Jimenez Gonzales Bello Valdez Caluya & Fernandez

September 5, 2008 BIR RULING [DA-(C-058) 197-08] DA 235-03 Jimenez Gonzales Bello Valdez Caluya & Fernandez SOL Building, 112 Amorsolo Street Legaspi Village Makati City Attention: Atty. Victoria T. Limkico and Atty. James Benedict F. Panopio Gentlemen : This refers to your letter dated July 14, 2008 stating that the Jimenez Gonzales Bello Valdez Caluya & Fernandez (JGLaw) is a general professional partnership formed, organized and existing under the laws of the Philippines with Securities and Exchange Commission (SEC) Registration No. P-15845; and that it is created for the primary purpose of engaging in the practice of law. TaCIDS In connection therewith, you now request for confirmation of your opinion that income payments which JGLaw receives in consideration for the professional services rendered to its clients are exempt from income tax under Section 27 in relation to Sections 22 (B) and 26 of the Tax Code of 1997 and consequently from withholding tax prescribed in Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001. In reply thereto, 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 for 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, as amended by Revenue Regulations No. 6-2001. 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, as amended. (BIR Ruling No. DA091-99 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. HEDSCc Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service