Prior to the enactment of the Companies and Allied Matters Act 2020, Limited Liability Partnerships (LLPs) were treated as tax transparent. That is, while LLPs were not taxable as corporate entities, they were taxed as partnerships such that the income taxes payable were paid by the partners of LLPs under the Personal Income Tax Act based on each partner’s respective share of the profit from the LLPs. Thus, section 70 of the Partnership Law of Lagos
State Chapter P1 Laws of Lagos State 2015 (Partnership Law) provides that the income of partners of a limited liability partnership will be liable to tax under the Personal Income Tax Act, where applicable. The above position continues to be the case for LLPs registered under the Partner Law.
With the advent of the Companies and Allied Matters Act 2020 (the Act or CAMA), an LLP incorporated under the Act is considered a body corporate with a legal entity separate from the partners. In terms of taxation of an LLP incorporated under the Act, arguments had been made in some quarters that LLPs incorporated under the Act would be treated as general partnerships in accordance with global best practice as opposed to imposing income tax on
the LLP itself.
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