assignment of partnership interest philippines

WHAT ARE THE PROPERTY RIGHTS OF A PARTNER?

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Published — May 26, 2021

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

WHAT ARE THE PROPERTY RIGHTS OF A PARTNER? Read also: EXISTENCE OF PARTNERSHIP WITHOUT BEING LEGALLY FORMED

A partner is co-owner with his partners of specific partnership property

A partner’s interest in the partnership is his share of the profits and surplus

A partner has the right to participate in the management of the partnership

U nder the Civil Code of the Philippines, the property rights of a partner are his rights in specific partnership property, his interest in the partnership, and his right to participate in the management.

What does it mean when a partner is a co-owner with his partners of specific partnership property?

The law says:

The incidents of said ownership are such that:

• A partner, subject to the provisions of the Civil Code of the Philippines and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes. However, a partner has no right to possess such property for any other purpose without the consent of his partners.
• A partner’s right in the specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property.
• A partner’s right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership. When the partnership property is attached for a partnership debt, the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws.
• A partner’s right in specific property is not subject to legal support.

If a partner conveys his whole interest in the partnership, would it dissolve the partnership?

A conveyance by a partner of his whole interest in the partnership does not of itself dissolve the partnership. The assignee, during the continuance of the partnership, is not entitled to interfere in the management or administration of the partnership business or affairs. Also, said assignee is not allowed to inspect the partnership books. The conveyance or transfer merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled. However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual remedies.

In case of dissolution of the partnership, the assignee is entitled to receive his assignor’s interest and this time, may require an account from the date only of the last account agreed to by all the partners.

Furthermore, take note that another interest of a partner in the partnership is his share in the profits and surplus.

Alburo Alburo and Associates Law Offices  specializes in business law and labor law consulting. For inquiries, you may reach us at [email protected], or dial us at (02)7745-4391/0917-5772207.

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MARIA LOURDES P. A. SERENO Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ARTURO D. BRION Associate Justice Acting Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA Chief Justice

* Associate Justice Presbitero J. Velasco, Jr. is designated Additional Member as per Special Order No. 1084 dated 13 September 2011.

** Associate Justice Arturo D. Brion is designated as Acting Chairperson per Special Order No. 1083 dated 13 September 2011.

*** Associate Justice Roberto A. Abad is designated Additional Member per Raffle dated 19 September 2011.

1 Rollo, pp. 8-17, Realubit’s 9 August 2007 Petition.

2 Penned by Justice Apolinario D. Bruselas, Jr. and concurred in by Justices Bienvenido L. Reyes and Aurora Santiago-Lagman

3 Record, CA-G.R. CV No. 178782, CA’s 30 April 2007 Decision, pp. 124-134.

4 Id. at 133.

5 Exhibits "B" and "1," record, Civil Case No. 98-0331, 17 March 1994 Joint Venture Agreement, p. 210.

6 Exhibits "A" and "2," 27 June 1997 Deed of Assignment, id. at 207.

7 Exhibit "C," 19 February 1998 Demand Letter, id. at 211.

8 Spouses Jaso’s 3 August 1998 Complaint, id. at 2-7.

9 Spouses Realubit’s 21 October 1998 Answer, id. at 24-32.

10 RTC’s 17 September 2001 Decision, id at 427-431.

11 Id. at 431.

12 CA rollo, CA-G.R. C.V. No. 73861, CA’s 30 April 2007 Decision, pp. 124-134.

13 Id. at 177-178.

14 Rollo, pp. 11-13.

15 Id. at 131-133.

16 Cavile v. Heirs of Clarita Cavile, 448 Phil. 302, 315 (2003).

17 Potenciano v. Reynoso, 449 Phil. 396, 408 (2003).

18 Spouses Caoili v. Court of Appeals, 373 Phil. 122, 139 (1999).

19 Manongsong v. Estimo, 452 Phil. 862, 877-878 (2003).

20 TSN, 22 September 1999, pp. 3-5.

21 TSN, 12 January 2000, pp. 4-8.

22 Maestrado v. Court of Appeals, 384 Phil. 418, 435 (2000).

23 Aloria v. Clemente, 518 Phil. 764, 776 (2006).

24 Exhibit "1-A," record, Civil Case No. 98-0331, p. 210.

25 Exhibits "A-3" and "2-A," id. at 207.

26 Exhibit "D-1," id. at 215.

27 Art. 1783, Civil Code of the Philippines.

28 Heirs of Tan Eng Kee v. Court of Appeals, 396 Phil. 68, 80-81(2000).

29 Tocao v. Court of Appeals, 396 Phil. 166, 184 (2000).

30 Tolentino, Civil Code of the Philippines, 1959 ed., Vol. V, pp. 297-298.

31 Art. 1812, Civil Code of the Philippines.

32 Art. 1831. On application by or for a partner, the court shall decree a dissolution x x x

On the application of the purchaser of a partner’s interest under Article 1813 or 1814:

(1) After the termination of the specified term or particular undertaking;

(2) At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued.

33 Goyena v. Ledesma-Gustilo, 443 Phil. 150, 158 (2003).

34 Romualdez-Licaros v. Licaros, 449 Phil. 824, 837 (2003).

35 Tsai v. Court of Appeals, 418 Phil. 606, 617 (2001).

36 Record, Civil Case No. 98-0331, p. 430.

37 Record, CA-G.R. CV No. 73861, pp. 163-164.

38 Spouses Batingal v. Court of Appeals, 403 Phil. 780, 788 (2001)

39 Bank of the Phil. Islands v. Leobrera, 461 Phil. 461, 465 (2003).

40 Spouses Sevilla v. Court of Appeals, G.R. No. 150284, 22 November 2010, 635 SCRA 508, 514-515.

Assignment Of Partnership Interest

Jump to Section

What is an assignment of partnership interest.

• Information about the partnership like the name of the business
• The type of interest being transferred
• The names and information of both the assignor and the assignee
• Information about the remaining partners

Common Sections in Assignments Of Partnership Interest

Below is a list of common sections included in Assignments Of Partnership Interest. These sections are linked to the below sample agreement for you to explore.

Assignment Of Partnership Interest Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.37 15 dex1037.htm FORM OF AGREEMENT AND ASSIGNMENT OF PARTNERSHIP INTEREST , Viewed October 25, 2021, View Source on SEC .

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Assignment Of Partnership Interest

When you want to transfer the stake in a partnership to a new member, you’ll use an Assignment of Partnership Interest to outline the terms of the transaction.

• About document

Related documents

How it works.

Members of a partnership often need to transfer some or all of their stake to a new partner. Doing so can be a delicate process because it impacts the partnership as a whole, not just the seller and buyer.

To make the transaction as transparent as possible and to satisfy potential requirements in the partnership articles, the transfer should be recorded in an Assignment of Partnership Interest. As the document's name implies, its successful execution transfers a portion of the interest in the partnership from a current partner to a new partner.

What Is an Assignment of Partnership Interest?

An Assignment of Partnership Interest is a legal document establishing the terms under which stake in a partnership is transferred from an assignor to an assignee. In other words, the new partner (assignee) acquires the right to receive benefits from the partnership per the stake granted.

The particulars of the Assignment of Partnership respond, in large part, to the type of partnership in question. In some cases, the Partnership Agreement under which the partnership is formed doesn't allow for a transfer of interest to new members or does so only under specific circumstances.

It's also worth noting that a partnership carries both rights and responsibilities. A new partner who receives an interest in the partnership assumes all the Partnership Agreement obligations, including liabilities. However, some states place limitations on assignees' rights that don't recognize them on equal footing as the founding partners.

Other Names for Assignment of Partnership Interest

Depending on your state, an Assignment of Partnership Interest may also be known as:

Transfer of Partnership Interest

Partnership Interest Transfer Form

Transfer of Share in Partnership

Who Needs an Assignment of Partnership Interest

Most of the time, an Assignment of Partnership Interest is drafted by a partnership member who's looking to transfer their stake in a partnership. However, the interest assignee could also create the form if they believe specific clauses need to be included.

Other current members of the partnership are also typically involved in creating the document to ensure it's in line with the terms established in the Partnership Agreement. The terms of the agreement frequently place restrictions on the type and amount of interest transferred by each partner.

Situations calling for a transfer of interest may include the business's cash flow requirements, a need to reallocate business assets, changes in the overall partnership strategy, and changes in the regulatory landscape, among others.

Why Use 360 Legal Forms for Your Assignment of Partnership Interest

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Create your own documents by answering our easy-to-understand questionnaires to get exactly what you need out of your Assignment of Partnership Interest.

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Fast and easy

All you have to do is fill out a simple questionnaire, print, and sign. No printer? No worries. You and other parties can even sign online.

How to Create an Assignment of Partnership Interest with 360 Legal Forms

An Assignment of Partnership Interest needs to satisfy several parties. The assignor and assignee need to have their rights protected, and it must fall within the terms of the original Partnership Agreement. It's essential to use a form addressing all the details involved.

Let 360 Legal Forms help with our extensive library of attorney-vetted legal forms. The process is fast and easy. All you have to do is fill out our easy-to-understand questionnaire. Once complete, simply download your form as a PDF or Word document from your secure online account.

What Information Will I Need to Create My Assignment of Partnership Interest

To create your document, please provide:

Assignor: Full name and address of the partner transferring the business interest

Assignee: Full name and address of the incoming partner receiving the business interest

Partnership Details: Legal name and address of the partnership in which interest is being transferred, along with business purposes and other details

Remaining Partners: Names and addresses of the other members of the partnership

Consideration: Payment that the assignor will receive for the transfer of interest

Closing Date: When the assignment of interest will be executed

Assignment of Partnership Interest Terms

Warranties: A section of the Assignment of Partnership Interest clearly stating what the assignor promises are right about the interest and the terms of the partnership

Indemnification clause: A clause releasing each party from responsibility created by the other party's failure to act as the document requires

Implied terms: Terms and clauses including an agreement under law or custom even if they're not spelled out directly in the agreement

Exclusion clauses: A part of an agreement releasing a party from responsibility under a specific circumstance

Assignment of Partnership Interest Signing Requirements

To be legally enforceable, an Assignment of Partnership Interest must be signed by the assignor, the assignee, and all the remaining members of the partnership. If applicable, witnesses to the signing need to sign the document as well.

The signatures do not need to be notarized to be valid. However, you may choose to notarize the signatures to prevent any challenge arising at a later time.

What to Do with Your Assignment of Partnership Interest

Once the Assignment of Partnership Interest is signed (and signatures notarized if you so choose), distribute signed copies to every partnership member and the assignee. Keep a copy for your records and make sure the partnership's secretary records the transfer of interest in the minutes of the partnership. In some states, it may be necessary to file a document with the Commissioner of Corporations, and tax liabilities may arise based on the value of the interest.

Frequently Asked Questions

No. You can choose to notarize the signatures on the assignment document, but it’s not required for it to be legal and valid.

In theory, yes. However, this is not only inadvisable but could also result in legal issues down the line. Without the document to establish each party’s obligations, either may choose to back out of the transaction. Furthermore, it puts the partnership at risk, since the assignee ends up with a controlling stake in the business without explicitly being bound to the terms of the original Partnership Agreement.

When partnership interest is transferred, the assignor’s proceeds are typically treated as a capital gain/loss. But, some or all of the capital gains may end up as ordinary income if the assignor attributes it to unrealized receivables. State and local laws may also play a role and you’re well-advised to consult a tax attorney or CPA licensed to practice in your state.

Yes, the document can be used to transfer a partner’s interest to natural or legal persons in a general sense. However, it should be noted that federal tax audit rules may be affected for a partnership if one or more members is itself a partnership and the original agreement may prohibit this type of transfer specifically.

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Understanding partnership

(First of two parts)

“Perfect partners don’t exist,” said athlete Wayne Rooney. “Perfect conditions exist for a limited time in which partnerships express themselves best.”

If you’re establishing a business partnership, understanding its nature and the rights and obligations of the parties involved is imperative.

Local civil law defines partnership as a contract in which two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves.

In Ortega v. Court of Appeals, the Supreme Court characterized partnership as one where mutual agency exists among its partners—that is, the birth and life of a partnership at will are predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the foundation of a partnership. In this regard, as a general rule, persons who do not intend to become each other’s partners are not partners to third persons. Moreover, co-ownership or co-possession of a property does not by itself establish a partnership, whether the co-owners or co-possessors share any profits earned.

A partnership must be evidenced by a public instrument where immovable property or real rights have been contributed therein. Failure to attach to this instrument an inventory of said property, signed by the parties, shall render the contract of partnership void as to third parties. Thus, in Torres v. Court of Appeals, the Supreme Court clarified that the lack of said inventory will not completely release the partners from their respective obligations to each other pursuant to their contract.

A partnership which entirely consists of properties contributed by the partners may be classified as a universal partnership of all present property. Under this set up, the contributed properties shall be commonly owned by the partners, as well as all profits earned therefrom. A stipulation for the common enjoyment of any other profits may also be made, including fruits earned from properties acquired by the partners through inheritance, legacy or donation. These properties, however, shall not form part of this universal partnership.

Meanwhile, a universal partnership of profits comprises all that the partners may acquire by their industry or work during its existence. In this set-up, the partnership only acquires the usufruct to the movable and immovable properties possessed by its partners, including the right to profits therein. Said properties shall continue to exclusively pertain to the partners possessing them.

Partners acquire rights to, among others, the specific partnership property by becoming co-owners thereof. Thus, subject to the relevant provisions of the Civil Code and a contrary agreement between the partners, each of them has an equal right to possess said property for partnership purposes. If a partner would intend to possess this property for any other purpose, his partners must consent thereto beforehand.

Moreover, a partner’s right in specific partnership property is not assignable, except in connection with the assignment of rights of all partners thereto. Neither may his right be subject to attachment or execution, which are the subjects of court proceedings, except on a claim against the partnership, nor be subject to legal support.

As mentioned, every partner is an agent of the partnership for the purpose of its business. Every partner’s act of apparently carrying on in the usual way the business of the partnership of which he is a member binds it, unless this partner has in fact no authority to act for the partnership in the particular matter, and the third person he has been dealing with does not know of the fact of lack of authority.

Meanwhile, a partner’s act which is not apparently for the carrying of the partnership’s business in the usual way does not bind it unless authorized by the other partners.

Except when authorized by the other partners or unless they have abandoned the business, one or almost all partners are not authorized to, among others: (a) assign the partnership property in trust for creditors or on the assignee’s promise to pay the debts of the partnership; and (b) do any other act which would make it impossible to carry on the ordinary business of the partnership.

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.

Article 1811. A partner is co-owner with his partners of specific partnership property.

The incidents of this co-ownership are such that:

A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; but he has no right to possess such property for any other purpose without the consent of his partners;

A partner’s right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property;

A partner’s right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws;

A partner’s right in specific partnership property is not subject to legal support under article 291. (n)

Free Assignment of Partnership Interest Template for Microsoft Word

Download this free Assignment of Partnership Interest template as a Word document to make it easy to assign your interest in a partnership to a third party.

Assignment of Partnership Interest

THIS ASSIGNMENT (the “Assignment”) made and entered into on [Insert Date]

AMONGST: [Insert Name] of [Insert Address] (the “Assignor”)

– AND- [Insert Name] of [Insert Address] (the “Assignee”)

– AND-

[Insert Name] of [Insert Address] (the “Remaining Partner”)

A. The Assignor is the holder of a partnership interest (the “Interest”) in [Insert name of partnership interest] (the “Partnership”), a partnership previously established on [Insert date of initial partnership agreement] for the purpose of  and formed in accordance with an agreement (the “Partnership Agreement”).

B. The Assignor desires to assign the Interest to the Assignee and the Assignee desires to acquire the Interest from the Assignor.

C. The Interest acquired by the Assignee will include all rights in the Partnership previously afforded to the Assignor including the status as partner. The Remaining Partner has agreed and gives consent to such assignment according to the terms and conditions of this Assignment.

IN CONSIDERATION OF and as a condition of the parties entering into this Assignment and other valuable consideration, the receipt and sufficiency of which consideration is acknowledged, the parties to this Assignment agree as follows:

Sale and Purchase

1. By this Assignment the Assignor withdraws from the Partnership and to the fullest extent permitted by the Partnership Agreement, assigns all its rights, interests, title and benefits in the Partnership to the Assignee. The Assignee will become a partner in the Partnership taking the place of the Assignor in the Partnership with all the rights and obligations previously afforded to the Assignor. The Assignee, as a partner in the Partnership, will be bound by the terms and conditions of the Partnership Agreement as amended. On assignment of the Interest to the Assignee, the Assignor will cease to be a partner in the Partnership.

Consideration

2. As full consideration for the assignment of the Interest the Assignee has submitted and the Assignor has accepted the following consideration: [Enter consideration]

3. The closing of the purchase and sale of the Interest (the “Closing”) will take place on [Insert closing date] (the “Closing Date”) at the offices of the Assignor or at such other time and place as the Assignor and Assignee mutually agree.

Representations and Warranties of the Assignor

4. The Assignor warrants that the Assignor has a general partnership interest in the Partnership and that the Assignor has the legal right to execute and perform an assignment of the Interest exclusive of the Assignor’s status as partner.

5. The Assignor warrants that the Interest is free and clear of all liens, encumbrances, restrictions and claims.

6. The Assignor warrants that on completion of this Assignment the Assignor will retain no residual interest or interests in the Partnership.

7. The Assignor warrants that the Assignor is not in any way in default of any of the expressed or implied terms and conditions of the Partnership Agreement. The Assignor also warrants that this Assignment is in full compliance with all terms and conditions of the Partnership Agreement.

8. The Assignor warrants that the Assignor is not bound by any other contractual agreement or legal requirement that would be violated by this Assignment.

9. The Assignor warrants that it has provided the Assignee with the most current copy of the Partnership Agreement inclusive of all amendments.

10. The Assignor warrants that no other consent is required from any third party or government entity authorising this Assignment except for those consents of the Remaining Partner contained in this Assignment.

Assignee’s Obligations

11. On Closing of this Assignment, the Assignee will observe and perform any and all terms and conditions of the Partnership Agreement, relating to the newly acquired rights, that were previously binding on the Assignor. Transitional Rights and Obligations

12. To the full extent permitted by the Partnership Agreement, all income, rights, benefits, obligations and liabilities of the Interest will belong to the Assignor before the Closing and will transfer to the Assignee after the Closing. Consent of Remaining Partner

13. The Remaining Partner consents to the terms and conditions of this Assignment with the intent that the Assignee will become a partner in the Partnership with all of the rights, benefits, obligations and liabilities previously afforded to the Assignor under the Partnership Agreement as amended.

Governing Law and Jurisdiction

14. This Assignment will be construed in accordance with, and exclusively governed by the laws of the [Insert state or country].

15. The Assignor and the Assignee submit to the jurisdiction of the courts of the [Insert state or country] for the enforcement of this Assignment or any arbitration award or decision arising from this Assignment.

Miscellaneous

16. Time is of the essence in this Assignment.

17. This Assignment may be executed in counterpart. Facsimile signatures are binding and are considered to be original signatures.

18. All warrants and representations of the Assignor and the Assignee connected with this Assignment will survive the Closing.

19. This Assignment will not be assigned either in whole or in part by any party to this Assignment without the written consent of the other party.

20. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Assignment. Words in the singular mean and include the plural and vice versa. Words in the masculine gender include the feminine gender and vice versa. Words in the neuter gender include the masculine gender and the feminine gender and vice versa.

21. If any term, covenant, condition or provision of this Assignment is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties’ intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Assignment will in no way be affected, impaired or invalidated as a result.

22. This Assignment contains the entire agreement between the parties. All negotiations and understandings have been included in this Assignment. Statements or representations which may have been made by any party to this Assignment in the negotiation stages of this Assignment may in some way be inconsistent with this final written Assignment. All such statements are declared to be of no value in this Assignment. Only the written terms of this Assignment will bind the parties.

23. This Assignment and the terms and conditions contained in this Assignment apply to and are binding upon the Assignor, the Assignee, the Remaining Partner and their respective successors, assigns, executors, administrators, beneficiaries, and representatives.

24. Any notices or delivery required here will be deemed completed when hand-delivered, delivered by agent, or seven (7) days after being placed in the post, postage prepaid, to the parties at the addresses contained in this Assignment or as the parties may later designate in writing.

25. All of the rights, remedies and benefits provided by this Assignment will be cumulative and will not be exclusive of any other such rights, remedies and benefits allowed by law.

IN WITNESS WHEREOF the Assignor, the Assignee and the Remaining Partner have duly affixed their signatures under hand and seal on [Insert date]

_____________________________ WITNESS: ___________________________ Address: _____________________________ Occupation: __________________________ _____________________________ ______________________________

_____________________________ WITNESS: ___________________________ Address: _____________________________ Occupation: __________________________ _____________________________ _________________________

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Advertising agreement, arbitration agreement, barter agreement, business sale agreement.

Philippine Government Forms All in One Location

Amended Articled of Partnership (to change partners)

What this is for:, how to file:.

BIR Form No.

Monthly Percentage

Republika ng Pilipinas

Kagawaran ng Pananalapi

Kawanihan ng Rentas Internas

September 2005 (ENCS)

Fill in all applicable spaces. Mark all appropriate boxes with an “X”.

3 For the month

Amended Return

5 Number of sheets attached

Information

Taxpayer's Name (For Individual)Last Name, First Name, Middle Name/(For Non-individual) Registered Name

8 Line of Business/

11 Registered Address

13 Are you availing of tax relief under Special Law

or International Tax Treaty?

Telephone Number

If yes, specify

Computation of Tax

Taxable Transaction/

Industry Classification

Taxable Amount

19 Total Tax Due

Less: Tax Credits/Payments

Creditable Percentage Tax Withheld Per BIR Form No. 2307 (See Schedule 1)

Tax Paid in Return Previously Filed, if this is an Amended Return

Total Tax Credits/Payments (Sum of Items 20A & 20B)

22 Tax Payable (Overpayment) (Item 19 less Item 21)

Add: Penalties

24 Total Amount Payable/(Overpayment) (Sum of Items 22 and 23D)

If overpayment, mark one box only:

To be Refunded

To be issued a Tax Credit Certificate

I declare, under the penalties of perjury, that this return has been made in good faith, verified by me, and to the best of my knowledge, and belief,

is true and correct, pursuant to the provisions of the National Internal Revenue Code, as amended, and the regulations issued under authority thereof.

President/Vice President/Principal Officer/Accredited Tax Agent/

Authorized Representative/Taxpayer

(Signature Over Printed Name)

Title/Position of Signatory

TIN of Signatory

Tax Agent Acc. No./Atty's Roll No.(if applicable)

Particulars

Treasurer/Assistant Treasurer

Date of Issuance

Date of Expiry

Details of Payment

Drawee Bank/

28 Check 28A

29 Tax Debit

27 Cash/Bank 27A

30 Others 30A

Machine Validation/Revenue Official Receipt Details (If not filed with an Authorized Agent Bank)

Receiving Office/AAB

and Date of Receipt

(RO's Signature/

Bank Teller's Initial)

BIR FORM 2551M (ENCS)-PAGE 2

Tax Withheld Claimed as Tax Credit

Period Covered

Name of Withholding Agent

Income Payments

Tax Withheld

Total (To Item 20A)

Percentage Tax On:

ALPHANUMERIC TAX CODE (ATC)

Persons exempt from VAT under Sec. 109v (Sec. 116)

Domestic carriers and keepers of garages

International Carriers

Franchises on gas and water utilities

Franchises on radio/TV broadcasting companies whose

annual gross receipts do not exceed P 10 M

Tax on banks and non-bank financial intermediaries performing quasi

banking functions

1) On interest, commissions and discounts from lending

activities as well as income from financial leasing, on

the basis of remaining maturities of instruments from

which such receipts are derived

Maturity period is five (5) years or less

Maturity period is more than five (5) years

2) On dividends and equity shares and net income of

subsidiaries

On royalties, rentals of property, real or personal, profits

from exchange and all other gross income

On net trading gains within the taxable year on foreign currency,

debt securities, derivatives, and other financial instruments

Tax on Other Non-Bank Financial Intermediaries not performing quasi-banking functions

On interest, commissions and discounts from lending activities

as well as income from financial leasing, on the basis of remaining

maturities of instruments from which such receipts are derived

PT 115 2) From all other items treated as gross income under the code

PT 120 Life Insurance premium

Agents of Foreign Insurance Companies

a) Insurance Agents

b) Owners of property obtaining insurance directly

with foreign insurance companies

BIR Form No. 2551M Percentage Tax Return

Guidelines and Instructions

Who Shall File

This return shall be filed in triplicate by the following:

Persons whose gross annual sales and/or receipts do not exceed P1,500,000

and who are not VAT-registered persons.

Domestic carriers and keepers of garages, except owners of bancas and

owners of animal-drawn two wheeled vehicle.

Operators of international air and shipping carriers doing business in the

Philippines.

Franchise grantees of gas or water utilities.

grantees of radio

broadcasting

companies whose gross annual receipts of the preceding year do not exceed

Ten Million Pesos (P10,000,000.00) and did not opt to register as VAT

Banks, non-bank financial intermediaries and finance companies.

Life insurance companies.

Agents of foreign insurance companies.

"Gross receipts" means all amounts received by the prime or principal

contractor, undiminished by any amount paid to any subcontractor under a

subcontract arrangement.

When and Where to File

The return shall be filed not later than the 20th day following the end of each

month. Any person retiring from a business subject to percentage taxes shall

notify the nearest Revenue District Office, file his return and pay the tax due

thereon within twenty (20) days after closing his business.

The return shall be filed with any Authorized Agent Bank (AAB) within the

territorial jurisdiction of the Revenue District Office where the taxpayer is

required to register/conducting business. In places where there are no AABs, the

return shall be filed with the Revenue Collection Officer or duly Authorized City

or Municipal Treasurer within the Revenue District Office where the taxpayer is

required to register/conducting business.

A taxpayer may, at his option, file a separate return for the head office and

for each branch or place of business or a consolidated return for the head office

and all the branches except in the case of large taxpayers where only one

consolidated return is required.

There shall be imposed and collected as part of the tax:

A surcharge of twenty five percent (25%) for each of the following

violations:

Failure to file any return and pay the amount of tax or installment due

on or before the due date;

Unless otherwise authorized by the Commissioner, filing a return with

a person or office other than those with whom it is required to be filed;

Failure to pay the full or part of the amount of tax shown on the return,

or the full amount of tax due for which no return is required to be filed

Failure to pay the deficiency tax within the time prescribed for its

payment in the notice of assessment.

A surcharge of fifty percent (50%) of the tax or of the deficiency tax, in case

any payment has been made on the basis of such return before the discovery

of the falsity or fraud, for each of the following violations:

Willful neglect to file the return within the period prescribed by the

Code or by rules and regulations; or

In case a false or fraudulent return is willfully made.

Interest at the rate of twenty percent (20%) per annum, or such higher rate as

may be prescribed by rules and regulations, on any unpaid amount of tax

from the date prescribed for the payment until the amount is fully paid.

Compromise penalty.

Attachments Required

Certificate of Creditable Tax Withheld at Source, if applicable;

Duly approved Tax Debit Memo, if applicable;

For amended return, proof of the payment and the return previously filed;

All returns filed by an authorized representative must attach authorization

When and Where to Pay

Upon filing this return, the total amount payable shall be paid to the

Authorized Agent Bank (AAB) where the return is filed. In places where there

are no AABs, payment shall be made directly to the Revenue Collection Officer or

duly Authorized City or Municipal Treasurer who shall issue a Revenue Official

Receipt BIR Form No. 2524) therefor.

Where the return is filed with an AAB, taxpayer must accomplish and submit

BIR-prescribed deposit slip, which the bank teller shall machine validate as

evidence that payment was received by the AAB. The AAB receiving the tax

return shall stamp mark the word “Received” on the return and also machine

validate the return as proof of filing the return and payment of the tax by the

taxpayer, respectively. The machine validation shall reflect the date of payment,

amount paid and transactions code, the name of the bank, branch code, teller’s

code and teller’s initial. Bank debit memo number and date should be indicated in

the return for taxpayers paying under the bank debit system.

For Electronic Filing and Payment System (EFPS) Taxpayer

The deadline for electronically filing and paying the taxes due thereon shall

be in accordance with the provisions of existing applicable revenue issuances.

Basis of Tax

The tax is based on gross sales, receipts or earnings except on insurance

companies where the basis of tax is the total premium collected/paid.

Note: All background information must be properly filled up.

All returns filed by an accredited tax representative on behalf of a taxpayer

shall bear the following information:

A. For CPAs and others (individual practitioners and members of GPPs);

a.1 Taxpayer Identification Number (TIN); and

a.2 Certificate of Accreditation Number, Date of Issuance,

and Date of Expiry.

B. For members of the Philippine Bar (individual practitioners, members

b.1 Taxpayer Identification Number (TIN); and

b.2 Attorney’s Roll Number or Accreditation Number, if any.

Nos. 1, 2 and 3 of this form refer to transaction period and not the date of

filing this return.

The last 3 digits of the 12-digit TIN refers to the branch code.

TIN = Taxpayer Identification Number

Other Documentary Requirements:

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Assignment Of Interests

9.1 Assignment of Interests of the General Partner

The General Partner shall not (save for an assignment of its interest as General Partner to an Associate in circumstances where it is appropriate to do so for tax and/or regulatory reasons) sell, assign, transfer, exchange, pledge, encumber or otherwise dispose of or grant any participation in all or any part of its General Partnership interest or voluntarily dissolve or withdraw as the General Partner of the Partnership.

9.2 Assignment of Interests of Limited Partners and Special Limited Partner

(a) No sale, assignment, transfer, exchange, pledge, encumbrance or other disposition or grant of any participation (transfer) of all or any part of the

Special Limited Partner’s or of any Limited Partner’s interest (including any ultimate beneficial interest) in the Partnership (including, without limitation, all or any part of its Loan), whether voluntary or involuntary shall be valid or effective without the prior written consent of the Manager and, in the case of the transfer of the Special Limited Partner's interest as a result of taxation considerations or regulatory requirements without, in addition, the consent of a majority of the members of the Advisory Board which shall not be unreasonably withheld and for reasons other than taxation considerations or regulatory requirements without, in addition, an Investor Special Consent which shall not be unreasonably withheld), which consent may be given or may be withheld (in its sole and absolute discretion) for any reason whatsoever or without assigning any reason thereto, including (without limitation):

(i) if the Manager considers that the transfer would otherwise cause the Partnership to be disqualified as a limited partnership or to be terminated;

(ii) if the Manager considers that the effect of such transfer of interest will result in (1) a violation of the Securities Act or any applicable securities law of any of the States of the United States; (2) the Partnership or any of the other Partnerships being required to register, or seek an exemption from registration, as an investment company under the United States Investment Company Act of 1940; (3) a loss of partnership status for US Federal income tax purposes for the Partnership or any of the other Partnerships; (4) the termination of the Partnership (or any of the other Partnerships) under Section 708 of the Code but only if such termination would result in material adverse tax consequences to the Limited Partners or the investors in any of the other Partnerships; or (5) a transaction effected through an established securities market within the meaning of the United States Treasury Regulations promulgated under Section 7704 of the Code or otherwise would cause the Partnership (or any of the other Partnerships) to be a publicly traded partnership within the meaning of Section 7704 of the Code, or would cause there to be more than 100 partners (as determined under the Treasury Regulations promulgated under Section 7704 of the Code). For purposes of determining the number of partners under this paragraph (5), a person ("a beneficial owner") owning an interest in a partnership, grantor trust or S corporation for United States Federal income tax purposes ("a flow-through entity") that owns directly, or through other flow-through entities, an interest in the Partnership is treated as a partner if (X) substantially all of the value of the beneficial owner’s interest in the flow-through entity is attributable to the flow-through entity’s direct or indirect interest in the Partnership and (Y) a principal purpose in using the tiered arrangement is to permit the Partnership to have not more than 100 partners. The Manager may rely on a certificate from a purchaser or

transferee of an interest in the Partnership in making a determination as to the number of partners pursuant to the provisions of paragraph (5);

(iii) if the Manager considers that any proposed transferee of the interest of a Partner intends to hold the said interest otherwise than for itself beneficially;

(iv) if the Manager considers that the transfer will result in the assets of the Partnership being treated as plan assets for the purpose of the ERISA Plan Assets Regulation;

(v) if the Manager considers that the transfer would or may subsequently violate any applicable law or any term of the Agreement or subjects the Partnership to other adverse legal or regulatory consequences; or

(vi) if the Manager considers that the proposed transferee will be unable to meet its obligations hereunder in respect of Commitments. In order for the Manager to make the determination set forth in clause 9.2(a)(iv) above any proposed transferee of interests in the Partnership will be required to confirm to the Manager to what extent it is a benefit plan investor for the purposes of the ERISA Plan Assets Regulation.

Notwithstanding the above however, if a Limited Partner wishes to transfer its interest in the Partnership to an Associate or to another entity under common control with it, the written consent of the Manager to such transfer may not be unreasonably withheld or delayed.

(b) The Special Limited Partner or any Limited Partner wishing to transfer all or part of its interest in the Partnership (including, without limitation, all or any part of its Loan) shall apply to the Manager for consent to the transfer by giving not less than thirty (30) days’ prior written notice and shall furnish such information in relation to the proposed transfer and the proposed assignee or transferee as may be required by the Manager provided that no such assignee or transferee of a Limited Partner’s interest or a Special Limited Partner’s interest in the Partnership shall become a Substitute Limited Partner or Substitute Special Limited Partner without the further written consent of the Manager, which consent may be given or withheld in its sole and absolute discretion and for any reason whatsoever or without assigning any reasons thereto. The transferring Limited Partner or Special Limited Partner shall bear all costs and expenses arising in connection with any such proposed transfer, including (without limitation) reasonable legal fees arising in relation thereto and the transferring Limited Partner or Special Limited Partner, the transferee and all other Partners shall be obliged to join in the giving of any election required by the Manager.

(c) Prior to a proposed transfer, the Manager shall be entitled to require a written opinion of reputable counsel, satisfactory in form and substance to the Manager, to the effect that such transfer will not result in (i) a violation of the Securities Act or any applicable securities law of any of the States of the United States, (ii) the Partnership or any of the other Partnerships being required to register, or seek an exemption from registration, as an investment company under the United States Investment Company Act of 1940, (iii) a loss of partnership status for US Federal income tax purposes for the Partnership (or any of the other Partnerships), (iv) the termination of the Partnership (or any of the other Partnerships) under Section 708 of the Code but only if such termination would result in material adverse tax consequences for the Limited Partners or the investors of any of the other Partnerships, or (v) the Partnership or any of the other Partnerships being considered a publicly traded partnership for US Federal income tax purposes. Such opinion shall also cover such other matters as the Manager may reasonably request.

(d) The foregoing clause 9.2(c) shall not apply to a transfer of all or part of a Limited Partner’s interest in the Partnership (including all or any part of its Loan) (i) to a person which succeeds to its business substantially as an entirety, or directly or indirectly, owns all the outstanding equity securities of such Limited Partner (or of the person of which such Limited Partner, directly or indirectly, is a wholly-owned subsidiary), (ii) to an Associate of such Limited Partner which is an accredited investor as defined in the Securities Act or (iii) to a Limited Partner provided that in all cases the transferee is not in the United States or a US Person. The Manager agrees to co-operate with any Limited Partner making a transfer by providing as soon as reasonably practicable such records and other factual information as may be reasonably requested with respect to any proposed transfer.

(e) Any Substitute Limited Partner or Substitute Special Limited Partner shall be bound by all the provisions hereof and, as a condition of giving its consent to any transfer to be made in accordance with the provisions of this clause 9.2, the Manager shall require the proposed Substitute Limited Partner or Substitute Special Limited Partner to acknowledge its assumption (in whole or in part) of the obligations of the transferring Limited Partner or Special Limited Partner by entering into this Agreement as a signatory or by executing a deed of adherence in a form satisfactory to the Manager. Neither the Partnership nor the Manager shall incur any liability for allocations and distributions made in good faith to the transferring Limited Partner or Special Limited Partner until the written instrument of transfer has been received by the Partnership and recorded in its books and the effective date of the transfer has passed.

(f) Notwithstanding any other provisions of this clause, each Limited Partner and Special Limited Partner undertakes to notify the Manager forthwith in writing of the full name of any entity or person to whom it proposes to transfer its interest pursuant to this clause, of any change in its own name and any other information which the Manager may reasonably request.

9.3 Assignment of Interests in Violation of this Clause

The Partnership shall not recognise the transfer of an interest (including any Loan) made in violation of this clause for the purposes of making distributions of Income or Capital, or repayments of Loan or Capital Contribution, or otherwise with respect to interests in the Partnership and any transfer of an interest to a Substitute Limited Partner or Substitute Special Limited Partner on the basis of any representation by such Partner which is untrue or which is subsequently breached by such Partner shall be void. Instead all of the Capital Contributions relating to such an interest shall be cancelled and the provisions of clause 4.5(c) shall apply.

• Investment Policy Guidelines
• Allocation Of Liabilities, Profits And Losses
• Distributions
• Assignment Of Interests (You are here)
• Meetings Of Limited Partners And The Advisory Board
• ERISA Investors
• BHC Partners
• Miscellaneous

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