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Lecture - Partnership 2033 14

The document discusses key aspects of partnership taxation in Malaysia including the definition of a partnership, existence of partnerships, types of partners, chargeable persons, basis of computation, changes in profit sharing ratios, partnership capital allowances, divisible income, and the format of a tax computation for a partnership.

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Haananth Subramaniam
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32 views7 pages

Lecture - Partnership 2033 14

The document discusses key aspects of partnership taxation in Malaysia including the definition of a partnership, existence of partnerships, types of partners, chargeable persons, basis of computation, changes in profit sharing ratios, partnership capital allowances, divisible income, and the format of a tax computation for a partnership.

Uploaded by

Haananth Subramaniam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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1 LECTURE 10

PARTNERSHIP

Income Tax Act 1967

A partnership is “an association of any


kind (including joint ventures, syndicates
and cases where a party to the
DEFINITION association is itself a partnership)
between parties who have agreed to
combine any of their rights, powers,
property, labour or skill for the
purpose of carrying on a business and
sharing of profits……”

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3

From the definition, there must be:

a) An association of some kind


between persons
DEFINITION b) An agreement between
persons to combine their rights,
powers, property, labour or skill

c) A purpose of carrying on a
business in a partnership

A partnership usually formed by at


least two persons agreeing to
carry on a business with a view to
make profit.
EXISTENCE OF
A
PARTNERSHIP A partnership usually formed with
the existence of a Deed of
Partnership. However, in certain
circumstances, a partnership
agreement is NOT exist.

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TYPES OF PARTNERS

Full partner – section 4 (a) source

Salaried partner – section 4 (b) source

Sleeping partner – section 4 (a) source

A partnership is NOT a
chargeable person. Each
CHARGEABLE individual partner is assessed on
PERSON their share of the partnership
income, as no assessment can be
raised on the partnership.

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7
The computation of a partnership is the
same as that of a business income, except
that NO deduction are allowed for:
a) Partners’ wages
b) Interest payable on the partner’s
BASIS OF capital
COMPUTATION
c) Private expenses charged to the
partnership accounts in arriving at
the provisional adjusted income of
the partnership

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Where there is a change in the
profit sharing ratio during the year,
the allocation of the divisible income
will be apportioned on a time
CHANGE basis to the period before and after
IN PROFIT the change in profit sharing ratio. The
SHARING amounts allocated to the various
DURING period are then aggregated to arrive
THE YEAR at the adjusted income of the
individual partners.

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9
Example:
Profit sharing ratio:

1 January to 30 June 2019


CHANGE Gary : 50%
IN PROFIT George : 50%
SHARING
1 July to 31 December 2019
DURING
THE YEAR Gary : 75%
George : 25%

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Example:
Divisible adjusted income is RM20,000:
1 January to 30 June 2019 (20k x 6/12
= 10k)
CHANGE
Gary : 50% x 10k = RM5,000
IN PROFIT
George : 50% x 10k = RM5,000
SHARING
DURING 1 July to 31 December 2019 (20k x
THE YEAR 6/12 = 10k)
Gary : 75% x 10k = RM7,500
George : 25% x 10k = RM2,500

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Capital allowance is claimed for
expenditure incurred on fixed assets
owned by the partnership for business
purposes at the end of the basis period.

PARTNERSHIP
CAPITAL Capital allowance computed shall be
ALLOWANCES allocated to the respective partners
based on the proportion of their profit
sharing ratio at the END of the basis
period for the year of assessment.

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12

Capital allowances and balancing


charges shall be allocated as follows:

a) The partners who are in the


PARTNERSHIP partnership at the END of the
CAPITAL basis period for the year of
ALLOWANCES assessment

b) In accordance with their share


of divisible income at the
END of that basis period

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13
The divisible income for a partnership
is the provisional adjusted income less:
a) Partners’ wages or salaries
b) Interest payable to a partner
c) Private expenses of the partners
DIVISIBLE
INCOME AND charged to the partnership account
PROVISIONAL
ADJUSTED
INCOME The adjusted income of an individual
partner is:
a) Share of divisible income
b) Remuneration, interest, private
expenses from the partnership

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FORMAT OF TAX COMPUTATION

PROFIT / (LOSS) BEFORE TAX XXX

TAX ADJUSTMENTS

- TO ADD BACK XX

- TO DEDUCT (XX)

PROVISIONAL ADJUSTED INCOME XX

LESS : PARTNERS’ EXPENSES (XXX)

DIVISIBLE INCOME XXX

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