Limited Liability Partnership (LLP)Act 2017 introduced that Securities and exchange commission of Pakistan can incorporate another LLP in addition to the Companies. Now for the taxation point of view how will this body corporate will be treated ? As there are distinct rules for Association of Persons, Individuals and Companies in the Income Tax Ordinance 2001 along with specified rates for each category. Whether it will fall in individual category
The LLP act 2017 defines the nature of LLP as “A limited liability partnership shall be a body corporate by registration under this act and shall be a legal entity separate from its partners”.
While we see in Company definition in the Income Tax Ordinance 2001 that a Body corporate is a type of Company. Hence a LLP will be treated as a Company for the taxation purposes. There are multiple partners in LLP so the question raises how to treat income of the partner ? That income is treated a the income of a partner in a partnership firm.
The difference between a partnership and a limited liability partnership is that the liability of the partners become limited to the extent of his share in the later case. Same as like a company where the liability of the members is limited to their share. Share of partner form an LLP is exempt same as the share of partner from an AOP, however where director in a company withdraws profits it will be dividend and taxed as such.