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Filing QAP for a Professional Partnership (GPP) When a Partner Joins or Leaves Mid-Year

·6 mins
Guides DAT Files Withholding Tax BIR Compliance

When a general professional partnership (GPP) admits a new partner or loses one mid-year, the ₱720,000 threshold that decides whether a partner’s drawings are withheld at 10% or 15% resets to zero for that individual partner on the date they join — it is not a firm-wide total shared across every partner, old or new. The same per-partner logic applies in reverse when a partner withdraws: their final settlement is withheld against their own cumulative total up to that point, and they simply stop appearing on the firm’s QAP filing from the following quarter onward.

This guide covers how the GPP partner-withholding rule actually applies on a partner-by-partner basis, how a mid-year change shows up on the QAP DAT file, and a worked example covering both a new partner and a withdrawing partner in the same quarter.

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Why GPP partner withholding is tracked per partner, not per firm #

A general professional partnership itself is exempt from creditable withholding on the professional fees it bills to clients, but the GPP becomes a withholding agent in its own right the moment it pays out drawings, sharings, allowances, or stipends to its individual partners — and that obligation is assessed against each partner’s own running total, not the firm’s combined distributions. Section 2.57.5(B)(4) of Revenue Regulations (RR) No. 2-98, as amended, exempts the client-to-GPP payment from withholding; Section 2.57.2(H) of the same regulation, as amended by RR No. 30-03, is what then requires the GPP to withhold on what it pays its partners.

A secondary tax-law summary of that provision describes the mechanics this way:

“Income payments made periodically or at the end of the taxable year by a general professional partnership to the partners, such as drawings, sharings, allowances, stipends, and the like are subject to the 15 percent, if the payments to the partner for the current year exceeds P720,000; and 10 percent creditable withholding tax, pursuant to Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 30-03.”

Because the rule speaks in terms of “payments to the partner,” not payments by the firm in aggregate, a firm with five long-standing partners already past ₱720,000 each does not push a newly admitted sixth partner into the 15% bracket on day one — that new partner’s own drawings start the count from zero.

How a new partner’s partial-year drawings are withheld #

A partner admitted partway through the year is withheld exactly like any other partner, just starting later:

  1. First drawing after admission is withheld at 10%, since the partner’s cumulative total for the year is necessarily below ₱720,000 at that point.
  2. Each subsequent drawing continues at 10% until that partner’s own cumulative drawings for the calendar year cross ₱720,000.
  3. Once the ₱720,000 threshold is crossed, the firm withholds 15% on that drawing and every drawing afterward for the remainder of the year, for that partner specifically.
  4. The following January, the count resets to zero for every partner, new or old alike, and the same 10%-then-15% progression starts again.

How a withdrawing partner’s final settlement is withheld #

A partner who resigns, retires, or is bought out mid-year is withheld on their final drawing or settlement the same way as any other drawing — at 10% or 15%, depending on where their own cumulative total for the year already stood before that final payment. A buy-out or retirement settlement that represents the partner’s share of undistributed partnership profits is an income payment in the same character as an ordinary drawing, not a separate, unwithheld capital transaction, so it does not escape the withholding rule simply because it is the partner’s last payment from the firm.

How this shows up on the QAP DAT file #

A GPP’s QAP reports each partner only for the quarters in which they actually received a withheld payment, so a mid-year partner change produces an uneven appearance pattern across the year’s four quarterly filings rather than a clean start or stop at a quarter boundary. A partner admitted in August, for example, appears for the first time on the Q3 QAP (covering the quarter of that first drawing) and continues on Q4 — they simply have no entry on the earlier Q1 or Q2 filings, which is correct and does not need an explanatory note or amendment. A partner who withdraws in August appears on Q1, Q2, and Q3 (through their final settlement), then drops off the Q4 QAP entirely.

Worked example: one partner joins, one partner withdraws, same quarter #

A four-partner accounting GPP admits a new partner, Partner E, on August 1, and Partner D withdraws effective August 31 after a final buy-out settlement.

  • Partner E’s first drawing, paid September 15 for ₱150,000, is withheld at 10% (₱15,000), since her cumulative total for the year is well under ₱720,000.
  • Partner D’s final settlement, paid August 31 for ₱300,000, is withheld at 15% (₱45,000), because his cumulative drawings for the year — ₱680,000 from January through July, plus this ₱300,000 settlement — total ₱980,000, crossing the ₱720,000 threshold partway through this payment.

Both withheld amounts are reported on the firm’s Q3 QAP DAT file: Partner E appears for the first time, and Partner D appears for the last time before dropping off Q4.

Frequently asked questions #

Does a new partner’s withholding threshold start at ₱720,000 or does it share the firm’s existing total? #

It starts at zero. The ₱720,000 threshold under RR No. 2-98 (as amended by RR No. 30-03) that decides between the 10% and 15% rate on GPP partner drawings is tracked per individual partner’s cumulative payments for the year, not pooled across the whole firm, so a partner admitted mid-year begins counting from their own first drawing, unrelated to what existing partners have already received.

Does a withdrawing partner’s final settlement still get withheld? #

Yes. A final drawing, retirement payment, or buy-out settlement paid to a withdrawing partner in consideration of their share in partnership profits is still an income payment subject to the same 10%/15% creditable withholding structure, applied against that partner’s own cumulative total for the year up to the date of withdrawal.

How does a mid-year partner change appear on the QAP DAT file? #

Each partner is reported on the GPP’s Quarterly Alphalist of Payees (QAP) only for the quarters in which they actually received a withheld drawing. A partner who joined mid-year appears starting in the quarter of their first drawing; a partner who withdrew mid-year appears through the quarter of their final settlement and then drops off subsequent quarters’ QAP filings.

Does the GPP itself get withheld when it bills clients for professional services? #

No. Under Section 2.57.5(B)(4) of RR No. 2-98, as amended, income payments to a GPP for its professional services are exempt from creditable withholding tax at the client level. The withholding this guide covers happens one step later, when the GPP distributes drawings or shares to its own individual partners.

Summary #

A GPP’s 10%/15% withholding on partner drawings is tracked per partner, not per firm, so a mid-year admission starts that partner’s threshold at zero and a mid-year withdrawal is withheld through the partner’s final settlement before they drop off the QAP. For related GPP and QAP topics, see What Is QAP?, QAP vs SAWT: What’s the Difference, and Best BIR Excel Uploader Alternative for Law Firms and GPPs.