Partnership Taxation -Applicable Provisions of Inland Revenue Act No 24 of 2017. Facilitator- Prasanna Walisundara

1. W. M. Prasanna Walisundara –Tax Consultant
FCA, ACMA, MBA, B.SC Business Administration
Prasanna.walisundara@gmail.com

2. “Partnership” means an association of two or more individuals or
corporations carrying on business jointly for the purpose of making profit,
irrespective of whether the association is recorded in writing.
Section 195.
 Relevant Provisions
 -Section 53
1. Not be liable to pay income tax and not entitle for any tax
credits but shall be liable to pay income tax with respect
to WHT payments.
2. Liable to pay capital gain tax
3. Income/Loss of a partnership shall be allocated
But Still
4. Amount derived or expenses incurred in common shall
be treated as partnership income or expenditure

3. Section 53 Continued….
5. Assets owned and liabilities owed in common by
partners shall be treated as owned or owed by the
partnership
6. All business activities of a partnership shall be
treated as conducted in the course of a single
partnership
7. Interest on loan granted or service fee paid for the
service given and salary paid to partners shall be
taken as respective partners’ share
8. Partnership shall be treated as the same entity where
there is a change of partners at least two existing
partners continue with the partnership
9. The precedent partner or an agent in SL shall
withhold tax under section 94.

4. Section 54- Partnership income or loss
1. Partnership income of a partnership is the income
from its business or investment.
2. A loss incurred by partnership is for a Y/A shall be
the partnership loss from the business or
investment for the year.

5. Section 55- Taxation of Partners
1. Calculating partner’s income from a partnership for
a Y/A of the partners;
 Partnership income should be added OR
 If there is a loss that loss should be deducted
2. Gain on disposal of an interest of a partner in the
partnership shall be treated as income from
business.
3. Partnership profit or loss allocated to partners:
Shall retain its character as to type and source
Shall be treated as an amount derived

6. Applicable Tax Rates
1. Gains from the realization of investment assets –The gain
shall tax at 10% (Paragraph 2 of the First Schedule)
2. WHT on Partner's share of the partnership income at the
rate of 8% (Section 84 (1)(a)ii

7. Format for calculation of Partnership Tax
Rs.
Business Profit XXXXX
Add: Partners’ Salaries XXXX
Partners’ Loan Interest XXXX
Profit to be allocated XXXXXX

8. Format for calculation of Partnership Tax Continued…
Total Rs. Partner A Partner
Share of Profit XXXXX XXXXX XXXXX
(Profit before followings)
Add: Salary XXXX XXXX XXXX
Interest on Loan XXX - XXX
WHT 8% XX XX XX
If there is a payment for an associate person that portion is also a part of
income of respective partner of the partnership. (Section 34 (4))