BIR Ruling [DA-222-01]

October 25, 2001 BIR RULING [DA-222-01] Section 26 DA-091-99 Patio & Navarro Prudential Life Plan Building 118 Gamboa St., Legaspi Village Makati City Attention: Atty. Ceferino A. Patio Partner Gentlemen : This refers to your letter dated September 18, 2000 requesting that the Patio & Navarro Law Offices be considered as a general professional partnership and therefore exempt from the payment of income tax under Section 26 of the Tax Code of 1997. Documents presented showed that Patio & Navarro Law Offices is registered with the Securities and Exchange Commission with S.E.C. Registration No. A199905364 dated April 5, 1999 classified as general partnership established principally for the practice of the legal profession. In reply, please be informed that pursuant to Section 26 of the Tax Code of 1997, general professional partnerships are not subject to income tax imposed under Chapter III, Title II of the Tax Code of 1997. However, persons engaging in the practice of their profession as partners in a general professional partnership shall be liable to income tax in their separate and individual capacities. Each partner shall report as gross income his distributive share, actually or constructively received, in the net income of the partnership. 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. Moreover, general professional partnerships are exempt from the imposition of withholding tax under Revenue Regulations No. 2-98. However, it is worth mentioning that income payments made periodically or at the end of the taxable year by a general professional partnership to the partners, such as drawings, advances, sharings, allowances, stipends and the like, are subject to the 10% creditable withholding tax pursuant to Section 2.57.2 (H) of Revenue Regulations No. 2-98. (BIR Ruling No. DA-091-99 dated February 15, 1999) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group