Income Tax on Other Taxable Entities Flashcards
Income Taxation on Partnerships and Partners
Explain 2 types and site if taxable or not:
1. GPP
2. Taxable (Ordinary) Partnerships
- 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 - Taxable / General / Business / Commercial/ Partnerships - formed by persons for purposes of distributing profits amongst themselves
-Taxable similar to corporation
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
Oks
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
Income Taxation on Partnerships and Partners
Ordinary Partnership Notes:
- 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
- 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
- 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).
- 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
Income Taxation on Partnerships and Partners
GPP and OP:
- 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) - 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
TECHNIQUE DITO SA TAX, WAG KA MAGSHOSHORT CUT SA COMPUTATION, DAPAT ILALATAG MO TALAGA.
Unlike sa FAR, AFAR, at MAS
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
Constructive receipt of income
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
the net income of the partnership will be traced into the income tax return of the
partners
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):
- making investments therein from which profits are realized.
- income derived therefrom as a common fund with intent to make profits.
3.When the property remained undivided for more than ten (10) years
- 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
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?
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
- 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%
A consortium (plural: consortia) is
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.