Professionals such as doctors, dentists, lawyers and accountants will be exempted from paying business permit fees to local government units for the operation of their clinics or offices, according to a new set of guidelines issued by the Finance Department.
Local Finance Circular 001-2019 signed by Finance Secretary Carlos Dominguez III on June 12, 2019 aims to ensure a fair, uniform and proper implementation of tax laws and in line with efforts to streamline government transactions to further improve the ease of doing business.
The guidelines state that while professionals still need to secure business permits from LGUs, the transaction should be free at all during the registration or renewal of the operation of their clinics or offices, as such permits cannot regulate the practice of their profession.
“This is because regulations over the practice of professions are within the exclusive domain of the respective agencies or regulatory boards empowered by law to supervise and regulate professions,” the DoF said.
LGUs, however, may impose a local business tax on professionals if they are verified to be engaged in selling, trading or distributing goods of whatever kind or involved in trade and other business activities that do not constitute the practice of their professions.
“In this case, the LGU can impose a business permit fee during the registration and renewal of the operation of the office or clinic of the concerned professional,” the DoF said.
The DoF-attached Bureau of Local Government Finance was tasked to monitor the compliance by LGUs with the circular and provide technical assistance to help them in following the guidelines.
Finance Undersecretary Antonette Tionko, who heads the DoF’s Revenue Operations Group, said the new set of guidelines sought to address reports and complaints received by the DoF on the improper imposition of local taxes, fees and other charges on professionals by LGUs.
She said the objective was to ensure the “fair, uniform and proper implementation” of the provisions of the Local Government Code governing the taxability of professionals relative to the practice of
their profession and to complement efforts in streamlining and facilitating government transactions as mandated under Republic Act 11032 or the Ease of Doing Business Law.
The circular also covers the imposition of the professional tax on employed professionals in both the private and public sectors, said Tionko.
“However, professionals exclusively employed in the government shall be exempt from the payment of the professional tax, unless he or she has been duly authorized to practice the profession outside of one’s official functions,” she said.
Under the circular, “an individual or corporation employing a person subject to the professional tax shall require payment by that person of the tax on his/her profession before employment and annually thereafter,” Tionko said.
The professional tax imposed by LGUs shall “not exceed P300 or the rate provided under a duly enacted local ordinance, subject to adjustment not exceeding 10 percent every five years,” the circular said.
The circular also provides for the rules in case of multiple practice of profession and the guidelines governing the payment of such professional tax.
“A line of profession does not become exempt even if conducted with some other profession for which the professional tax has been paid,” the LFC states.
“Thus, a lawyer who is also a certified public accountant must pay the professional tax imposed on each profession, if he [or she] is to practice both professions,” it says.