A Z Architects & Partners, Co.

August 21, 2007 BIR RULING [DA-462-07] 26 DA-091-99 A Z Architects & Partners, Co. Unit 1514 Cityland Pasong Tamo Tower 2210 Don Chino Roces Avenue Pio del Pilar, Makati City Attention: Arch. Antonio Nicanor V. Zuiga Managing Partner Gentlemen : This refers to your letter dated May 18, 2006 in effect requesting for an exemption as a general professional partnership engaged in architectural services. 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. It is 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 drawings, advances, sharing, allowances, stipends and the like, are subject to the 10% creditable withholding tax pursuant to Section 2.57.5 (B) (4) of Revenue Regulations (RR) No. 14-2002. (BIR Ruling No. DA-091-99 dated February 15, 1999) aHICDc It is understood therefore, that professional fees received by A Z Architects & Partners, Co. for services rendered are exempt from the withholding tax provisions of Revenue Regulations No. 2-98. Moreover, pursuant to RR 1-2003 dated January 2, 2003, sale of services by persons engaged in the practice of profession or calling and professional services rendered by general professional partnerships are subject to value-added tax (VAT). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be ascertained that the facts are different, then this ruling shall be considered as null and void. ECaSIT Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service