Updated: Feb 12
A partnership is not considered a person under the law and is not treated as a separate and distinct entity for taxation purposes. But, a partnership is still required to file an income tax return.
The Partnership Act 1961 was enacted in Malaysia to regulate partnerships.
According to section 3(1) of the Partnership Act 1961, a partnership is a “relationship which subsists between persons carrying on a business in common with a view to profit.
Definition of Partnership for Tax Purposes | 合伙企业在税法上的定义
Under s 2 of the Income Tax Act 1967, "partnership" is defined as:
an association of any kind (including joint adventures, syndicates and cases where a party to the 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 the profits therefrom, but excludes a Hindu joint family (https://www.ccs-co.com/post/what-is-a-hindu-joint-family) although such a family may be a partner in a partnership, a limited liability partnership and any association which is established pursuant to a scheme of financing in accordance with the principles of Syariah.
When determining who is responsible for paying income tax, it is essential to distinguish between "individuals" and "persons." The latter word has a broader meaning since, in addition to persons, it also covers other legal entities, such as companies incorporated under the Companies Act 2016 and Hindu joint families. However, partnerships are not included in this definition.
A partnership, in contrast to a company (incorporated under the Companies Act 2016) or limited liability partnership incorporated under the Limited Liability Partnerships Act 2012 [Act 743], is not considered a separate legal entity in the eyes of the law, nor is it considered to be a chargeable person for the purposes of taxation.
在确定谁有责任支付所得税时，必须区分 "个人 "和 "纳税人"。后一个词有更广泛的含义，因为除了人之外，它还包括其他法律实体，如根据《2016年公司法令》成立的公司和印度教联合家庭。然而，合伙企业并不包括在这个”纳税人“的定义中。
Residence status of Partners
The standard provisions are applicable under section 7 of the Income Tax Act of 1967 for individuals and section 8 of the Income Tax Act of 1967 for companies are used to assess a partner's residential status for tax purposes.
If the partnership's business activities are carried out in Malaysia, then the partners’ share of profits would be subject to Malaysian income tax.
Public Rulings | 公共裁决
The Inland Revenue Board (IRB) has released Public Ruling No. 7/2021 on "Partnerships Taxation Part I – Determination of the Existence of a Partnership" to guide on determining whether or not a partnership exists for the purposes of the income tax.
According to the Partnership Act of 1961 and the Income Tax Act of 1967, the public ruling provided a list of the features of a partnership and the elements that should be examined when deciding whether or not a partnership exists.
The public ruling includes a list of questions that should be answered to determine whether or not a partnership exists.
Para 6.3 of The public ruling explains the differences between a co-ownership and a partnership.
For a better understanding, Public Ruling No. 7/2021 and Public Ruling No. 8/2021 on "Partnerships Taxation Part II - Computation and Allocation of Income" are to be read together.
内陆税收局局（IRB）发布了第7/2021号，关于 "合伙企业税税第一部分 -- 确定合伙企业的存在 "的公共裁决，以指导纳税人以缴纳所得税为目的，确定合伙企业是否存在。
Public Ruling No. 7/2021 on "Partnerships Taxation Part I – Determination of the Existence of a Partnership"
Public Ruling No. 8/2021 on "Partnerships Taxation Part II - Computation and Allocation of Income"
We have written some articles on partnership accounts that you might find helpful: 1. Partnership Accounts
2. Partnerships In Malaysia - Theory
8. Taxation of Partnerships - Capital Allowance
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