The Federal Court of Malaysia in Havi Logistics (M) Sdn Bhd v. Pemungut Duti Setem [2025] 3 MLRA recently delivered a landmark judgment considering whether fixed or ad valorem stamp duty is payable under the Stamp Act 1949 (“Act”) on an Asset Purchase Agreement (“APA”), which is an important instrument in M&A transactions involving purchases of businesses or business assets.
Case Background
1. Havi Logistics (M) Sdn Bhd (“Havi”) entered into an APA with Martin-Brower Malaysia Co Sdn Bhd (“MB Malaysia”) to purchase certain business assets (including fixed assets like computer hardware and software, fittings, renovation, plant, machinery and equipment and inventory, while excluding goodwill), business contracts and liabilities.
2. The APA contained a deeming provision stating that “as of and at the closing, the title to the acquired assets and all risk of loss as to the acquired assets shall be deemed to have passed to Havi and deemed delivered at the place the acquired assets were located.”
3. The Collector of Stamp Duties (“Collector”) assessed the APA with ad valorem duty of RM399,196.00 on the basis that it constituted a “conveyance” of interest in the property of MB Malaysia to Havi. Accordingly, the APA fall under Item 32 of the First Schedule read together with Section 21 of the Act, attracting ad valorem duty.
- Instruments that fall under Item 32(a) of the First Schedule of the Act are described as instruments “on sale of any property (except stock, shares, marketable securities and accounts receivables or book debts of the kind mentioned in paragraph (c))”; and
- Section 21(1) of the Act states that “Any contract or agreement made in Malaysia under seal or underhand only, for the sale of any equitable estate or interest in any property whatsoever, or for the sale of any estate or interest in any property except……goods……, shall be charged with the same ad valorem duty, to be paid by the purchaser, as if it were an actual conveyance on sale of the estate, interest or property contracted or agreed to be sold”
4. Havi contested the assessment, arguing that the APA should be assessed under Item 4 of the First Schedule, which prescribes a fixed stamp duty of RM10.00. However, the Collector rejected Havi’s appeal.
Judicial Proceedings
1. High Court: Allowed Havi’s appeal, ruling in its favor.
2. Court of Appeal: Overturned the High Court’s decision.
- The fixed assets, which were part of the acquired assets sold under the Agreement, fell within the expression of ‘goods’ under Section 21(1) of the Act. As a result, the Agreement fell within the statutory exception contained in Section 21 of the Act.
- However, the Court of Appeal also ruled that the APA still constituted a conveyance on sale due to the contractual deeming provision.
3. Federal Court: Granted Havi leave to appeal and considered the following questions of law:
- Whether the APA constituted a conveyance on sale under Section 21(1) of the Act and was subject to ad valorem duty under Item 32(a) of the First Schedule?
- Whether the deeming provision in the APA makes the APA an instrument (ie conveyance on sale) under Section 21(1) of the Act?
- Whether the APA fell under the statutory exception in Section 21(1) of the Act?
Findings of the Federal Court
- The APA, when read in its entirety was a conveyance on sale within the meaning of Section 21(1) of the Act and is chargeable with ad valorem duty under Item 32(a) of the First Schedule of the Act. The fact that the sale transaction was not concluded on the date of the instrument or that it was to be completed at a future date is immaterial. Otherwise, ad valorem stamp duty can easily be avoided.
- The APA with or without the contractual deeming provision falls squarely within Section 21(1) of the Act and is thus to be construed as an actual conveyance on sale.
- The dictionary meanings of the words ‘goods’, ‘wares’ and ‘merchandise’ in Section 21(1) of the Act referred only to ‘trading goods’. As a result, non-trading moveable properties such as fixed assets and capital assets listed in the Agreement do not come under the exception in Section 21(1) of the Act and would be chargeable with ad valorem duty.
Implication for M&As (Purchase of Business Assets)
- Ad Valorem Duty Applies Regardless of Deeming Provisions: The decision clarifies that irrespective of language or deeming provisions, an APA which constitutes a conveyance on sale itself, rather than merely an agreement to sell, attracts ad valorem duty.
- Higher Transaction Costs for M&A Deals: Purchasers in M&A transactions involving the purchase of businesses or business assets, must factor in higher transaction costs due to ad valorem stamp duty of up to 4%, which may affect overall deal pricing and structuring.
- Strategic Deal Structuring: Businesses should take into account the potential incidence of stamp duty when structuring acquisitions as share sales (only 0.3%) or asset sales (between 1% to 4%). The use of different types of instruments to effect transfers of different components of a business should also be carefully considered from a stamp duty perspective.
This ruling serves as a critical reference point for businesses, legal advisors, and tax professionals when structuring transactions to ensure compliance while managing transactional costs effectively.
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This article was written by Low Rui Thong (Associate) from Donovan & Ho’s corporate practice.
Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.
