The director of a company is responsible for the company’s tax as follows:
- any tax that is due and payable by a company; and
- any debt that is due and payable by the company as an employer in respect of Monthly Tax Deduction (MTD).
Section 75A of the Income Tax Act 1967 (ITA) provides for a director of a company to be responsible for any tax or debt that is due and payable by the company, and the tax owing or debt is recoverable from the company’s directors. Any person occupying the position of a director during the period in which the tax or debt is liable to be paid is jointly and severally liable for any tax or debt that is due and payable by the company.
A director means any person who –
- is occupying the position of a director (by whatever name called), including any person who is concerned in the management of the company’s business; and
- is, either on his own or with one or more associates, the owner of, or able directly or through the medium of other companies or by any other indirect means to control, not less than 20% of the ordinary share capital of the company.
Action to recover a company’s taxes or debts that are due and payable can be taken against the directors of a company as follows:
- preventing taxpayer from leaving the country
- a civil suit against both a company and the directors of the company
A company which is under winding up, action cannot be taken against a company’s directors if taxes or debts arising become due and payable. This is because the directors of the company are no longer liable for taxes or debts arise when the company is in the winding up process.