The Department of Finance (DOF) issued a new set of rules to local government units (LGUs) that exempt professionals from paying fees to obtain business permits for the operation of their offices or clinics.
The Local Finance Circular (LFC) 001-2019 was signed by Finance Secretary Carlos Dominguez III last June 12. Among its salient features is the exemption of professionals from paying business permit fees.
Cutting red tape
Finance Undersecretary Antonette Tionko said that the new LFC addresses the complaints received by their department 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 same circular also aims to help in improving, restructuring, and assisting transactions and guaranteeing the right and just distribution of requirements by the government.
Securing business permits
Although professionals are exempted from paying business permit fees, DOF cleared that they are still required to secure such permits.
“Such permits cannot regulate the practice of their profession regulations over the practice of professions are within the domain of the respective agencies or regulatory boards empowered by law to supervise and regulate professions.”
Professionals are those who are licensed by the Philippine Regulatory Commission (PRC) for them to legally practice their respective lines of employment.
Limits and other features of the new circular
Meanwhile, DOF clarified that local governments may impose a local business tax on professionals if they are proven involved in business activities that are outside the scope of their professions.
“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. Registration and renewal of the operation of the office or clinic of the concerned professional.”
In the case of individuals who practice multiple professions, they are required to pay both the professional tax imposed on each profession.
The new circular also covers imposition of the professional tax on professionals employed in both the private and public sectors.
“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 clarified.
The professional tax must not exceed Php300. This tax is subject to an adjustment that should not exceed 10 percent every five years.
Under LFC 001-2019, the community tax shall not exceed P5,000 and shall amount to “Php5 plus Php1 for every Php1,000 of income from the exercise of profession.”
Community tax on corporations do not include general professional partnerships (GPPs), hence, they are exempt from paying the said levy.
The LGUs may collect occupancy permit fees, sanitation inspection fees, and other charges.
No fees must also impose service charge based on capital investments, gross sales, or receipts of the persons or the business, in reference to LFC 001-2019.
The Bureau of Local Government Finance (BLGF) is appointed by the department to monitor the compliance by, and provide technical assistance to LGUs.