Partners in a general professional partnership (GPP) are subject to income tax based on their distributive share, while the GPP itself is not an income taxpayer and merely passes income through to partners. Partners in a GPP classify income as ordinary income from business transactions, while partners in a general partnership classify income as dividend income, which is subject to final withholding tax rather than normal income tax. Partners in a GPP may be allowed deductions while partners in a general partnership are not allowed deductions. Certain types of passive income like dividends, royalties, and interest received by taxpayers are subject to final withholding taxes at different rates depending on the type of income and taxpayer.
Partners in a general professional partnership (GPP) are subject to income tax based on their distributive share, while the GPP itself is not an income taxpayer and merely passes income through to partners. Partners in a GPP classify income as ordinary income from business transactions, while partners in a general partnership classify income as dividend income, which is subject to final withholding tax rather than normal income tax. Partners in a GPP may be allowed deductions while partners in a general partnership are not allowed deductions. Certain types of passive income like dividends, royalties, and interest received by taxpayers are subject to final withholding taxes at different rates depending on the type of income and taxpayer.
Partners in a general professional partnership (GPP) are subject to income tax based on their distributive share, while the GPP itself is not an income taxpayer and merely passes income through to partners. Partners in a GPP classify income as ordinary income from business transactions, while partners in a general partnership classify income as dividend income, which is subject to final withholding tax rather than normal income tax. Partners in a GPP may be allowed deductions while partners in a general partnership are not allowed deductions. Certain types of passive income like dividends, royalties, and interest received by taxpayers are subject to final withholding taxes at different rates depending on the type of income and taxpayer.
Partners in a general professional partnership (GPP) are subject to income tax based on their distributive share, while the GPP itself is not an income taxpayer and merely passes income through to partners. Partners in a GPP classify income as ordinary income from business transactions, while partners in a general partnership classify income as dividend income, which is subject to final withholding tax rather than normal income tax. Partners in a GPP may be allowed deductions while partners in a general partnership are not allowed deductions. Certain types of passive income like dividends, royalties, and interest received by taxpayers are subject to final withholding taxes at different rates depending on the type of income and taxpayer.
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Taxation of Partners in a GPP
GPP-not an income taxpayer-merely a pass through entity
- required to file an income tax return annually -partners themselves are subject to income tax based on their distributive share
Partner of GPP v. Partner of a GP/BP
-income classification GPP- Income from BTP GP- DIVIDEND INCOME -Tax treatment GPP- normal income tax GP- FWT -Deductions GPP- MAY BE ALLOWED GP- not allowed
TAX ON PASSIVE INCOME SUBJECT TO FWT
1. DIVIDEND INCOME - cash, property, stock, liquidating -cash/property- fwt based on the amount of gross earnings without the benefit of deductions -rates will depend on the type of individual taxpayer RC-fwt 10% received div income from domestic corp ra/nrc- same nraetb-domestic corpo 20% fwt nranetb-domestic corpo 25% fwt
Dividend received from a non resident foreign corp- sourced outside-shall not be subject to tax unless resident citizen-subject to normal tax
Dividend received from a resident foreign corp - if sourced from within or ratable portion thereof shall be subject to normal tax
STOCK DIVIDENDS- not subject to income tax- unrealized gains
exc. 1. the corporate taxpayer which declared the div income granted 2 options to stockholder avail cash/PROP DIVIDEND or stock and some of the sh availed of the options of cash or prop. stockholders shall be taxed- percentagesof ownership will increase-subject to income tax 2. dividend equivalence- GR; redemption/cancellation is not subject to income tax is a capital transaction exc. a. there is redemption or cancellation b. the transaction involves stock dividends c. the time and manner of the transaction makes it essentially equivalent to a distribution of taxable dividends -determining factor - the reason behind the declaration of the stock dividend
LIQUIDATING DIVIDENDS- received from a corporation that has dissolved its business operations -depends whether the dividends is return ON capital or return OF capital
2. ROYALTIES General Rule: 20%FWT based on the amt of gross earnings Exception -10% FWT - Literary works, books, or musical compositions- only applies to individual taxpayers
3. Interest income a. bank deposit and deposit substitutes - 20% fwt exc- 1. expanded foreign currency deposit - 15% fwt if taxpayer is resident non-resident-exempt 2. long-term deposit-exempt from tax if the deposit has a holding period of at least 5yrs. when the deposit is pre terminated, it will be subject to tax. *resident foreign corp -7.5%fwt b. other agreements which are not classifed as bd/bs - normal tax
gains from the sale of bonds, debentures or other certificate if indebtedness-
excluded from the gross income if the holding period for such bond is more than 5 years
interest income from long term deposit- will be exempt if the holding period is at leas 5 years
deposit substitutes- alternative form of obtaining funds from the public - public-- 20 or more individual or corporate lenders at any one time
