INCOME TAX ON PARTNERSHIPS

2. General Partnership (Commercial Partnership)

Partnership is defined as (Art 1767) - Not a GPP
- Business
Article 1767. By the contract of partnership two or - Considered as corporations and taxable
more persons bind themselves to contribute money, as corporations
property, or industry to a common fund, with the - RCIT or MCIT
intention of dividing the profits among themselves. Two - Not included in partner’s computation of
or more persons may also form a partnership for the taxable net income.
exercise of a profession. (1665a) - Profit distribution are considered dividend,
Article 1768. The partnership has a juridical kaya
personality separate and distinct from that of each of Taxpayer Partnership Partners
the partners, even in case of failure to comply with the GPP Exempt Basic Tax
requirements of article 1772, first paragraph. (n) GP or GCP 30% Corporate 10% Final Tax
Income Tax (RC, RA, NRC)
Article 1771. A partnership may be constituted in any
20 for NRA-ETB
form, except where immovable property or real rights 25% NRA-NETB
are contributed thereto, in which case a public
instrument shall be necessary. (1667a)
Allowable deductions to GPP

1. itemized deductions -
Kinds of Partnership 2. Optional Standard Deduction
1. General Professional Partnership (GPP)
- With purpose of common profession
- Practice of profession Allowable deductions to partners comprising GPP
- Sec 26 of Tax Code, GPP is not subject to
Income tax (only on ordinary income) They cannot avail the 8% kase
“pass through” and creditable withholding
tax but required to file ITR (same manner
as corpo) BIR form 1702
- Subject to FWT ang passive at CGT

Liability of On separate and individual

partner in GPP capacity
Required of ITR A return of its income except
income exempts in tax code
Manner of Same as corporation
computation
Basis of income Each partner will report as
a partner will gross income his distributive
report share, actually or
constructively received, in the
net income of partnership.

- Graduated income tax rates (if sole

income from GPP) hindi pwede ang 8%
kase net na ang binibigay sa GPP
- May avail itemized deductions or Optional
Standard Deduction then distribute the net
income to the partners
- If