In the recent case of Havi Logistic (M) Sdn Bhd v Pemungut Duti Setem  MLJU 2801, the High Court held an asset purchase agreement which does not involve transfer of properties or interest legally or equitably attracts nominal stamp duty.
The brief facts of Havi (supra) are as follows:
- 1. The taxpayer entered into an asset purchase agreement to acquire the following assets from the vendor for a consideration amounting to RM10,378,806.35 (“Asset Purchase Agreement”):
- i. Acquired Assets
- a) Computer software;
- b) Computer hardware;
- c) Fittings;
- d) Renovations; and
- e) Plant, machinery and equipment.
- ii. Inventory
- i. Acquired Assets
- 2. The Asset Purchase Agreement specifically excluded ‘the good will Malaysia Business’ of the vendor.
- 3. The Stamp Office adjudicated the Asset Purchase Agreement with ad valorem stamp duty amounting to RM399,196.00 under Section 21(1) of the Stamp Act 1949 and Item 32(a), First Schedule to the Stamp Act 1949.
- 4. The taxpayer objected on the basis that the Asset Purchase Agreement attracts nominal stamp duty under Item 4, First Schedule to the Stamp Act 1949.
- 5. However, the Stamp Office disagreed. The taxpayer paid the stamp duty under protest and appealed to the High Court.
The High Court held that, amongst others:
- a) The burden of proof rests on the Stamp Office to provide that the Asset Purchase Agreement should be assessed under Item 32(a), First Schedule to the Stamp Act 1949.
- b) In construing the Stamp Act 1949, one must look at the instruments and not at the transactions (see Pemungut Duti Setem v BASF Services (Malaysia) Sdn Bhd  5 MLJ 348).
- c) The cardinal rule in interpretation of documents – intention of the parties must be gathered from the written agreement itself (see Petroleum Nasional Bhd v Kerajaan Negeri Terengganu  1 MLJ 8).
- d) The subject matter in dispute – goodwill, has been specifically excluded.
- e) Thus, the Asset Purchase Agreement clearly fell within the ambit of Item 4 of the First Schedule to the Stamp Act 1949 as there are no properties legally or equitably transferred being transferred.
This case demonstrated that the importance of preparing a well-drafted asset purchase agreement. In asset acquisition transactions, usually the schedule or list of assets would be the last to be ironed out. However, the drafters must be clear of what are in the list or schedule and set out what are being excluded. Failing which, one may run the risk of ad valorem stamp duty being imposed on the asset purchase agreement (see Stanway Limited v Collector of Stamp Duties, Ipoh  1 LNS 77).
The crux of this case is “sale of any equitable estate or interest in any property” under Section 21 of the Stamp Act 1949 and NOT ‘goodwill’ solely. Any sale of sale of any equitable estate or interest in any property would subject to ad valorem stamp duty. Hence, one must be clear with what are being sold and transferred under the agreement.
Another highlight of this case is where the High Court held that in bringing the Asset Purchase Agreement to tax under Item 32, First Schedule to the Stamp Act 1949, the Stamp Office must specify which sub-item of Item 32, First Schedule to the Stamp Act 1949 and provide reasons and basis for the same, especially when the taxpayer has provided the basis of their objection.
Hopefully, the Stamp Office would specify clearly in the notice of assessment under which item/sub-item, First Schedule to the Stamp Act 1949 in bringing the instrument to tax moving forward.
This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.
About the Author
Desmond Liew Zhi Hong
Halim Hong & Quek