Malaysia Tax Agency Issues Practice Note on Taxation of Royalty Income for Non-Residents

The Malaysian Inland Revenue Board Dec. 5 issued Practice Note No. 3/2023, clarifying the taxation of royalty income for non-residents. The note clarifies: 1) that the taxation of non-residents’ royalty income depends on a case-to-case basis; 2) definitions of “royalty” and “tax deduction for royalty payments”; 3) that the copyright and software fees are considered royalties because such payments are for the use or right to use software and copyright, where the original owner retains intellectual property; 4) that the payments made by distributors and resellers to the original owner for the purchase or use of software or applications qualify ...