Partnership Income Tax

INTRODUCTION Gains or profits from carrying on a partnership are liable to tax.

Partnership can exist between :

  • Individuals

  • Two companies

  • Individual and Company

  • Individual and trustee

RESPONSIBILTIES

  • To get and complete a copy of Income Tax Return Form P from the nearest LHNDM Branch (if the form does not reach on time)

  • To prepare statement of accounts and other statements such as rental statements and commission statements

  • To engage qualified tax agent to prepare business accounts (if required)

  • Refer to supporting documents such as life insurance receipts, donation receipts, receipt books, zakat receipts for deductions, reliefs and rebate

  • The Precedent Partner is responsible for filling up Form P and issuing Form CP30 to each and every partner - CP30 Form. CP30 shows distribution of income (profit/loss) to each partner

  • Every partner has to report his share of partnership income in his Form B

  • Precedent Partner is also responsible for informing LHDNM officially if the partnership ceases

  • Husband and wife have to fill separate Income Tax Return Forms

  • All supporting documents like business records, CP30 and receipts need not be submitted with Form P

  • Keep all business records, supporting documents for deductions, reliefs and rebate for a period of 7 years

  • Business records include profit and loss account, balance sheet, sales records, purchase records, stock receipts, bills and bank statements

  • The last date for submission of Form B and P is 30th June

  • Payment of tax due (if any) should be made on or before 30th June.

  • To comply with the installment scheme (CP500) - link Installment Scheme CP500


GROSS INCOME FROM PARTNERSHIP Gross Income from Partnership includes:

  • Cash receipts from sale of goods or from services provided

  • All debts incurred from sale of goods and services provide.

  • Receipts in kind

  • Recovery of bad debts

  • Insurance compensation received for business loss

  • Withdrawal of business stock or stock taken for personal use

ADJUSTED INCOME FROM BUSINESS SOURCE Is derived from gross income after deduction of business expenses such as:

  • Allowable business expenses

  • Allowable specific expenses

  • Double deduction expenses allowable under Income Tax Act 1967

  • Export Allowances


BUSINESS EXPENSES


Allowable


Expenses incurred in the production of income

Example:

  • Payment for wages/ salary

  • EPF Payment

  • Rental of business premise

  • Interest on business loan

  • Expenses for repair of premise and vehicles used for business purpose

Not Allowable


Personal expenses

Example:

  • Accommodation benefit

  • Payment of telephone bills

Purchase of personal assets

Example:

  • Personal Car

  • Furniture

Initial Expenses Example:

  • Expenditure on incorporation of business venture

  • Advertisement expenses


ALLOWABLE SPECIFIC EXPENSES

Specific expenses that are allowable such as:

  • Expenditure incurred in providing equipment for disabled employee (OKU)

  • Expenditure incurred in respect of publication in National Language

  • Donation to libraries

  • Expenditure incurred in providing services, public amenities and contribution to a charity or community project

  • Expenditure incurred in providing and maintenance of a child care centre for the benefit of employees

  • Expenditure incurred in establishing and managing a musical or cultural group

  • Expenditure incurred in sponsoring any art or cultural event


CAPITAL ALLOWANCE

Is given as deduction from business income in place of depreciation expenses incurred in purchase of business assets.


Examples of assets used in a business are motor vehicles, machines, office equipment, furniture and computers.


Conditions for claiming capital allowance are:

  • Operating a business

  • Purchase of business assets

  • Assets are being used in the business

  • Owner of the assets

Rates are determined according to the types of assets. Types and rate of Capital Allowance are as follows:


Initial Allowance

All types of assets 20%


Annual Allowance

Motor Vehicles and Heavy Machinery 20%

Plant and Machinery 14%

Office Equipment, Furniture and Fittings 10%

Computer 20%


If you would like to know more, please contact Bestar.




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