Recently, the Court of Appeal in Pemungut Duti Setem v GTP Network Sdn Bhd[1] held that an agreement for sale and purchase of assets constitutes conveyance on sale under Section 21(1) of the Stamp Act 1949 (“SA”), which would be subject to ad valorem duty under Item 32(a), First Schedule.
This article discusses the key points of the grounds of judgment given by the Court of Appeal in the case.
Facts
In August 2023, GTP Network Sdn Bhd (“the taxpayer”) entered into an asset purchase agreement with MEBA Holdings Sdn Bhd to acquire, amongst others, 16 telecommunications towers with a consideration of RM 15 million. Under the said agreement, the word “towers” refers to:
“16 telecommunications towers owned by the vendor as set out in Schedule 1 together with all assets, equipment and fixtures associated with and/or are required for the proper functioning and operations of the said telecommunications towers including but not limited to power supply modules, cabins, full tank, security fencing, generator sets, cabling and dark fibre, all of which are strictly chattels, moveable assets and equipment (and all of which are transferred via delivery by hand), constructed, operated and leased to customers.
The taxpayer’s solicitor submitted the agreement for stamp duty adjudication. The Stamp Duty Collector (“the Collector“) subsequently informed the solicitor that the agreement had been wrongly adjudicated and ought to have been stamped under Section 21 of the SA.
The taxpayer’s solicitor then resubmitted the agreement for stamp duty adjudication. In September 2023, a notice of assessment amounting to RM 582,000 was raised against the taxpayer (“Assessment”). Dissatisfied with the Assessment, the taxpayer filed a notice of objection and then appealed to the High Court.
Issue
The issue here is whether the agreement constitutes a conveyance on sale under Section 21(1), which provides that:
“Any contract or agreement made in Malaysia under seal or under hand 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 lands, tenements, hereditaments, or heritages, or property locally situate out of Malaysia, or goods, wares or merchandise, or stock, or marketable securities, or any ship or vessel, or part interest, share or property of or in any ship or vessel, 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.”
High Court’s decision
The High Court allowed the taxpayer’s appeal and held that the agreement was merely an agreement to convey, and not a conveyance on sale. The agreement contemplated future acts and further documentation before legal ownership could pass, and its completion was conditional upon the satisfaction of several requirements. Accordingly, it did not effect an immediate transfer of the assets.
The High Court further held that although beneficial ownership may have passed to a limited extent upon execution, legal ownership, rights and interests would only pass upon completion, subject to the fulfilment of conditions and the delivery of further documents such as licence agreements, novation agreements and right of way agreements. As further acts were necessary before the taxpayer could obtain effective ownership and use of the assets, the agreement itself did not transfer them.
The High Court also found that the Collector had wrongly treated the agreement as a novation agreement and that ad valorem duty is only chargeable where an instrument effects an immediate and complete transfer, with nothing further to be done. The agreement was therefore chargeable with nominal duty of RM10 under Item 4, First Schedule, and the Collector was ordered to refund the duty paid, with interest.
Dissatisfied with the decision, the Collector appealed to the Court of Appeal.
Collector’s position
The crux of the Collector’s contention is that the agreement constitutes “conveyances on sale” under Section 21(1), which is chargeable with ad valorem duty for the following reasons:
- a) The telecommunications towers and their associated assets are movable property falling within the definition of “property” under Section 2. Being capital assets and not trading stock in the nature of “goods, wares or merchandise”, the telecommunications towers do not come within the exceptions in Section 21(1) or the exemption under Item 4, First Schedule; and
- b) The High Court had erred by focusing on future deliverables and completion conditions rather than the substance and effect of the agreement, which vested beneficial ownership and economic rights in the taxpayer from the date of execution. Reliance was placed on the Federal Court’s decision in Havi Logistics (M) Sdn Bhd v Pemungut Duti Setem [2025] 2 MLJ 845.
Taxpayer’s position
The taxpayer’s position is that the agreement was merely an agreement to convey, and not an instrument of conveyance, relying on the English decision in Angus, which was applied by the Federal Court in BASF Services (M) Sdn Bhd v Pemungut Duti Setem [2010] 5 CLJ 109. In Angus, it was held that the instrument was held to be a mere agreement, and not a conveyance on sale, because the transaction was not completed when the instrument was executed and completion was to take place at a future date.
The taxpayer contended that the assets under the agreement, including the telecommunications towers, are goods or chattels which are excluded from ad valorem duty under Section 21(1). Legal ownership, risk and title did not pass to the taxpayer by virtue of the agreement itself, as numerous further actions were required before ownership, risk and title could pass.
Court of Appeal’s decision
The Court of Appeal allowed the Collector’s appeal and set aside the High Court’s decision. Amongst others, the Court of Appeal held that the assets are movable property within the definition of “property” under Section 2, which provides that:
“conveyance on sale includes every instrument and every decree or order of any Court, whereby any property or any estate or any interest in any property, upon the sale thereof is transferred to or vested in a purchaser or any other person on his behalf or direction.”
According to the terms, the agreement is for the sale of the property interests, i.e. telecommunication towers and associated rights. It was also the Court of Appeal’s finding that the agreement transfers beneficial and legal ownership of the telecommunication towers to the taxpayer and vests economic rights from the date of the agreement. The timing of completion, or when title passes, is immaterial. Otherwise, ad valorem duty could readily be avoided by merely stating that title would pass at a future date.
According to the Federal Court’s decision in Havi Logistics, the “goods” exception in Section 21(1) applies only to trading goods. As the word “goods” appears alongside “wares” and “merchandise”, the court read it as taking its meaning from those neighbouring words (a principle known as noscitur a sociis), so that it covers only trading stock and not all movable property.
Thus, the agreement constituted a conveyance on sale chargeable with ad valorem duty under Item 32(a), First Schedule.
Commentary
Following the Federal Court’s decision in Havi Logistics, this decision further reinforces the court’s position that asset purchase agreements are subject to ad valorem duty. The timing of completion or the point at which legal title passes is no longer the determinant of whether an instrument is a conveyance on sale.
Going forward, parties structuring the sale of businesses or assets in Malaysia should take note that an asset purchase agreement will attract ad valorem duty under Item 32(a), First Schedule.
[1] Duti Setem v GTP Network Sdn Bhd [2026] 7 CLJ 533
About the authors
Yap Wen Hui
Senior Associate
Tax, Customs and Incentives Practice Group
Halim Hong & Quek
wh.yap@hhq.com.my
