An organization that does not pay income tax on its profits but passes them through to its owners who pay the tax at their individual rates is called a

Flow-through tax entity

Explanation:

Flow-through tax entity does not record the income from its yearly operation as its net income. This type of organization direct directed those income to the owners, so the taxation laws that applicable for those income is the tax laws for individuals rather than business establishments.

Almost all countries allow this practice, but To prevent frauds, they usually required  to file an annual return reporting the shares of income allocated to owners,

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