BIR Ruling [DA-316-00]

August 22, 2000 BIR RULING [DA-316-00] 26; R.A. 8761 047-2000 DA-316-2000 Panopio and Licerio Law Offices Room 201 Padilla-De Los Reyes Building 232 Juan Luna, Binondo Manila Attention: Atty . Emelito A . Licerio Gentlemen : This refers to your letter dated June 22, 2000 requesting for a Certificate of Exemption from the payment of Expanded Value-Added Tax. It is represented that the Law Firm of Panopio and Licerio Law Offices is a general professional partnership duly registered with the Securities and Exchange Commission under SEC Registration No. A199915843 and with the BIR under OCN1RC0000039584 and that the certificate is intended for the Bangko Sentral ng Pilipinas with whom you have rendered legal services. In reply, Section 1 of Republic Act No. 8761 provides, viz: "SEC. 1. Section 5 of Republic Act No. 8424 is hereby amended to read as follows: "SEC. 5. Transitory Provisions . Effectivity of the Imposition of VAT on Certain Services . The imposition of the value-added tax on the following services shall take effect on January 1, 2001 : (a) Services performed in the exercise of profession or calling subject to the professional tax as provided for under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, and professional services performed by registered general professional partnerships , actors, actresses, talents, singers and emcees, radio and television broadcasters, choreographers, musical, radio, movie, television and stage directors and professional athletes. (emphasis supplied) Hence, the imposition of value added tax on general professional partnerships shall take effect on January 1, 2001. DaTICc Moreover, pursuant to Section 26 of the Tax Code of 1997, general professional partnerships are not subject to income tax under Chapter III, Title II of the Tax Code of 1997. However, persons engaging in business 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. General professional partnerships are likewise exempt from the imposition of withholding tax under Revenue Regulations No. 2-98. It is also noteworthy to mention, however, that income payments made periodically or at the end of the taxable year by a general professional partnership to the partners, such as drawing advances, sharings, allowances, stipends, etc. are subject to the 10% creditable withholding tax pursuant to Section 2.57.2(H) of Revenue Regulations No. 2-98. (BIR Ruling No. 047-2000 dated January 20, 2000) 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.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group