BATAS Law is a general professional partnership operating in the City of Valenzuela. It regularly pays value-added tax on its services. All its lawyers have individually paid the required professional tax for the year 2017. However, as a condition for the renewal of its business permit for the year 2017, the City Treasurer of Valenzuela assessed BAT AS Law for the payment of percentage business tax on its gross receipts for the year 2016 in accordance with the Revenue Tax Code of Valenzuela.
Is BATAS Law liable to pay the assessed percentage business tax? Explain your answer. (3%)
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**Answer:** No, BATAS Law is **not liable** to pay the assessed percentage business tax. **Legal Basis:** Under **Section 133(i)** of the Local Government Code (LGC), the exercise of the taxing powers of local government units shall not extend to the
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Quick check
Can a local government unit levy a local percentage business tax on the gross receipts of a general professional partnership?
Section 133(i) of the Local Government Code explicitly restricts local government units from imposing percentage taxes on gross receipts.
What tax obligation is required from individual lawyers practicing within a general professional partnership?
Individual lawyers practicing their profession are required to pay the annual professional tax under the Local Government Code.
Under Section 133(i) of the Local Government Code, which taxes are local government units strictly prohibited from levying?
Section 133(i) of the Local Government Code expressly prohibits local government units from levying percentage tax or Value-Added Tax.
How are general professional partnerships treated for local business tax purposes under Philippine law?
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What is the legal status of a local tax assessment requiring a law firm to pay percentage business tax to renew its business permit?
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1. Local Taxing Limitations
Under Section 133(i) of the Local Government Code, the taxing authority of local government units is subject to explicit statutory limitations. Specifically, local government units are prohibited from levying percentage tax or Value-Added Tax on sales, barters, exchanges, or professional services rendered by individuals or corporate entities, except as otherwise explicitly provided by law. Local tax ordinances that attempt to impose local percentage business taxes on gross receipts derived from professional services exceed municipal taxing powers and are void for lack of statutory authority.
2. Professional Partnership Tax
General professional partnerships are formed exclusively by individuals for the sole purpose of exercising a common profession. Under Philippine tax law, general professional partnerships are not subject to income tax or local business tax on their gross receipts derived from professional practice. Instead, the individual partners comprising the general professional partnership are required to pay the annual professional tax imposed by the local government unit and pay individual income taxes on their respective distributive shares in the net income of the partnership.
3. Local Business Preemption
When national legislation explicitly preempts or restricts the imposition of local taxes on specific activities or receipts, local government units cannot circumvent statutory limitations under the guise of regulatory fees or business permit conditions. The assessment of a percentage business tax on a general professional partnership as a prerequisite for renewing its annual business permit violates Section 133(i) of the Local Government Code. Consequently, local treasurers cannot lawfully compel professional law partnerships to pay local percentage taxes.