Hello everyone!

I am seeking some guidance regarding a tax-related issue that one of my friends, based in Sabah, is currently facing. She is partnering with an individual in the US to sell digital software and services. In this partnership, she provides a PayPal account and handles tasks such as monitoring income, issuing refunds, managing disputes, and overseeing accounting activities. Most of the software and services, however, are managed by her US-based partner.

Recently, she discovered that she needs to pay taxes, which has come as a surprise to her, as she has never had any experience with tax obligations or understood them in detail.

To provide more context, the business income is withdrawn to her bank account, from which she receives 10% of the total income, while the remainder is sent to her partner via international wire transfer. The business generates an income ranging between $2,000 and $9,000 USD per month, with fluctuations.

She is concerned and unsure about how to proceed with the tax payment process. Specifically, she is wondering if she is required to pay tax on the full income or just the 10% she receives.

Could anyone clarify how tax payments work in this situation, and what steps she should take to ensure compliance?

Thank you for your help and advice.

If it is money laundering the bank could have flagged it already but the business is roughly around 1 year + already. As for the documentation I will ask her again if there's any proper documentation including transaction of every sells made and if there any proper agreement.

She mentioned that it has been over a year, and she recently showed me the full transaction history from PayPal. Over the past year, there have only been two refund cases. As for disputes none.

Apologies for the delayed response. She has already contacted a tax consultant. To summarize, all income generated through her Stripe and bank accounts is subject to Malaysia's tax regulations.

She is required to provide all proof of delivery, documents, e-invoices from Stripe, and any other related documentation, ensuring that everything is backed up in case of any inquiries.

In short, all income is taxable by LHDN (Inland Revenue Board of Malaysia).

Regarding your question, she mentioned that she is already familiar with the software/services, as she uses them herself. Her role, on the other hand, is to manage the website, including providing live support (24/7 or as available), as well as tracking all income, refunds, and any disputes, if they arise.

Well I'm not fully sure how tax work in Malaysia so wish her luck tho, I also told her maybe should stop doing it since it's hard to deal with foreign country, what more it's in US.