The Australian Taxation Office (ATO) has released a
draft ruling that marks important changes to the way the Australian
tax authorities will interpret what constitutes a royalty for
withholding tax purposes, specifically in the context
of:
- licences for the use of or to reproduce software, or to modify
or adapt software;
- distribution agreements, including those with a right for the
distributor to sub-licence the use of the software, whether the
software is distributed by way of physical carrying media, digital
download or cloud-based technology; and
- ancillary software services, including those supplied for the
use or modification of software.
This may have a significant impact on the commercial
arrangements for Australian based and international businesses,
which should be reviewing their cross border licensing,
distribution and service agreements to determine whether the
changes impact those arrangements and whether the contractual terms
allow for any
