After a comparison of the legal form of corporations in our countries during the last two meetings, we started in Dubai with a corresponding comparison of the different legal Partnerships that are important in our countries.

First of all, it was interesting to see that in many countries, partnerships no longer play an important role as a legal form in the business sector and in others, they are still common.

In most countries, corporations are predominant but in some countries, the legal form of a partnership can be for many reasons interesting, especially for small and medium-sized companies.

It is not always easy to distinguish a partnership from a corporation. The more a partnership has characteristics of a corporation, the more difficult it is to decide whether it is a partnership or a corporation. That can lead to the fact that an entity which is in its country classified as a partnership may be regarded by other countries as a corporation and vice versa.

In Double tax agreements, where the allocation of taxation to a country may depend on whether it is a corporation or a partnership, a so called “Conflict of Qualification” may arise.

What makes the difference between a partnership and a corporation?

• A commercial partnership is based on a partnership agreement between individuals.
• The general members of a partnership (maybe only one) operate it
• For tax purposes the members are taxed under personal income tax rules directly on their share of profits, so called “transparent” or “Flow through taxable to owners”