Overview of Stamp Duty for Transactional Documents – Federal Court’s Decision in Havi Logistics (M) Sdn Bhd v. Pemungut Duti Setem
In the recent decision of Havi Logistics (M) Sdn Bhd v. Pemungut Duti Setem [2025] 2 MLJ 845, the Federal Court clarified critical aspects on the scope and application of ad valorem stamp duty under the Stamp Act 1949, particularly in relation to commercial agreements effecting the transfer of business assets. The case sets a binding precedent for the classification of instruments as “conveyances on sale” and provides definitive guidance for practitioners and businesses navigating stamp duty exposure on transactional documents.
A. Facts of the Case
On 6 February 2020, Havi Logistics (M) Sdn Bhd (“the Appellant”) entered into an asset purchase agreement (“the Agreement”) with Martin-Brower Malaysia Co Sdn Bhd for the acquisition of specific business assets and liabilities, excluding goodwill. The agreement encompassed fixed assets such as computer systems, plant and machinery and several business contracts. The agreement stipulated that the title and risk of the assets would pass to the appellant at closing, with no further action required from the parties, pursuant to a deeming clause. The appellant applied to the Collector of Stamp Duties (“the Respondent”) for assessment of the stamp duty payable on the agreement. The Respondent assessed the agreement as a “conveyance on sale” under Section 21(1) and Item 32(a) of the First Schedule of the Stamp Act 1949, imposing ad valorem duty amounting to RM399,196.00. The appellant paid the duty under protest and objected, arguing instead that the agreement should attract only a fixed duty of RM10 under Item 4 of the First Schedule. The High Court ruled in the Appellant’s favour, but the decision was overturned by the Court of Appeal, leading to a further appeal to the Federal Court, which will be discussed further in this article.
B. Issues Before the Court
The Federal Court addressed four pivotal legal questions:
- Whether the Agreement was a “conveyance on sale” within the meaning of Section 21(1) of the Stamp Act 1949 and therefore dutiable under Item 32(a) of the First Schedule of the Act. This issue required the court to determine whether the Agreement constituted a transfer of property that triggered ad valorem stamp duty.;
- Whether the deeming provision in Clause 2.3(c)(i) of the Agreement (which states that title and risk in the assets are deemed to have passed at closing) rendered the Agreement a “conveyance on sale” under Section 21(1) of the Act. The court had to decide if this clause alone was sufficient to characterise the agreement as a taxable conveyance.;
- Whether the Agreement fell within the exception under Section 21(1) of the Stamp Act 1949 because the fixed assets sold were “goods,” thus exempting the transaction from ad valorem duty. This required interpreting the statutory term “goods” and whether capital assets like equipment or machinery fall within that exemption; and
- Whether the Collector of Stamp Duties could lawfully raise a stamp duty assessment without specifying which sub-limb of Item 32 of the First Schedule had been invoked. This procedural issue addressed whether a vague or unspecified assessment was valid under the Stamp Act.
C. Federal Court’s Decision
1.The Agreement is a “Conveyance on Sale” Within Sections 2 and 21(1)
It was held that the agreement was a conveyance on sale, falling squarely within Section 2 of the Act, which defines such conveyance to include any instrument transferring property upon sale.
Importantly, the Federal Court clarified that it is not necessary for an instrument to affect a transfer of title at the point of execution for it to attract ad valorem duty. A contract for sale that, in substance, accomplishes or contemplates the transfer of property may suffice.
The Federal Court also explained that Section 21(1) deems certain contracts, though not formal conveyances, as chargeable with ad valorem duty “as if” they were conveyances. Accordingly, the Federal Court found that the agreement’s operative clauses (notably clause 2.1(a)) effected the transfer of fixed assets, liabilities, and business contracts, thus fulfilling the statutory requirement.
2. Deeming Clause Not Determinative
The Federal Court expressly disagreed with the Court of Appeal’s reliance on Clause 2.3(c)(i), which deemed title and risk to have passed at closing.
The Federal Court held that the agreement was a conveyance on sale regardless of this deeming clause, as the operative terms of the contract already effected a transfer in substance. The Federal Court emphasised that the legal character of the instrument must be assessed based on its operative effect, not merely the presence or absence of a deeming provision.
This establishes that an instrument which effects or implements a sale, whether explicitly or implicitly, is sufficient to attract ad valorem duty.
3. Fixed Assets Do Not Fall Within the “Goods” Exception
The Appellant had also relied on the exception in Section 21(1), which excludes agreements for the sale of “goods, wares or merchandise” from ad valorem duty. The Federal Court rejected this argument. Applying the canon of statutory construction noscitur a sociis, the Court held that “goods” must be understood in the context of “wares” and “merchandise”, all of which connote trading inventory, not capital items.
Accordingly, the fixed assets transferred under the agreement (computers, equipment, etc.) were not “goods” within the meaning of Section 21(1) and thus not exempted from ad valorem duty.
This part of the judgment effectively limits the goods exception to movable assets held for trade or resale, excluding fixed assets used in the business.
4. Assessment Valid Without Specific Sub-Limb Reference
On the procedural point, the Federal Court held that the Appellant’s failure to explicitly identify the applicable sub-limb of Item 32 in the First Schedule did not invalidate the assessment.
The Federal Court found that the stated case and the surrounding correspondence between the parties unambiguously indicated reliance on Item 32(a). As such, there was no material uncertainty or procedural irregularity that would render the assessment void.
This finding confirms that minor technical omissions do not defeat a lawful assessment where the substance and basis of the duty are clear.
D. Implication of the Decision
This case significantly clarifies the stamp duty treatment of transactional documents in Malaysia, especially asset purchase agreements and multi-asset deals. Key takeaways include:
1.Substantive Effect Over Form: Reaffirmation of the “Substance Over Form” Doctrine:
Practitioners must now exercise heightened diligence in assessing the legal effect of an agreement, not merely its label or structure. Even if an agreement does not expressly operate as a conveyance, it may nonetheless attract ad valorem stamp duty if it results in the transfer of proprietary rights, liabilities, or contractual obligations. The Federal Court emphasised that any agreement that, in substance, transfers property even without immediate transfer of title, may fall within the meaning of a “conveyance on sale” under Sections 2 and 21(1) of the Stamp Act 1949.
2.Narrow Interpretation of the “Goods” Exception:
The decision narrows the scope of the statutory exemption for “goods, wares or merchandise” under Section 21(1). Businesses can no longer rely on that exception to shield the transfer of capital or fixed assets (e.g., equipment, machinery, IT systems) from stamp duty exposure. This distinction is critical for due diligence and tax structuring, particularly in asset sales, business transfers, or internal reorganisations involving operating equipment or non-trading assets.
3. Contractual Deeming Clauses Are Not a Safe Harbour:
The Federal Court’s decision that the presence or absence of a deeming clause (e.g., Clause 2.3(c)(i)) is not determinative serves as a caution against overreliance on contractual drafting to avoid duty. A well-drafted clause will not override the underlying substance of the transaction. Practitioners must therefore avoid assuming that deferred closings or delivery mechanisms can sidestep ad valorem duty, particularly where the agreement itself effects the economic transfer.
4. Increased Risk of Audit and Reassessment:
From a compliance perspective, this decision empowers the Collector of Stamp Duties to scrutinise instruments based on their practical effect and not merely the stated purpose or title. Businesses must be prepared for assessments based on a holistic review of the transaction, including schedules, assumptions of liability and operational impact, even where no real property or formal transfer instrument is involved.
5. Strategic Consideration in Transaction Structuring:
Practitioners advising on mergers, acquisitions or asset transfers must carefully evaluate whether to use share sale versus asset sale structures, as the latter now clearly exposes the transaction to tiered ad valorem stamp duty. Where possible, businesses may consider using share sale structures (typically subject to fixed duty) to mitigate exposure, provided the transaction objectives and regulatory framework permit it.
6. Procedural Clarity:
The decision confirms that assessments are valid even if the sub-category under Item 32 is not expressly stated, provided the substance is unambiguous.
E. Conclusion
The Federal Court’s decision in Havi Logistics (M) Sdn Bhd v Pemungut Duti Setem [2025] 2 MLJ 845 provides authoritative clarification on the scope of stamp duty exposure under the Stamp Act 1949, particularly in relation to asset purchase agreements. By affirming that an agreement effecting the transfer of business assets, liabilities and contractual rights can amount to a “conveyance on sale” even without a formal instrument of transfer, the Court reinforces a substance-over-form approach to stamp duty liability. The decision also narrows the interpretation of the “goods” exception under Section 21(1), confirming that capital assets are not excluded from ad valorem duty.
For practitioners and businesses, this case underscores the importance of carefully evaluating the legal and economic effects of transactional documents, not just their labels. Legal advisors must now approach asset sale structures with greater caution, ensuring full awareness of potential ad valorem duty implications. Strategically, parties may also need to consider alternative transaction structures, such as share sales, where appropriate, to manage stamp duty exposure more efficiently. Ultimately, Havi Logistics serves as a landmark ruling that recalibrates how stamp duty risk is assessed in commercial transactions across Malaysia.
If you have any questions, please contact our Advisory & Compliance Partner, Afif Che Had (afif@nzchambers.com), or our Pupil-in-Chambers, Wan Tasnima.
Authors:
- Afif Che Had
- Wan Tasnima
References:
1 [2025] 2 MLJ 845
2 Stamp Act 1949