Bureau of Local Government Finance Opinion

January 28, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Sheryl L. Olano SEBASTIAN LIGANOR GALINATO & ALAMIS Attorneys at Law 1409 East Tower Philippine Stock Exchange Centre Exchange Road, Ortigas Center Pasig City 1605 Madam : This refers to your letter dated December 1, 2014 requesting, in behalf of your client, GF & Partners, Architects, Co. (GF & P), confirmation of the following issues: (a) As a general professional partnership, GF & P is not subject to local business tax under the Revised Makati Revenue Code. (b) Except for professional tax, the architects who compose GF & P are likewise not subject to local business tax. It is represented that GF & P is a partnership duly registered, validly existing and in good standing under and by virtue of the laws of the Philippines, with principal office at 11th Floor, BDO Plaza, 8738 Paseo de Roxas, Makati City. It is an architectural firm and operating as a general partnership. On November 10, 2014 the Office of the City Treasurer of Makati issued a Notice of Assessment to GF & P wherein it was assessed of local business tax pursuant to Sec. 3A.02 (g) of the Revised Revenue Code of Makati City. However, GF & P alleged that Sec. 3A.02 (g) of the said Revenue Code which is being used as the basis in imposing local business tax refers to another Section of the same Code which expressly excludes persons subject to professional tax. This Bureau referred your letter to the City Treasurer of Makati City under a 1st Indorsement dated December 17, 2014 for comment and/or appropriate action. In reply, the City Treasurer under a letter dated January 21, 2015, copy enclosed, advised that they will review the examination of the subject business and will take appropriate action on the matter. acEHCD In view of thereof, it is informed that as far as the tax liability of general professional partnership is concerned, the BLGF has consistently adopted the opinions, copy enclosed, rendered by the Department of Finance (DOF) as follows: A. Letter dated April 11, 1998 of the then Acting Secretary of the DOF wherein it was held that: 1. A GPP is not considered a corporation and is therefore not a taxable entity; 2. A GPP is not considered a separate taxpayer from the partners; 3. The professionals which compose the GPP are subject to the individual income tax under the NIRC and the professional tax under the Local Government Code; and 4. In conclusion, it is clear that GPP cannot be considered as a contractor which is subject to a local business tax since: 1) it is not a taxable entity, 2) no part of its income is derived from engaging in any trace or business; 3) the income (tax) is imposed on the partners. B. Letter dated December 6, 1999 of Secretary Edgardo B. Espiritu addressed to Dr. Flor S. Enriquez, 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 a consequence of the practice of the dental profession. They are, necessarily, for the exercise of such a profession. SDHTEC 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. Accordingly, 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. It bears emphasis, however, that a professional who is a private practitioner and who has paid the professional tax may be considered exempt from the Mayor's permit fee before he could exercise his profession. However, if he is operating a business, say an office, a Mayor's permit fee should still be secured in order to operate said business which, furthermore, shall be subject to the tax on business, regulatory fees and service charges imposed by the local government concerned under a duly-enacted tax ordinance in view of Section 147, and in relation to Section 151 in case of cities, of the LGC, quoted as follows: SEC. 147. Fees and Charges . The municipality may impose and collect such reasonable fees and charges on business and occupation and, except as reserved to the province in Section 139 of this Code, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing before any person may engage in such business or occupation, or practice such profession or calling . (Emphasis ours) Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director