adminDid you know that a partnership business is where two or more individuals are in business together making and sharing profits and losses. The individuals are equally and personally liable for the debts from the business. The definition of a person under section 2(1) of the Income Tax Act Chapter (23:06) does not include a partnership and hence a partnership is not a separate legal persona and is not liable to income tax.
Section 10(2) of the Act deems the income accruing to a partnership to have accrued to the respective partners on the date of the accounting year end, in proportion to the partners’ agreed profit sharing ratio as laid down in the particular partnership agreement.
The profit that is received by or accrued to or in favour of a partnership shall be regarded as income for tax purposes in the hands of the individual partners.
The partners are taxed in their individual capacity.
Manner in which returns are submitted
Section 37(15) of the Income Tax Act Chapter (23:06) requires persons carrying on any trade in partnership to submit a joint return, supported by such accounts as may be necessary to show the results for the year of assessment. Section 51(5) of the Income Tax Act Chapter (23:06) however provides for separate assessments to be made on each partner.
Each partner is therefore liable to tax only in his individual capacity in terms of Section 37(15) of the same act.
Each partner shall be separately and individually liable for the rendering of the joint return, but the partners shall be liable to tax only in their separate individual capacities.
Partners are taxed at a rate of 25 percent plus 3 percent aids levy. (The rate is applicable to business income. Salaries are taxed at the appropriate rates).
Death of a Partner
When a partner dies, accounts are prepared in order to show the results of the operations of the partnership for the period from the last accounting date to the date of the death of the partner. The surviving partner needs not return his share of profits accrued as a result of the production of accounts to the date of death of a partner until the date to which the accounts would have been prepared had the partner not died.
Treatment of expenses
Expenses that are incurred by the partnership for the benefit of the partner are allowable in the hands of the partnership and are taxable in the hands of the partner who is benefiting. Examples include salaries and insurance premiums for the benefit of the partner.
However, expenses like premiums for joint life policies and partner drawings are not allowable.
Withholding taxes
A partnership may also suffer withholding taxes on various kinds of Zimbabwean incomes.
Disclaimer
This article was compiled by the Zimbabwe Revenue Authority for information purposes only. Zimra shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority.
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