29 June, 2018
Tax case
Kerajaan Malaysia v Isqandar Dzulkarnaen Putra Bin Salehudin & Norsiah Binti Mokri [Unreported]
In 2015, the Inland Revenue Board of Malaysia (“Revenue”) instituted a civil suit against two directors of a company ("the company") who were non-active directors (“2015 civil suit”). Prior to that, the Revenue had instituted a civil suit to recover taxes allegedly due and payable by the company (“Company’s taxes”). The Revenue wound up the company when it was unable to recover the company's taxes. The 2015 civil suit was subsequently instituted against the directors under section 75A of the Income Tax Act 1967 (“Section 75A”) purportedly to recover the Company’s taxes for years of assessment 2008 and 2009. The Revenue also imposed travel bans on the directors.
At the material time, a “director” was defined under Section 75A to mean any person who occupies the position of director and is, either on his own or with one or more associates, the owner of more than 50% of the ordinary share capital of the company. However, the law was amended with effect from 24 January 2014 thereby lowering the shareholding threshold from more than 50% to not less than 20% of the ordinary share capital of the company (“2014 amendment”). The Revenue sought to rely on the 2014 amendment to make the directors liable even though the years of assessment in question were prior to the 2014 amendment.
The High Court held in favour of the directors and allowed the directors’ application to strike out the 2015 civil suit. The learned Judge held that Section 75A was not applicable as the 2014 amendment did not apply retrospectively to years of assessment 2008 and 2009. As the directors collectively owned less than 50% of the ordinary share capital of the company for the relevant years of assessment, they were not directors within the meaning of section 75A(2)(b) of the Income Tax Act 1967.
Income tax
The Revenue has recently issued a new Tax Investigation Framework dated 15 May 2018 (available in the Malay language only) to replace the Tax Investigation Framework dated 1 October 2013.
For further information, please contact:
Abhilaash Subramaniam, Shearn Delamore & Co
abhi@shearndelamore.com
