Guide On How To File Your Income Tax As A Partnership, Limited Liability Partnership (LLP) Or Limited Partnership (LP)

Finding a good partner to start your business is a blessing. However, filing your income tax can be a step more complicated than that of a sole-proprietorship. Filing your income tax as a partner is a hybrid of filing as self-employed persons (using Form B or B1) and as a partnership (using Form P). 

According to IRAS, a partnership is legal relationship between two or more persons who carry out a business with the objective of making a profit and sharing the profit between them. Even though the partnership itself doesn’t pay tax, the individual partners have to pay tax as partners are considered self-employed persons

Read Also: Guide On How To File Your Income Tax As A Private Hire Car (PHC) Driver Or Taxi Driver In Singapore

What you need to file:

  • Individual partners need to file Form B (for self-employed) or Form B1 (for tax residents) using their own SingPass.
  • Partnership needs to file Form P – the annual return of the partnership. This is submitted by the precedent partner using CorpPass.

The precedent partner is the first partner named in the partnership agreement. If there is no partnership agreement, the precedent partner is the partner who is agreed upon and appointed by the other partners. The precedent partner needs to submit both Form P (on behalf of the partnership) and Form B/B1 (their own individual income tax return).

File The Partnership’s Annual Return Under Form P

Form P has to be filed by the precedent partner if the partnership has done business that year (even if there is no notification from IRAS) or the partnership has received a notification to file. 

The due date for filing Form P is 15 Apr 2024 or 18 Apr 2024 (for e-filing)

If the partnership has not done business but received a notification to file, the precedent partner must still file Form P but should select the status as “No Business Activity” at the Selection Page. 

Form P will be sent to the precedent partner by January. If it is not received, please contact IRAS directly. Alternatively, e-Filing of Form P is available from 1 February. For partnerships that have e-filed before 28 February, the partnership allocation would be pre-filled in the individual partners’ Form B/B1, saving the precedent partner the additional step to inform the individual partners separately of their share of the partnership income. 

File The Individual Partner’s Income Tax Return Under Form B/B1

The individual partners (including the precedent partner) must file their share of the partnership’s income using Form B/B1 under “Partnership” > “Trade, Business, Profession or Vocation”. If Form P is filed before 28 February, this will be automatically prefilled. 

The due date for filing Form B/B1 is 15 Apr 2024 or 18 Apr 2024 (for e-filing).

As the partnership is not a taxable entity, the individual partner’s share of partnership income is taxed at the respective partner’s own income tax rate. For example, a partner is earning a full-time income of $60,000 and receives additional income of $21,000 from the partnership. His total taxable income is $81,000 before any applicable personal deductions. The additional partnership income moves him up to the next tax bracket, where the next $40,000 above $80,000 is taxed at 11.5%.

Read Also: Complete Guide To Singapore Corporate Taxes: Tax Rates, Tax Rebates And Tax Exemptions

Partnerships Are Required To Report A 4-Line Statement And Divisible Profit and Loss

While sole-proprietorships are only required to report a 2-line statement (revenue and adjusted profits) if their revenue is below $200,000, partnerships are required to submit a 4-line statement to IRAS.

RevenueRevenue is the total gross income received from your business
Gross Profit/Loss Gross profit is the revenue figure less the cost of goods sold. If you have a service business, your gross profit will be the same as your revenue.
Allowable Business ExpensesAllowable business expenses are expenses that you incur wholly and exclusively to earn your business income. Personal, private and capital expenses are not allowable business expenses.
Adjusted Profit/LossThis is the amount after deducting allowable business expenses from gross profit/loss

Partnerships with revenue exceeding $500,000 will also have to submit a certified statements of accounts (comprising profit and loss account and balance sheet). Partnerships with revenue exceeding $1,000,000 (or expected to exceed $1,000,000 in the next year) should register for GST.

Additionally, the partnership should also report in Form P the divisible profit or loss amongst the partners. 

According to IRAS, this should be calculated with the following formula:

Source: IRAS

As an illustration, IRAS has provided the following example of how profit and loss is divisible amongst partners. IRAS also provides a sample working sheet as a guide.

This divisible profit and loss for each partner needs to be reported in Form P by the precedent partner. 

You Can Claim Employees’ Salaries As Allowable Business Expenses But Not A Partner’s Salary

In general, allowable business expenses are expenditure that have been incurred to earn the business income. These have to be related to the business and not private or capital in nature. Expenses that are capital in nature (e.g. purchase of fixed assets) are not allowable business expenses. However, depreciation of fixed assets may be claimed as capital allowances.

Notably, partnerships cannot claim the partner’s salary, bonus, allowance or CPF/ MediSave contributions as a business expense, but can claim salary, bonus, allowance or CPF/ MediSave contributions for other employees as a business expense. 

Please refer to IRAS for details on allowable and disallowable business expenses.

Source: IRAS

Read Also: How Much Self-Employed Persons Need To Contribute To MediSave (And What Happens If You Don’t)

Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) Have To Report The Contributed Capital Of Each Partner

Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs)have an additional step of reporting the contributed capital of each of the limited partner. An LP will also be required to indicate whether a partner is a general or limited partner. 

According to IRAS, a limited partner’s share of trade loss and capital allowance from an LLP or LP that can be offset against other income is restricted to the capital contributed by the limited partner. Without information on the capital contribution, the limited partner’s share of adjusted loss and capital allowance will be disregarded.

Partnerships Can Qualify For Simplified Record Keeping (SRK)

According to IRAS, a small business can qualify for Simplified Record Keeping (SRK) if:

  1. The business annual revenue is less than $200,000 (with effect from 1 January 2020) for the past two financial years;
  2. The business assets amount to less than $100,000 as at the end of the latest financial year;
  3. The business is not in the business of investment holding or property development and;
  4. The business is a sole-proprietorship or partnership that is not GST-registered. 

In general, IRAS requires accounting records and supporting documents to be kept for five years. The advantage of qualifying for SRK is that the record keeping is easier: only simple records (e.g. listings) need to be kept, without the need to keep supporting documents (e.g. receipts and invoices).

This article was originally published on 16 March 2021 and updated with new information.

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