Question & AnswerQ&A (BIR REVENUE REGULATIONS NO. 2-2010)
The main purpose is to amend certain provisions of Revenue Regulations No. 16-2008 to clarify the manner of claiming the Optional Standard Deduction (OSD) by General Professional Partnerships (GPPs) and their partners, as well as the manner and period for making the election to claim OSD in income tax returns.
General Professional Partnerships (GPPs) and their individual partners who are entitled to it under the Philippine Tax Code may claim the OSD.
No, a GPP is not subject to income tax under Title II of the Code. Instead, partners are liable to pay income tax on their respective distributive shares of the net income of the GPP.
The net income of a GPP is computed in the same manner as a corporation, either by claiming itemized deductions or by availing of the Optional Standard Deduction, which is up to 40% of gross income.
No. If the GPP avails of the OSD, the partners cannot claim further deductions from their distributive share in the net income because the OSD is in lieu of all itemized deductions for both the GPP and its partners.
If the GPP avails of itemized deductions, the partners may also claim itemized deductions on their share of the net income, provided those deductions were not already claimed by the GPP.
A taxpayer must indicate their election by checking the appropriate box in the income tax return filed for the first quarter of the taxable year. This election becomes irrevocable for that taxable year.
Failure to file the first quarter income tax return results in the taxpayer being considered as having availed of the itemized deductions option for the entire taxable year.
No, individual taxpayers who claim the OSD are not required to submit financial statements, though they must keep records related to their gross sales or gross receipts, unless the Commissioner otherwise permits.
The deductions claimed from the partner's other gross income must follow the same deduction type (OSD or itemized deductions) as the one availed for the partnership income. If the GPP claims OSD, the partner may claim 40% OSD on other gross income but not on the distributive share from the GPP.