Malaysian Tax Stoppages: Understanding Liability and Maximizing Mobility

By: Dezan Shira & Associates
Editor: Eugenia Lotova

With the passing of Ruling No. 12/2015, it is time for Malaysian residents to double check their taxes. Section 104 of the Income Tax Act of 1967 had established that individuals with outstanding tax dues would be forbidden from leaving the country until the debt was settled, but this law was never enforced—until last year. Since a large portion of the government’s revenue is generated from taxes, the Inland Revenue Board of Malaysia (LHDN) has decided to partner with the Immigration Department to collect unpaid taxes. As a result, since 2015, over 100,000 Malaysian taxpayers have been forbidden from leaving the country, sometimes unaware that they had outstanding liabilities. This article discusses how this new ruling may affect your company and how to ensure tax compliance.

Stoppage Issuance: Reasons and Notification

Under the law, the job of tax calculation is on each individual, not the authorities and anyone who owes taxes to the Malaysian government may be blacklisted and prevented from leaving the country. In the case of companies, the director is liable for the company’s taxes, including money withheld from employees and to be paid to the LHDN. If a company is covering a portion of taxes on behalf of the employee and has an outstanding balance, the employee will be held responsible. .

The method by which exit from Malaysia is prevented is via the issuance of a stoppage. A stoppage order will be issued to the individual either in person or by mail. It is effective from the date of issuance stamped on the certificate and the individual is only responsible for the amount specified.

Considering the employer’s possible exposure, it is absolutely necessary to consult with the appropriate authorities or an expert to mitigate the risks of receiving a stoppage.