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    4.e. INCOME TAXATION - PARTNERSHIPS

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    Tine Tungpalan
    The document discusses the different types of partnerships under Philippine tax law, including general professional partnerships which are not subject to income tax. It explains that partners in these partnerships will report their distributive share of partnership income or loss in their individual tax returns. The document also provides guidance on determining a partner's distributive share and whether losses can be deducted.

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    4.e. INCOME TAXATION - PARTNERSHIPS

    Uploaded by

    Tine Tungpalan
    71 views13 pages
    The document discusses the different types of partnerships under Philippine tax law, including general professional partnerships which are not subject to income tax. It explains that partners in these partnerships will report their distributive share of partnership income or loss in their individual tax returns. The document also provides guidance on determining a partner's distributive share and whether losses can be deducted.

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    The document discusses the different types of partnerships under Philippine tax law, including general professional partnerships which are not subject to income tax. It explains that partners in these partnerships will report their distributive share of partnership income or loss in their individual tax returns. The document also provides guidance on determining a partner's distributive share and whether losses can be deducted.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    71 views13 pages

    4.e. INCOME TAXATION - PARTNERSHIPS

    Uploaded by

    Tine Tungpalan
    The document discusses the different types of partnerships under Philippine tax law, including general professional partnerships which are not subject to income tax. It explains that partners in these partnerships will report their distributive share of partnership income or loss in their individual tax returns. The document also provides guidance on determining a partner's distributive share and whether losses can be deducted.

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    © All Rights Reserved
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    You are on page 1of 13

    PARTNERSHIPS

    WHAT ARE THE KINDS OF PARTNERSHIP


    FOR INCOME TAX PURPOSES?
    • A. Partnerships not subject to income tax, which include the
    following:

    • 1. General professional partnerships (are partnerships formed by


    persons for the sole purpose of exercising their common
    profession, no part of the income of which is derived from
    engaging in any trade or business); and
    • 2. Joint venture or consortium formed for the purpose of
    undertaking construction projects or engaging in petroleum, coal,
    geothermal and other energy operations pursuant to an operating
    consortium agreement under a service contract with the
    Government.

    • B. Partnerships subject to tax.


    WHAT PARTNERSHIPS ARE
    SUBJECT TO TAX?
    • All partnerships, other than those enumerated as
    not subject to tax, are deemed and treated as
    corporations subject to the corporate income tax
    rate.

    • Exempt partnerships are still required to file an


    annual information return on their incomes and
    expenses for the purpose of ascertaining the
    partners’ taxable shares.
    LIABILITY OF MEMBERS OF GENERAL
    PROFESSIONAL PARTNERSHIPS

    • A general professional partnership as


    such shall not be subject to income tax.

    • Persons engaging in business as partners


    in a general professional partnership shall
    be liable for income tax only in their
    separate and individual capacities.
    LIABILITY OF MEMBERS OF GENERAL
    PROFESSIONAL PARTNERSHIPS
    • For purposes of computing the distributive
    share of the partners, the net income of
    the partnership shall be computed in the
    same manner as a corporation.

    • Each partner shall report as gross income


    his distributive share, actually or
    constructively received, in the net income
    of the partnership.
    WHAT IS MEANT BY A PARTNER’S
    DISTRIBUTIVE SHARE IN PARTNERSHIP
    NET INCOME?
    • By distributive share is meant a partner’s computed
    and ascertained share in the net profits of the
    partnership, whether actually distributed to the
    partners or not.

    • A partner’s distributive share in the net income of a


    taxable business partnership is subject to a final tax of
    10% (RC, NRC, OCW and RA) or 20% (NRA-ETB).
    This final tax shall be withheld by the partnership and
    remitted to the BIR. (Sec. 24[B-2], NIRC).
    WHAT IS MEANT BY A PARTNER’S
    DISTRIBUTIVE SHARE IN PARTNERSHIP
    NET INCOME?
    • A partner’s distributive share in the net income of a
    non-taxable general professional partnership shall form
    part of his gross income in the individual income tax
    return subject to the graduated income tax rates.

    • This share shall be subject to a creditable withholding


    tax of 15% (if income payments exceed Php720,000 for
    the current year) or 10% (if income payments do not
    exceed Php720,000 for the current year) to be withheld
    and paid by the partnership to the BIR. (Sec. 26, NIRC)
    OPTIONAL STANDARD DEDUCTION
    (OSD) AS AMENDED BY RA NO. 9504
    • General professional partnership and the
    partners may avail of the OSD only once,
    either by the general professional
    partnership or the partners comprising the
    partnership. (RA No. 10963)
    IS THE PARTNER’S SHARE IN THE NET LOSS
    OF THE PARTNERSHIP DEDUCTIBLE IN HIS
    PERSONAL INCOME TAX RETURN?

    • It depends. In the case of a business partnership


    subject to tax, the partner’s share in the net loss
    of the partnership is not deductible since any gain
    therefrom is subject to final tax.
    • In the case of a general professional partnership
    not subject to tax, the partner’s share in the net
    loss of the partnership may be claimed as a
    deductible expense in his personal income tax
    return.
    MAY A GENERAL PROFESSIONAL PARTNERSHIP
    CLAIM CONTRIBUTIONS AS DEDUCTIBLE
    EXPENSE?
    •A general professional partnership, unlike a
    business partnership, is not subject to tax. But it
    may deduct contributions deductible in full from its
    gross income for purposes of computing its net
    income.

    • The contributions with limit, however, shall be


    claimed by the individual professional partners in
    their respective income tax returns in proportion to
    their respective interests in the partnership.
    IS A CO-OWNERSHIP SUBJECT TO
    INCOME TAX?
    • Generally, a co-ownership is exempt from
    income tax because the activities of the co-
    owners are usually limited to the
    preservation of the properties owned in
    common and the collection of the income
    therefrom. The co-owners shall include in
    their personal income tax returns their
    respective shares of the income of the co-
    ownership.
    IS A CO-OWNERSHIP SUBJECT TO
    INCOME TAX?
    • A co-ownership shall be subject to income
    tax and treated like a corporation under any
    of the following cases:

    • A. When the income of the co-ownership is


    invested by the co-owners in other income-
    producing properties or income-producing
    activities; or
    IS A CO-OWNERSHIP SUBJECT TO
    INCOME TAX?
    • B. When there is no attempt to divide
    inherited property for more than ten (10)
    years and the said property was not under
    any administration proceedings nor held in
    trust, and unregistered partnership is
    deemed to exist (BIR Ruling, Aug. 18,
    1959).

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