What is a partnership for income tax purpose

What is a partnership for income tax purpose?

Partnership is not a person in law and unlike a company it is not a separate and assessable entity for tax purpose. But a partnership still required to lodge a tax return in Malaysia, which we commonly known as Form P. Form P determines what is the net partnership income or partnership loss for each year of assessment. Each partner must have indicate this divisible income or loss for the partnership in he/her tax return and pay tax accordingly. (If it was a loss case, the partner can net off the loss with the other income generated in that particular year of assessment).

The parties to a partnership need not be only individuals and in fact could be anyone, such as Company or a partnership.

Partnership is defined in Section 2 of Income Tax Act, and its existence required the following criteria:
1) Partnership is an association of any kind between parties;

2) The parties agree to combine any of their rights, powers, properties, labour or skills;

3) The partnership is formed for the purpose of carrying business and for the purpose of sharing profit from the said business.

Hence, an association of people would not form a partnership unless they carry on a business.