Havi Logistics’ Dispute

Havi Logistics disputed the Collector’s assessment, arguing that:

a. The APA should be assessed under Item 4 of the First Schedule of the SA 1949 (“Item 4”), attracting only a fixed duty.

b. The agreement was not a “conveyance on sale” since the transfer of legal title did not occur upon execution but only at closing, meaning it was not an instrument of conveyance.

c. The acquired fixed assets fell within the definition of “goods” under Section 21(1) of the SA 1949, which is exempt from ad valorem stamp duty.

 

The High Court’s (“HC”) and Court of Appeal’s (“COA”) Decisions

The High Court

The HC ruled in favour of Havi Logistics, holding that the APA was subject to a fixed duty of RM 10 under Item 4.

The Court of Appeal

The COA reversed the HC’s decision, holding that the Collector’s ad valorem assessment was valid, as:

a. The Acquired Assets sold under the APA fell within the exception of “goods” under Section 21(1) of the SA 1949 and were thus not assessable to ad valorem stamp duty by virtue of Section 21(1) of the SA 1949 alone. The COA did not distinguish between fixed / capital assets and inventory / trading stock.

b. However, the effect of the Deeming Provision is that the APA functioned as a “conveyance on sale”, thus rending it liable for ad valorem stamp duty under Item 32(a).

Havi Logistics subsequently appealed to the FC.

 

FC’s Decision

The FC upheld the COA’s decision but rejected its reasoning that the APA was a “conveyance on sale” solely due to the Deeming Provision. Instead, the FC held as follows:

a. The Acquired Assets Were not “Goods” under Section 21(1) of the SA 1949

The term “goods” should be interpreted in context with the words “wares or merchandise”, which comes immediately after it in Section 21(1) of the SA 1949. This means the exception applies only to inventory or trading stock. Capital or fixed assets do not fall within this definition and therefore do not qualify for the exception under Section 21(1).

b. The APA was a “Conveyance on Sale” Regardless of the Deeming Provision or Timing of Title Transfer

Since the APA fell within the scope of Section 21(1) of the SA 1949, it attracted ad valorem stamp duty as if it were an actual conveyance on sale. There is no requirement under Section 21(1) that an instrument must operate to convey or transfer property for it to be dutiable as a conveyance on sale.

In fact, Section 21(1) was enacted precisely as an exception to the general requirement under Section 2, which states that an instrument must convey or transfer property before it is subject to ad valorem duty as a “conveyance on sale”.

Accordingly, the APA was subject to ad valorem duty regardless of whether the Deeming Provision existed or whether title passed at a later date. The timing of completion or the date of which title is transferred is irrelevant in determining whether an instrument is a conveyance on sale. Otherwise, taxpayers could easily circumvent ad valorem stamp duty simply by drafting agreements to defer the passing of title to a future date.

 

Analysis of Implications for Business Asset Transfers

The FC’s decision has now clearly established that an agreement for the sale of fixed or capital assets qualifies as a “conveyance on sale” under Section 21(1) of the Stamp Act 1949. As a result, such agreements are subject to ad valorem stamp duty, regardless of whether the title passes at a later date or whether the agreement includes a deeming provision.

Beyond this, taxpayers should also consider the following implications when structuring asset sale transactions.

a. Importance of Separating Inventory and Capital Assets

An agreement should clearly distinguish between consideration attributable to fixed or capital assets and inventory or trading stock. This is because inventory and trading stock are classified as “goods” under Section 21(1) of the Stamp Act 1949 and are exempt from ad valorem stamp duty.

In the Havi Logistics Case for instance, the APA specifically identified the consideration estimated to be payable for Inventory Cost, ensuring that stamp duty was not imposed on the consideration for these exempted items.

b. Stamp Duty is Payable Upon Execution, Regardless of Completion Date

Not all contracts or transactions reach completion. Some may be subject to conditions precedent (“CPs”) that are not fulfilled, while others may fail for various reasons.

Other tax legislations recognise and account for this uncertainty to some extent. For instance, the Real Property Gains Tax Act 1976 (“RPGTA”) accounts for conditional contracts[1], whilst the Income Tax Act 1967 (“ITA”) requires a debt to have arisen for income to be recognised and tax to be charged[2].

By contrast, stamp duty liability on asset sale agreements arises immediately upon execution, regardless of whether the transaction is ultimately completed. The agreement must be presented for stamping within 30 days after execution[3], and late stamping penalties may apply thereafter[4].

This raise concerns over whether stamp duty can be refunded if an asset sale falls through due to unmet CPs or other reasons. However, under Section 21(7) of the SA 1949, a refund application is possible if the agreement is rescinded or not performed. If the Collector refuses a refund, taxpayers may seek judicial review or apply for a revision to the Minister of Finance under Section 78 of the SA 1949.

Since stamp duty is payable upfront, this increases transactional costs and should be factored into deal structuring and financial planning.

 

Concluding Thoughts

The Havi Logistics Case highlights the growing complexity of stamp duty matters and underscores the importance of strategic transaction structuring in M&A deals. Legal and tax advisors must proactively assess stamp duty implications in business and asset sales, ensuring a balanced approach that aligns legal and commercial interests while minimising stamp duty exposure within the bounds of the law.

More broadly, this ruling is part of a rising trend in stamp duty disputes. With the issuance of the Stamp Duty Audit Framework, the shift to a self-assessment system beginning 1 January 2026, and the corresponding increase in powers to be given to the Collector thereunder, stamp duty audits are expected to rise. In the context of asset sales, future disputes may arise concerning:

a. The definition of “property” in asset sales.

b. The valuation and classification of goods, particularly when inventory and fixed assets are segregated.

 

If you have any inquiries on stamp duty treatment of instruments or issues arising from stamp duty audits, please contact Partner Chris Toh Pei Roo (tpr@lh-ag.com).

 

 

REFERENCES

[1] Paragraph 16, Schedule 2 RPGTA

[2] Section 24(1) ITA

[3] Section 47 SA 1949

[4] Section 47A SA 1949