Partnership
A partnership is a business entity with two or more owners who “carry on a trade, business, financial operation, or venture and divide the profits therefrom.” It also is a conduit that passes through to each partner his share of the partnership's income and deductions.
Summary of Tax Obligations
Partners in a partnership are treated as sole traders and are therefore subjected to the same taxes, based on their share of the income/receipts/profits.
All sole traders are required to register with the Board of Inland Revenue to obtain a BIR File Number.
The partnership as a body is required to register with the Board of Inland Revenue to obtain a BIR File Number.
The Partnership as a body is required to pay
Green Fund Levy
Green Fund Levy is computed at the rate of 0.3% on actual gross sales or receipts with effect from 2016-01-21.
(Exempt Income is included in this calculation).
Green Fund Levy is paid via the quarterly installment method - that is, at the end of March, June, September, and December each year.
Sole Traders are required to pay
Income Tax
Income Tax is charged for each year of income on the chargable profits arising in that year at the rate of 25%, up to 2016-12-31. For income year 2017 the rate was 25% up to $1,000,000.00 and 30% for every dollar over $1,000,000.00.
Calculation for chargable profits
Business Levy
Business Levy is computed at the rate of 0.6% on actual gross sales or receipts with effect 2016-01-21.
An exenption applies for the first three (3) years from the date of registration of the business.
Health Surcharge
Health Surcharge MUST be deducted and remitted
Where the total sales/receipts for the year aveage more than $469.99 per month - the rate is $8.25 per week. Where the total sales/receipts for the year average less than or equal to $469.99 per month - the rate is $4.80 per week.
All of the aforementioned taxes are paid via the quarterly installment method - that is, at the end of March, June, September, and December each year.
Value Added Tax (VAT)
A self-employed individual/sole trader is required to register for VAT where the total sales or receipts (commercial supplies) are in excess of $500,000.00 in a twelve (12) month period (or if it is expected that fross sales/receipts shall be in excess of $500,000.00).
Dedcutions, Expenses & Credits
Tax Deductions
- Personal Allowance
- Tertiary Education Expenses
- First TIme Home Owner Allowance
- Covenanted Donations
- Alimony and Maintainance Payments
- COntributions to Approved Deferred Annuity/Pension Plans
Allowable Expenses
- Wear and Tear Allowance
- Specific Bad Debts
- Promotional Expenses
- Bank and Interest Charges
Tax Credits
- 30% of the Investment ina Venture Capital Company
- 25% of the cost of Solar Water Heating System (the tax credit is limited to $10,000)
- 25% of the cost of Purchase and Installation of CNG Kit and cylinder (the tax credit is limited to $10,000)
- 25% of the face value of teh National Tax-Free Savings Bonds purchased where the maturity period is five (5), seven (7), or ten (10) years
Business Expenses
In addition, all business expenses, which are verifiable and wholly and exclusively incurred in the production of income, can be educted when determining Chargable Profits.
Where expenses incurred has some private use included, e.g. rent or motor vehicle expenses - the expense must be apportioned to reflect the percentage of the business use to be deducted when computing Chargable Profits.
Employers
Where an entity hires workers it is required to obtain a PAYE account number. This account number is used to remit taxes withheld from the salary or wages (emolumnet income) of their employees.