Practice Note No. 3/2023 -tax treatment of copyright and software payments made by distributors and resellers to non-residents dated 5th December 2023.

Key Takeaway of PN 3/2023 :

1. The payments for the use or right to use copyright and software, even when modified, exploited, or distributed, are considered hashtag#royalties.

2. These royalties are subject to hashtag#withholdingtax tax under section 109 of the Income Tax Act 1967, especially when paid to non-residents who do not have a permanent establishment in Malaysia.

3. This applies regardless of the rights granted to the distributor or reseller.

4. Reference should be made to Double Taxation Avoidance Agreements for specific cases.

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