DOF sets guidelines for imposing local taxes, fees on professionals

Published July 2, 2019, 12:00 AM

by manilabulletin_admin

By Chino S. Leyco

The Department of Finance (DOF) has set its guidelines that aim to harmonize the taxes, fees and other charges being collected by the local government units (LGUs) on professionals.

DOF logo
DOF logo

In a statement, the DOF said it issued the Local Finance Circular (LFC) 001-2019 to streamline government transactions by setting fair, uniform and proper rates in doing business in the LGU level.

Among the salient features of the LFC 001-2019, which was signed by Secretary Carlos G. Dominguez III last June 12, is the exemption of professionals from paying business permit fees for the operation of their offices or clinics.

Under the guidelines, while professionals still need to secure business permits from LGUs, such should be at no cost at all during the registration or renewal of the operation of their clinics or offices, given that 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, the LFC states.

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.

Under the LFC, the DOF-attached Bureau of Local Government Finance (BLGF) is tasked to monitor the compliance by LGUs with the circular and provide technical assistance to aid them in following the guidelines.

According to Finance Undersecretary Antonette Tionko, the new set of guidelines seeks to address reports and complaints received by the DOF on the improper imposition of local taxes, fees and other charges on professionals by LGUs.

The LFC’s objective is 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 LFC 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,” Tionko said.

Under the LFC, “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 ten (10) percent every five (5) years,” the LFC said.

The LFC 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 (CPA) must pay the professional tax imposed on each profession, if he (or she) is to practice both professions.”