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October 18, 2019 | MANILA, PHILIPPINES

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Professional partnerships not subject to MORE STORIES

income taxes
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GENERAL PROFESSIONAL partnerships (GPP) are not subject to income taxes
coverage of gov’t assets
and their corresponding creditable withholding taxes, the Bureau of Internal
Revenue (BIR) reiterated in its latest issuance. Debt service falls sharply in 1st half to P378.4B
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The bureau released Revenue Memorandum Circular No. 3-2012 setting the tax implications
of a GPP, “partnerships formed by persons for the sole purpose of exercising their common Taxwise Or Otherwise -- By Reynaldo E. Maniego III:
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The most common forms of GPPs are accountancy firms, architectural firms and law firms.
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While GPPs are not subject to income tax, partners will be liable instead “in their separate
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and individual capacities,” the issuance read. - YPO
“It is the individual partners who shall be subject to income tax, and consequently, to
withholding tax...” based on their share in the GPP, the issuance continued.

Payments made by clients to GPPs for their professional services are likewise not subject to
these taxes, it added.

GPPs, unlike corporations, are not separate taxable entities, Tammy H. Lipana, chairperson of
the Philippine Chamber of Commerce and Industry tax committee, said in an interview last
Friday. The BIR recognizes that GPPs are primarily formed because of the need to pool
resources.

“GPPs are pass-through entities, that’s why it’s the partners that shoulder the income taxes,”
Ms. Lipana explained.

“Partners are also usually active and exercise their profession, unlike shareholders in
corporations,” she added.

Profits and tax liabilities are divided among partners depending on their share, Lina P.
Figueroa, a principal at Punongbayan & Araullo, said.

When partners are given their drawings and advances per month, their withholding taxes are
already taken from the payments.

The partners can use these credits for their quarterly and annual income tax returns, Ms.
Figueroa explained. -- Diane Claire J. Jiao

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