(NAR) VOL. 23 NO. 1, JANUARY - MARCH 2012
“SEC. 26. Tax Liability of Members of General Professional Partnerships. – A general professional partnership as such shall not be subject to the income tax imposed under this Chapter. Persons engaging in business as partners in a general professional partnership shall be liable for income tax only in their separate and individual capacities.
For purposes of computing the distributive share of the partners, the net income of the partnership shall be computed in the same manner as a corporation.
Each partner shall report as gross income his distributive share, actually or constructively received, in the net income of the partnership.”
“Section 2.57.5. Exemption from Withholding. – The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following:Clearly, a general professional partnership shall not be subject to income tax since it is the individual partners who shall be subject to income tax in their separate and individual capacities. A general professional partnership is defined in Section 22 (B) of the 1997 Tax Code, as amended, as follows:(A) ……..
(B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following:
(1) ……
(4) General Professional Partnerships
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“Sex. 22. Definitions. – When used in this Title:Relative thereto, income payments made to a General Professional Partnership in consideration for its professional services are not subject to income tax and consequently to withholding tax prescribed in Revenue Regulations No. 2-98, as amended.(A) …..
(B) The term ‘corporation’ shall include partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas en participacion), associations, or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government. ‘General professional partnerships’ are partnerships formed by persons for the sole purpose of exercising their common profession, not part of the income of which is derived from engaging in any trade or business.
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