Many common law jurisdictions apply a concept called "flow through taxation" to partnerships.
Partnerships are "flow-through" entities for United States federal income taxation purposes.
Flow-through taxation means that the entity does not pay taxes on its income.
Federal tax law permits the owners of the entity to agree how the income of the entity will be allocated among them, but requires that this allocation reflect the economic reality of their business arrangement, as tested under complicated rules.
First, these profits or losses of the partnership are assessed according to the Hong Kong Inland Revenue Ordinance, Chapter 112, section 22.