Essential Guide to Paying Professional Tax Annually

“Professional is not a label you give yourself – it’s a description you hope others will apply to you.”

– David Maister, Author and Former Harvard Business School Professor

By Realttorney^®

Ti auguro un buon anno nuovo! It is the second day of the new year. For some, it is back to work. Others are still in vacation mode until Sunday, January 5 — which we Catholics in the Philippines celebrate as the Feast of the Epiphany. For the rest of the country, this coming Sunday is the final day of the Christmas season.

Whether you are working now or still vacationing, a real estate service practitioner must be reminded of legal compliance that must be made at the beginning of every new year. Before the effectivity of the Ease of Paying Taxes Act, licensed real estate brokers and accredited real estate salespersons would visit the Bureau of Internal Revenue to pay the annual registration fee of Five Hundred Pesos, under BIR Form No. 0605. But that is no more today.

In this article, we will focus on the payment of the professional fee to your Local Government Unit. What is it? Who pays it? And why do we need to pay an annual professional tax?

Section 139 of Rep. Act No. 7160, otherwise known as the “Local Government Code of 1991”, provides the legal basis for provinces to impose and collect professional tax on each person engaged in the exercise or practice of his/her profession.

Meanwhile, cities are also authorized to impose professional tax under Section 151 of the Local Government Code, which provides that a city may levy taxes, fees, and charges that a province or municipality may impose.

So now, what is a professional tax, and who pays it? It is a tax imposed by the provincial or city government on each person engaged in the exercise or practice of his or her profession.

The professional tax is paid by anyone who is legally authorized to practice a profession in the Philippines. This is interpreted to mean all professions that are supervised by the Professional Regulation Commission (PRC) and required to take and pass a licensure examination.

Kindly note that any individual or corporation employing a person subject to professional tax shall require payment by that person of the tax on his profession before employment and annually thereafter, as may be provided under a duly enacted local ordinance.

Furthermore, professionals exclusively employed in the government shall be exempt from the payment of this tax, unless he/she has been duly authorized to practice the profession outside of his/her official functions.

When do you pay professional tax? The professional tax shall be payable annually, on or before the thirty-first (31st) day of January. Any person first beginning to practice a profession after the month of January must, however, pay the full tax before engaging therein. The Sanggunian concerned may, for a justifiable cause or reason, extend the time of payment of such taxes, fees, or charges, without surcharges or penalties, but only for a period not exceeding six (6) months.[1]

Where do you pay the professional tax? The payment of the professional tax shall be made to the province or city where the professional practices his/her profession or has his/her principal office is maintained, in case one practices the profession in several places.

Please remember that a professional who has paid the corresponding professional tax is entitled to practice his/her profession in any part of the Philippines without being subjected to any other national or local tax, license, or fee for the practice of such profession.

In the case of Intestate Estate of Jose Uy v. Atty. Pacifico M. Maghari III (A.C. No. 10525, September 1, 2015), the Supreme Court stated that “with the professional tax receipt number, [authorities] can verify if the same person is qualified to engage in a profession in the place where he or she principally discharges his or her functions.”

How much professional tax do we pay? Professionals shall pay an amount not to exceed PhP 300.00, Philippine currency, or the rate provided under a duly enacted local ordinance, subject to adjustment not exceeding ten percent (10%) every five (5) years.[2]

What if I have several licenses from different professions? A line of profession does not become exempt even if conducted with some other profession for which the tax has been paid. Thus, an attorney who is also a licensed real estate broker must pay the professional tax imposed for each profession, if he/she is to practice both professions.

What do I need to present before I pay the professional tax? To collect the tax, the provincial treasurer or his/her duly authorized representative shall require from such professionals their current annual registration cards issued by the competent authority before accepting payment of their professional tax for the current year.

Finally, according to Local Finance Circular No. 001-2019 of the Department of Finance, the PRC shall likewise require the professionals to present proof of the annual payment of professional tax before registration of professionals or renewal of their licenses. This proof of payment is called the Professional Tax Receipt, or simply PTR.

But is this being practiced by the PRC in its main office and in its regional offices? Share your experience in the comment section.

After reading all the above, if you are an accredited real estate salesperson you may be wondering that since you are not required by Rep. Act No. 9646 to take and pass a licensure examination, do you still need to pay the professional tax?

The answer is a resounding YES. Why? Because an accredited real estate salesperson is a type of Real Estate Service Practitioner (RESP) according to Section 3 of the Real Estate Service Act (RESA).

Section 38 of RESA requires all real estate service practitioners to indicate the certificate of registration, professional identification card, PTR number, and APO receipt number, and the date of issuance and the duration of validity on the documents he/she signs, uses, or issues in connection with the practice of his/her profession.

The penultimate question that needs to be addressed here is about the payment of business permits for those RESPs who operate a realty office – whether outside their place of residence or within their home office.

As a professional who has already paid my professional tax, am I still required to pay business tax to the LGU?

Section 6 of the Local Finance Circular No. 001-2019 of the Department of Finance states that a professional who has paid his/her professional tax shall be exempt from the payment of business permit fee in the operation of his/her office.

However, a professional shall still be required to secure a business permit, at no cost, from the concerned LGU during the registration of office and renewal thereof, subject to a duly enacted local ordinance.

Finally, if upon verification, a professional is actually engaged in selling, trading, or distributing any article of commerce of whatever kind, or involved in the function of trade, or undertakes any business activity that does not constitute the practice of profession, according to applicable law/s governing the practice of such profession, he/she shall be liable to pay the annual local business tax (LBT) to the city or municipality concerned, pursuant to the applicable rates provided under Sections 143 and 146 of the LGC, and as may be provided under a duly enacted local ordinance.

Now that you know everything that you need to know about professional tax, when will you get yours? Remember, compliance with Section 38 of RESA is mandatory for all licensed real estate brokers and accredited real estate salespersons. Failure to do so will subject us to disciplinary sanctions by the PRBRES.

Would you want to risk that?

Hence, the final question here is, when will you pay your professional tax? I suggest that you do it on or before the end of next Friday. Don’t wait until the deadline. Be different. Comply as soon as you can.

Have a successful and abundant year to everyone.

——-

Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.

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[1] Section 167 [Time of Payment] of the Local Government Code of 1991.

[2] Section 191 [Authority of Local Government Units to Adjust Rates of Tax Ordinance] of the Local Government Code of 1991.