Income Tax on Other Taxable Entities

Question 1

Income Taxation on Partnerships and Partners

Explain 2 types and site if taxable or not:
1. GPP
2. Taxable (Ordinary) Partnerships

Answer 1

1. GPP - formed by persons for sole purpose of exercising their common profession (di pwedeng CPA and Lawyer)
   -No part of income is derived from engaging in any trade or business
   -Exempt from income tax
2. Taxable / General / Business / Commercial/ Partnerships - formed by persons for purposes of distributing profits amongst themselves
   -Taxable similar to corporation

Question 2

Income Taxation on Partnerships and Partners

GPP Notes:
1. GPP & GPP Partners may claim itemized deduction of OSD (40%)
2. 8% flat tax rate option is not allowed on the distributive share of PARTNERS from the GPP since the same is already net of applicable deductions (tax table lang dapat lagi)
3. Actual Distribution to partner is subject to CWT:
if >720k - 15%
if <720K - 10%
-bakit actual lang? kasi pag constructive, yung pera nasa Partnership pa, so safe pa yun na mabayaran yung magiging tax due sa end of year.
4. Yung share of a partner dito (na mag aappear sa ITR nila), excludes dapat sa yung income subject to FWT and CGT (kasi magkakaroon na ng double taxation)
5. Subject lang sya sa CWT, not to FT

Answer 2

Oks

Question 3

Income Taxation on Partnerships and Partners

Note: Share in profit (distributive share) is deemed received by the partner even if no ACTUAL payment was made, under the principle of CONSTRUCTIVE RECEIPT

Question 4

Income Taxation on Partnerships and Partners

Ordinary Partnership Notes:

1. Please remember for Ordinary Partnership Distributable Share - It should be net of tax or Net Income After Tax. So NI minus mo yung computed tax then yun ang ididistribute
2. If silent, 25% parin tax rate, meaning, di nya nameet yung Net Taxable Income of P5M and below AND total Assets (excluding land) of P100M and below
3. Subject to 10% FT yung share ng partner (Hindi to subject sa CWT, only GPP). Dividend income of a partner under ordinary partnership is subject to 10% FWT; hence, it will not form part of the partner’s personal income tax return (ITR).

Answer 4

4. May double taxation dito per Indirect

And since subject na yan sa FWT, di na dapat kasama sa ITR (regular income tax) ng mga partner yan

Question 5

Income Taxation on Partnerships and Partners

GPP and OP:

1. Distributable share/income - Isipin mo lang lagi na parang NI allocation lang to sa AFAR
   so it includes income subject to FT and CGT (Net Income lang to)
2. Dapat yung mga income na subject to FT and CGT, net of tax na bago isama sa Partnership income-to get the Distributable share/income

Question 6

TECHNIQUE DITO SA TAX, WAG KA MAGSHOSHORT CUT SA COMPUTATION, DAPAT ILALATAG MO TALAGA.

Unlike sa FAR, AFAR, at MAS

Question 7

Income Taxation on Partnerships and Partners

The share of a partner in the profits of a general professional partnership is regarded as received
by him and thus taxable although not yet distributed. This principle is known as

Answer 7

Constructive receipt of income

Question 8

Income Taxation on Partnerships and Partners

A general professional partnership is exempt from income tax, but is required to file an income
tax return Because

Answer 8

the net income of the partnership will be traced into the income tax return of the
partners

Question 9

Co-ownerships
There is co-ownership whenever the ownership of an undivided thing right belongs to different persons

General rule: Co-ownerships are not subject to income tax.

Except (4):

Answer 9

1. making investments therein from which profits are realized.
2. income derived therefrom as a common fund with intent to make profits.

3.When the property remained undivided for more than ten (10) years

4. when the co-ownership activities are already beyond mere preservation of the co-owned property.

So, pag exempt, same application with GPP

Pag taxable, same sa ordinary partnership

Same Concept

Question 10

Joint Venture

General rule: Joint ventures are taxable as corporation.

A. Exempt (Non-Taxable) JVs - joint ventures or consortiums formed for the purpose of undertaking?

B. Also, yung pinag kaiba nito from Co-ownership and Partnership, yung mga venturers dito pwedeng individual and corporations. So anong Final Tax Rate ng dalawa pag TAXABLE yung JV?

C. Pano naman yung share ng mga venturers pag Non-Taxable?

Answer 10

A)
1. Construction projects
Requirements:
a. The joint venture was formed for the purpose of undertaking a construction project
b. Should involve joining or pooling of resources by licensed local contracts; that is, licensed as general contractor by the Philippine Contractors Accreditation Board (PCAB) of the DTI
c. The local contractors are engaged in construction business
d. The JV itself must likewise be duly licensed as such by the PCAB

2. Engaging in energy operations, petroleum, coal, geothermal with the government

B)
Individual - 10% padin
Corporation - Exempt - (See Domestic Corpo FWTaxes-as in exempt)

C)
Same concept sa GPP. Sama padin sa regular income to arrive at Taxable Income of 25%

Question 11

A consortium (plural: consortia) is

Answer 11

an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal.