Bureau of Local Government Finance Opinion

December 17, 2014 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the City Treasurer, Makati City, for comment and/or appropriate action the herein letter dated December 1, 2014 of Atty. SHERYL L. OLANO of SEBASTIAN LIGANOR GALINATO & ALAMIS, Attorneys at Law, in behalf of their client, GF & Partners, Architects, Co. (GF & P) requesting 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. ACTIHa 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 that Office issued 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 that City. However, GF & P alleged that Sec. 3A.02 (g) of the said Revenue Code which is being used as the basis by that Office in imposing local business tax refers to another Section of the same Code which expressly excludes persons subject to professional tax. Sec. 3A.02 (g) refers to the definition of contractors under Sec. 3A.01 (t) of the Revised Makati Revenue Code which, which provides as follows: "Section 3A.01(t). Contractors includes person, natural or juridical, not subject to professional tax whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties or such contractor or his employees." While Section 3E.01 and Sec. 3E.02 of the same Revenue Code refer to the imposition and coverage of professional tax, which also provide as follows: "Section 3E.01. Imposition of Tax. There is hereby levied annual professional tax on each person engaged in the exercise or practice of his profession requiring government examination at the rate of Three Hundred Pesos (P300.00)." "Section 3E.02. Coverage. The following professionals who passed the bar examinations, or any board, or other examinations conducted by the Professional Regulation Commission (PRC) and other government agencies shall be subject to the professional tax: HCSAIa "Actuaries; architects , land and naval . . . ." Further, Section IB.01 (e) of the same Revenue Code expressly excludes general professional partnerships from the definition of 'Corporation', viz. : "Section IB.01(e). Corporation includes partnerships, no matter how created or organized, joint-stock companies, joint accounts ( cuentas en participacion ), associations or insurance companies but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or agreement under a service contract with the government. General professional partnerships are partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business." Based from the abovequoted Sections of the Revised Revenue Code of Makati, GF & P believes that architects are excluded from the definition of 'contractors'. Therefore, the assessment made by that Office to GF & P has no leg to stand on and being a general professional partnership, is not subject to local business tax as clearly provided under the immediate preceding provision of the Revised Revenue Code of Makati City. In view of the foregoing, your comment and/or appropriate action within five (5) days from receipt hereof together with the excerpt of the Revised Revenue Code of Makati City will be appreciated. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director