Partnership Tax: How Partnership Profits Are Taxed

# Partnership Tax: How Partnership Profits Are Taxed

Profits from a business, trade, vocation or profession are income liable to tax; a business consists of a sole proprietorship and a partnership.

Updated: 8 November 2026 — Independently fact-checked.

Review date: 8 November 2026
Year of assessment: All YA (provisions of ACP 1967); references forms YA 2025
Status: Published

Partnerships & income tax

Profits from a business, trade, vocation or profession are income liable to tax; a business consists of a sole proprietorship and a partnership.

An ordinary partnership is not a separate tax entity in the corporate sense — partnership income is computed as if the partnership were a person, then apportioned to each partner to be taxed at each partner's own level.

Source: Tax Advisory Pamphlet 2025; Income Tax Act 1967 s.55 (see Official sources section).

The s.55 ACP mechanism

Under s.55 ACP, for tax purposes:

the business & assets of the partnership are deemed to be transferred to each partner;
the provisional adjusted income is apportioned;
"divisible income" = provisional adjusted income less the total remuneration and interest paid to partners and personal expenses charged in the partnership accounts (s.55(3));
the divisible amount is apportioned to partners according to the partnership agreement in force (s.55(4));
each partner's adjusted income = their share + the related remuneration/interest components (s.55(5)).

Source: Income Tax Act 1967 s.55(1)–(6) (see Official sources section).

Form P (Partnership Return)

A partnership submits Form P / Partnership Return (e-P) under subsection 86(1) of ACP 1967. This form records the partnership name, the number of members, the basis of apportionment and the confirmation of the business.

The deadline for submitting Form B, P and M (carrying on a business) and for paying the balance of tax is 30 June each year.

Source: Official e-P form; Tax Advisory Pamphlet 2025 (see Official sources section).

Reporting by partners

Each partner reports their share of partnership income in Form B (or Form C if the partner is a company):

B2 — Statutory income of Malaysian-source partnership: amount E/G from Worksheet HK-1B; B2a = number of partnerships;
partnership losses: B5 (brought forward) / B15 (current year);
foreign-source income remitted: B3 / Section E.

Source: Form B Explanatory Notes — YA 2025 (see Official sources section).

Difference from PLT

Limited liability partnerships (PLT/LLP) are treated separately (like a company for certain purposes) — do not mix them with ordinary partnerships. Details of PLT treatment on this matter still await official HASiL confirmation — re-check with HASiL before making decisions. — refer to the separate guide.

Warnings

Do not confuse Form P (partnership), Form B (individual partner) and Form C (company).
Calculation examples must be based on the s.55 mechanism and verified figures; do not invent them.
The effect of changes to the sharing agreement mid-basis-period — the s.55(4) mechanism mentions "sharing arrangements (subsisting from time to time)"; practical examples on this matter still await official HASiL confirmation — re-check with HASiL before making decisions.