Bureau of Local Government Finance Opinion

April 14, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the Regional Director for Local Government Finance, Region I, San Fernando City, La Union, the herein letter dated January 15, 2015 of Bethany Physicians/Doctors of Medicine , said City, which was received by that Office on January 22, 2015, requesting for an opinion relative to Section 139 of Book II, Title One, Chapter I, of Local Taxation and Fiscal Matters of the Local Government Code (LGC) of 1991, otherwise known as R.A. 7160, to quote: "SEC. 139. Professional Tax. a) The province may levy an annual professional tax on each person engaged in the exercise or practice of his profession requiring government examination of such amount and reasonable classification as the sangguniang panlalawigan may determine but shall in no case exceed Three hundred pesos (P300.00). b) Every person legally authorized to practice his profession shall pay the professional tax to the province where he practices his profession or where he maintains his principal office in case he practices his profession in several places. Provided, however, that such person who has paid the corresponding professional tax shall be entitled to practice his profession in any part of the Philippines without being subjected to any other national or local taxes, license, or fee for the practice of such profession. xxx xxx xxx" Based from their understanding, said Physicians/Doctors represented that ' local government units in the place where we practice our profession can only levy upon professionals like us the Professional Tax without being subjected to any other National or local tax, license or fee for the practice of our profession .' The City Government of San Fernando, La Union however required them to pay Regulatory Fee other than Professional Tax payable to the province, whereas the Barangay Council of the Barangay where the office is located requires them to pay Business Permit. Apparently, said Bethany Physicians/Doctors of Medicine raised two issues namely: 1) whether or not the collection of Regulatory fee by the City Government of San Fernando, La Union; and 2) whether or not the business permit fee collected by the Barangay are in accordance with law. In this connection, that Office expresses the following views: Issue No. 1.: "In relation to SEC. 139 of the Local Government Code of 1991, on the other hand, attention is also invited in SEC. 147 of the same Code provides as follows: 'SEC. 147. Fees and Charges. The municipality may impose and collect such reasonable fees and charges on businesses and occupations and, except as reserved to the province in Section 139 of this Code , on the practice of any profession and calling, commensurate with the cost of regulation, inspection and licensing before any person may engage in such business or occupation, or practice of such profession or calling '. (Emphasis Ours) CAIHTE It may be deduced from the aforementioned provisions of SEC. 139 and SEC. 147 of the Code that: 1. The exemption of a professional from any national or local tax license or fee after payment of the professional tax is for the practice of profession. 2. However, the income or receipts derived from the exercise of such profession is not deemed exempt from national taxes, as for example the income tax, or from local taxes imposed on the business he is engaged in. 3. A professional however, may be considered exempt from the Mayor Permit fee but if he is engaged in business like operating a medical or dental clinic, the business or clinic shall be subject to the Mayor's permit fee and such other regulatory fees or service charges imposed by local government units. Furthermore, it was mentioned that the professional tax is a fixed tax on the professional imposable by the province or city, while the business tax is a tax on business based on gross receipt levied by a municipality or city. In this connection, that Office informed that a Mayor's permit fee may no longer be collected from professionals who are paying professional tax like doctors and dentists having their own private clinics. However, such clinics shall be subject to the payment of said Mayor's permit fee, the business tax based on gross receipts, as well as the regulatory fees or service charges imposed by the municipality or city under a duly-enacted ordinance." Issue No. 2.: "Under SEC. 152. Scope of Taxing Powers. The barangays may levy taxes, fees, and charges, as provided in this Article, which shall exclusively accrue to them: 'xxx xxx xxx c) Barangay Clearance No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the barangay where such business or activity is located or conducted. For such clearance, the sangguniang barangay may impose reasonable fee. The application for clearance shall be acted upon within seven (7) working days from the filing thereof. In the event that the clearance is not issued within the said period, the city or municipality may issue the said license or permit. xxx xxx xxx" On the basis of the foregoing provisions, barangays are only empowered to issue barangay clearance on businesses conducted therein and impose a reasonable fee through a duly enacted barangay ordinance. They are not empowered to issue business permits or licenses as these are vested upon the cities and municipalities, hence, the Barangay Business Permit for the amount of Eight Hundred Pesos (P800.00) appearing in their official receipt is an ultra vires act on the part of the Barangay, as based on the letter to the Municipal Treasurer of Babak, Davao, of then Executive Director Lorinda M. Carlos dated July 14, 1994, which raised similar issues to the queries at hand. However, the Bethany Physicians/Doctors of Medicine , City of San Fernando, La Union, c/o Dra. Richelle L. Mendoza , located at the 2nd Floor, North Wing, Bethany Hospital, submitted an opinion rendered by then Secretary of Finance, Edgardo B. Espiritu, dated December 6, 1999, which state otherwise." DETACa In this connection and for the immediate resolution of the herein issue, please be informed that the opinion embodied in the letter dated December 6, 1999 addressed to Dr. Flor S. Enriquez, former President of the Philippine Dental Association on the request for opinion on whether cities or municipalities may validly require dentists to secure a Mayor's Permit before they can practice their profession and whether a dental clinic may be taxed as a business establishment, it was held as follows: a. Such professional who has paid the corresponding professional tax to the province where he practices his profession shall be entitled to practice his profession in any part of the Philippines without being subjected to any other national or local tax, license or fee, including the Mayor's Permit or license fee, for the practice of such profession. b. As to dental clinics, they are established as a direct consequence of the practice of the dental profession. They are, necessarily, for the exercise of such a profession. c. Therefore, to impose a graduated tax on a dental clinic on the premise that it is a "business establishment rendering or offering to render professional services" would be to impose a local tax on the practice of profession. This would be in contravention of the Local Government Code. It is the view of this Bureau that said opinions still hold until such time that the same are modified or rescinded accordingly by the same administrative authority or by the Court of competent jurisdiction. In this connection, all previous rulings and/or opinions issued by this Bureau relative to the herein subject matter which are inconsistent with the views expressed herein are hereby modified and/or repealed accordingly. With respect to imposition of business permit by the Barangays, this Bureau concurs with your stand that barangays are not empowered to issue business permits or licenses . Provinces, cities, municipalities, and barangays should levy taxes, fees and charges only as specified in the LGC so as to prevent encroachment in each one's taxing powers and jurisdictions. Be guided accordingly. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director