management of the company from behind the company using proxy.

A director can be jointly and severally liable for the unpaid taxes of the company despite there is a separate legal entity as director is considered an officer of the company. However, tax liability only arised when the director holds more than 20 per centum of the ordinary shares of the company.

The position of the taxation on director before 24 January 2014 is that a director may be exposed to tax liability if he holds more than 50 per centum ordinary shares of the company.

Liable for tax in that particular year of assessment

A newly appointed director in a Sdn Bhd should only be liable for unpaid taxes of the company from the date of joining and should not be liable for taxes incurred by the company prior to him joining. 

The director who had not assumed the role as a director and willing to take the responsibilities should not shoulder the burden undertaken by the company, including the tax. [see Gov of Malaysia v Mahawira Sdn Bhd (12 March 2021)]

Brief Case – Government of Malaysia v Mahawira Sdn Bhd

In this case, the second respondent was a director and hold 20 per centum share in the first respondent (taxpayer company). The appellant claimed against the respondents for unpaid taxes in the sum of RM3 million for year of assessment 2001, 2002, 2003 and 2004.

The High Court allowed the judgment in default to be entered against the second respondent for the sum of RM1,116,110.96 only, but not for the year of assessment 2001, 2002 and 2003 as she only became the director of the first respondent with effect from 19 December 2003.


Whether the second respondent responsible for the taxpayer company unpaid taxes for 2001, 2002, and 2003?


Second respondent only liable for the company taxes for year of assessment 2004.

Section 75(A)(2) of the Income Tax Act 1967 does not operate retrospectively against the second respondent. When the second respondent became a director of the first respondent back then, section 75A(2)(b) of ITA 1967 requires a director to hold more than 50% shares before such director is made liable to pay taxes.

Authored by Dylan Chong, Partner from JR Ng & Chin who specialises in tax appeal (Income Tax, Real Property Gains Tax, Service and Sales Tax, Custom Duties) and tax planning for companies’ directors and individuals. You may contact him at

The contents of this publication are given as general information for reference purposes only and do not constitute the firm’s legal advice. For any specific matter or legal issue, please do not rely on this publication but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.

Leave a comment

Your email address will not be published. Required fields are marked *