MANILA, Philippines — The government has harmonized the taxes and other fees that self-employed professionals such as doctors, accountants, and lawyers, among others, pay to local government units (LGUs) to cut red tape.
In a statement on Tuesday, the Department of Finance (DOF) said Local Finance Circular (LFC) 1-2019 signed by Finance Secretary Carlos G. Dominguez III on June 12 was aimed at “ensuring a fair, uniform and proper implementation of tax laws and in line with ongoing efforts to streamline government transactions to further improve the ease of doing business.”
In particular, LFC 1-2019 exempted self-employed professionals from payment of business permit fees for their clinics and offices.
“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 explained.
“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,” it added, citing LFC 1-2019.
Finance Undersecretary Antonette C. Tionko said LFC 1-2019 was issued following complaints lodged by self-employed professionals before the DOF, citing “improper imposition of local taxes, fees and other charges by LGUs.”
Also, while LFC 1-2019 covered the professional tax imposed by LGUs on both private and government professionals, Tionko said that “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.”
As for the private sector, “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,” she said.
According to LFC 1-2019, LGU’s profession tax must “not exceed P300 or the rate provided under a duly enacted local ordinance, subject to adjustment not exceeding 10 percent every five years.”
In case of multiple practices of professions, LFC 1-2019 said: “A line of profession does not become exempt even if conducted with some other profession for which the professional tax has been paid. 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.”
LFC 1-2019 also clarified that the community tax can only be slapped on individuals and corporations, and since they do not include general professional partnerships, these were exempt from such payments.
Under LFC 1-2019, the community tax will amount to “P5 plus P1 for every P1,000 of income from the exercise of profession, which in no case shall exceed P5,000.”
The circular likewise mandated that while “LGUs may impose and collect other applicable fees and charges (such as garbage fee, sanitary inspection fee, occupancy permit fee, etc.), the amount of which shall be reasonably commensurate to the cost of regulation or provision of service, as may be provided under a duly enacted local ordinance.”
The other fees must also not impose any service charge based on capital investments, gross sales, or receipts of the persons or businesses, according to LFC 1-2019.