QuestionsQuestions (BIR REVENUE MEMORANDUM CIRCULAR NO. 3-2012)
No. A GPP as such shall not be subject to the income tax imposed under the NIRC. Income tax liability attaches only to the partners in their separate and individual capacities.
The persons engaging in business as partners in a GPP are liable for income tax only in their separate and individual capacities.
For computing distributive share of the partners, the net income of the partnership shall be computed in the same manner as a corporation.
No. Each partner must report as gross income his distributive share, actually or constructively received, in the net income of the partnership.
It explains that income payments made to a GPP in consideration for its professional services are not subject to income tax and therefore not subject to the creditable withholding tax rules under RR No. 2-98, as amended.
It provides an exemption from the withholding of creditable withholding tax for certain income payments, including those to persons enjoying exemption from income taxes—specifically listing GPPs.
A partnership formed by persons for the sole purpose of exercising their common profession, where no part of the income is derived from engaging in any trade or business.
The GPP must be for the sole purpose of exercising their common profession, and its income must not be derived from engaging in any trade or business.
No. The circular states that income payments made to a GPP in consideration for its professional services are not subject to income tax, and consequently not subject to withholding tax.
The individual partners, because they are the ones liable for income tax in their separate and individual capacities under Section 26.
It states that such payments are subject to 15% if the payments to the partner for the current year exceed P720,000.00; and 10% creditable withholding tax if otherwise, pursuant to Section 2.57.2(H) of RR No. 2-98, as amended by RR No. 30-03.
The circular cites P720,000.00 as the threshold: 15% if payments to the partner for the current year exceed P720,000.00; otherwise 10%.
It is treated as gross income to that partner to the extent of his distributive share, whether actually or constructively received.
No. The partnership as such is not subject to income tax; instead, partners report and pay tax on their distributive shares computed from the partnership’s net income.
Payments made to the GPP by clients for professional services are not subject to withholding because the GPP is tax-exempt as an entity. But payments made by the GPP to its partners (drawings/allowances/etc.) are subject to withholding at 15% or 10% depending on the annual threshold.