LGU taxation of professionals | Inquirer Business
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LGU taxation of professionals

In line with the objectives of the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, the Department of Finance (DOF) issued last month Local Finance Circular No. 001-2019.

The circular spells out guidelines for local government units (LGUs) on the imposition and collection of local taxes, fees and charges from professionals.

Professionals refer to “persons engaged in the exercise or practice of his profession, such as but not limited to lawyers, certified public accountants, doctors of medicine, architects … and all other professionals requiring government licensure examinations regulated by the Professional Regulation Commission, Supreme Court, etc.”


The circular requires them to pay an annual professional tax of not more than P300, or the rate provided under a duly enacted local ordinance, subject to adjustment not exceeding 10 percent every five years.


This tax can be imposed only by provinces, cities and the municipality of Pateros in Metro Manila. All other LGUs are prohibited from enacting ordinances that impose this tax or something similar to it.

The inclusion of Pateros in the list is due to a provision in the Local Government Code that gives it taxing authority similar to the provinces in some business activities within their territorial jurisdiction.

The tax has to be paid in the place where the professional practices his or her profession, or where his or her principal office is located if he or she also practices in other places.

In the latter case, payment of the professional tax in the principal office’s site shall exempt the professional concerned from paying any other national or local tax, license or fee for the practice of such profession.

If a professional subject to the tax is employed by another person or corporation, the employer is obliged to require the payment of the tax as a prerequisite for employment, and every year thereafter, if there is an ordinance to that effect.

Professionals exclusively employed in the government enjoy a pass from this tax unless authorized to practice their profession outside of their official functions.


In case a professional has two or more areas of practice, e.g., a lawyer who is also a certified public accountant, he or she must pay a professional tax for each professional activity he or she is engaged in.

With the payment of the professional tax, the circular prohibits LGUs from requiring professionals to secure business permits for the exercise of their profession on the pretext of regulating the conduct of business or trade in their areas.

The prohibition rests on the principle that the power to supervise and regulate professions is lodged exclusively in the government office specifically empowered by law to exercise that authority.

In addition, no business permit fee to operate the professional’s office or clinic shall be imposed by the LGU if the professional tax has already been paid.

However, if under a duly enacted ordinance a business permit is required for the registration of an office or clinic, the permit shall be issued by the LGU at no cost to the professional.

There is a caveat to this exemption. If the professional is shown to have (a) engaged in the sale, trading or distribution of any articles of commerce of whatever kind, or (b) involved in the function of trade, or (c) undertakes any activity that does not constitute the practice of profession pursuant to the law governing the practice of such profession, the professional shall be liable to pay the applicable annual business tax to the LGU concerned.

What’s more, the professional will forfeit the privilege of exemption from the payment of the business permit for the registration of his or her office or clinic.

Thus, for example, if a dermatology or weight reduction clinic sells products prepared or manufactured by its staff to its patients, it would be treated like any other commercial activity subject to the LGU’s tax and regulatory ordinances.

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One final word. The definition of professionals is strictly construed. It does not include the world’s oldest profession.

TAGS: Corporate Securities Info, Department of Finance (DOF), raul j. palabrica, taxation

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