Imposition of Corporate Income Tax to LPA Collaborative

January 29, 1958 BIR RULING NO. 069-58 LPA Collaborative 1111 Tennessee, Manila Attention : Mr . Rufino D . Antonio Chief Architect Gentlemen : Reference is made to your letter dated December 21, 1957, stating that you are not a partnership but only an organization of registered, practicing architect members, representing the individual member in your contract with the Philippine Government regarding the preparation plans of the National Control Buildings. cdta You now request a reconsideration of our ruling issued to you on October 28, 1957 holding that you are a partnership subject to corporate income tax. In reply thereto, I have the honor to inform you as follows: By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession. (Art. 1767, New Civil Code) Pursuant to this article, the essential elements of a partnership are two, namely: (a) an agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits among the contracting parties. In order that a contract of partnership may arise, the parties must have reciprocally undertaken to established a common capital through the contribution by each of property or services, or either or both of them. It must have been the intention of the parties to put their contribution to a common fund. This means that each undertakes to surrender dominion over his contribution to the partnership, be such corporeal or incorporeal property or services. (Partnership by Francisco, pp. 27, 32) An agreement to share in the profits of a business is a prima facie evidence that a partnership has been formed. (Javier, Philippine Law on Partnership, p. 49) Under Section 84(b) of the Tax Code, the term corporation includes partnerships, no matter how created or organized, joint stock companies, and associations, but does not include duly registered general copartnerships (compaias collectivas) Under the above definition of a partnership, the first element constituting a partnership in undoubtedly present in your case as the member architects agreed to contribute their professional services to a common fund in connection with your service-contract with the Government. As to the second element, it is obvious that the purpose of your members is their mutual undertaking to contribute their services in the realization of gain and then to divide the same among themselves. In view of the foregoing, this Office hereby reiterates the ruling contained in its letter to you dated October 28, 1957, holding that the League of Philippine Architects (LPA Collaborative) is a partnership which has been formed by the member-architects for the exercise of their profession. cdti Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue