THE Department of Finance (DOF) has issued guidelines on the payment and collection of taxes by local government units (LGUs) from professionals, in order to ensure a fair, uniform and proper implementation of tax laws. It is also seen to boost efforts to streamline government transactions and improve the ease of doing business.
Local Finance Circular (LFC) 001-2019 still rerquires professionals to secure business permits from LGUs, at no cost, 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.
The circular, signed by Finance Secretary Carlos G. Dominguez III on June 12, 2019, outlines the exemptions of professionals in the payment of business permit fees in operating their offices or clinics.
According to the finance department, LGUs 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 added.
The 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.
Finance Undersecretary Antonette C. Tionko, who heads the DOF’s Revenue Operations Group, said the new guidelines seek to address reports and complaints received by the DOF on the improper imposition by LGUs of local taxes, fees and other charges on professionals.
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 in 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.
“However, professionals exclusively employed in the government shall be exempt from the payment of the professional tax, unless [they have] been duly authorized to practice the profession outside of one’s official functions,” 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 LFC said.
According to Tionko, the LFC was crafted following consultations with the BLGF, the Departments of the Interior and Local Government (DILG) and of Trade and Industry (DTI), local treasurers and representatives from local government leagues, among others.