Professional Taxes: What are they for?

A professional tax, or occupation tax, is a tax charged on any one who is practicing a profession such as accountant, lawyer, doctor or engineer.  It is a tax which a professional must pay in order to be given the privilege to practice a professional service.

In the Philippines, the Local Government Code requires the payment of professional taxes on professions requiring government examination.  To elucidate, the Local Government Code states:

"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 as 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 tax, license, or free for the practice of such profession."

By express provision, a professional may practice his profession anywhere in the Philippines provided he pays an annual tax not exceeding P300.  Payment of professional tax must be done annually on or before the 31st day of January.

Any professional who intends to pay his professional tax must present his latest Official Receipt and/or Government License ID before the local government accepts payment.

But technology seems to be evolving and I am amused that in some cities or municipalities, they allow photos of your Government IDs and/or Official Receipts for presentation.

I have stored in my Smart Phone a picture of my government ID and latest Official Receipt of payment of my Professional Tax. I have yet to test if these will be allowed when I try to pay my Professional Tax next year.

Transferring Real Property in the Philippines

Let us start an article which involves payment of taxes. For transferring real property, one must pay Capital Gains Tax, Documentary Stamp Tax and Transfer Tax.

For the Sale of real property subject to Capital Gains Tax, the following are the documentary requirements at the Bureau of Internal Revenue:

1) Tax Identification numbers of both the buyer and seller. In case the seller is both husband and wife, the Tax Identification numbers of both must be presented.

2) Notarized Deed of Absolute Sale/Document of Transfer.

3) Certified True Copy of the latest Tax Declaration issued by the Local Assessor's Office for land and improvement applicable to the taxable transaction.

4) Certified True Copy of the Transfer Certificate of Title, Condominium Certificate of Title, or Original Certificate of Title. The original Owner's copy shall be presented for purposes of ocular comparison.

5) Official Receipt together with the duly validated tax return as proof of payment.

6) Acknowledged Receipt of the consideration by the Seller.

7) Sworn Declaration of No Improvement by at least one (1) of the transferees or Certificate of NO IMPROVEMENT issued by the Assessor's Office, if applicable.

8) Location plan/ vicinity map if the zonal value cannot be readily determined from the documents submitted.

For purposes of payment of transfer taxes and registration fees, the following are the documentary requirements:

1) Certified True Copy of the latest Tax Declaration issued by the Local Assessor's Office for land and improvement applicable to the taxable transaction.

2) Certificate of Real Property Tax clearance issued by the Local Treasurer's Office.

3) Certificate Allowing Registration from the Bureau of Internal Revenue.

4) Certificate of Capital Gains Tax clearance and Documentary Stamp Tax clearance issued by the Bureau of Internal Revenue.

5) Original Owner's Duplicate of the Transfer Certificate of Title for purposes of surrendering the same to the Register of Deeds.

6) Original copy of the Deed of Sale stamped by the proper government unit concerned that the corresponding Capital Gains Tax, Documentary Stamp Tax and transfer taxes have been paid.

7) Official Receipt for the payment of transfer tax with the corresponding endorsement for registration by the Local Treasurer's Office as proof of payment.

Finally, once the Register of Deeds issues a new Transfer Certificate of Title (TCT), the Local Assessor's Office should be provided photocopies of the following documents, all of which should come from the Office of the Register of Deeds, so that a new Tax Declaration shall be issued in favor of the new owner:

1) Transfer Certificate of Title issued in the name of the new owner;

2) Proof of payment of transfer tax;

3) BIR's Certificate Authorizing Registration;

4) Deed of Absolute Sale with "stamped" proof of payment of Capital Gains Tax, Documentary Stamp Tax and Transfer Tax.

For everyone's information.