St.Jude Medical International Holding S.A.R.L. v Lembaga Hasil Dalam Negeri (LHDN)

Case Significance

Confirms the High Court's power to stay enforcement of a Real Property Gains Tax Act 1976 assessment pending appeal, holding that the tax statutes do not oust that power and that a stay may serve the public interest in judicial determination before enforcement.

This High Court decision at Georgetown, Penang, is a ruling on an application for a stay pending appeal in a large real property gains tax dispute. The applicant, St. Jude Medical International Holding S.A.R.L., a company incorporated and tax-resident in Luxembourg, wholly owned the shares in a Malaysian company engaged in manufacturing and selling medical devices. On 26 July 2024 the Director-General of Inland Revenue issued a Notice of Assessment under the Real Property Gains Tax Act 1976, arising from the applicant's disposal of shares in the Malaysian company, which was deemed to be a real property company. The tax was assessed at RM1,524,500,288.40, and a ten per cent increase under section 21(4) of the Act for non-payment within the prescribed period brought the total, inclusive of penalties, to RM1,676,950,317.24. The applicant challenged the assessment both by a statutory appeal (Form Q) to the Special Commissioners of Income Tax and by judicial review, the latter raising questions about Malaysia's taxing jurisdiction and the operation of Article 14 of the Malaysia-Luxembourg Double Taxation Agreement. After the judicial review was dismissed with costs, the applicant sought a stay pending its appeal to the Court of Appeal against both that dismissal and the enforcement of the assessment. The court, per Suzana binti Muhamad Said JC, held that sections 103 and 106 of the Income Tax Act, in pari materia with sections 21 and 23 of the Real Property Gains Tax Act, do not prevent the court from granting stays in tax matters, and reasoned that permitting a stay in an appropriate case serves the broader public interest, since compelling taxpayers to pay disputed assessments before judicial determination may carry reputational risks for Malaysia as an investment destination. Satisfied that the balance of justice favoured preserving the status quo pending determination of the dispute, the court allowed the application for a stay with costs. The judgment is significant for confirming the court's power to stay enforcement of a real property gains tax assessment pending appeal and the considerations that inform its exercise.