Can You Register as Professional Even if You Never Took a Professional Licensure Exam?

Today we tackle one of the most misunderstood terms in the business registration lexicon of the Bureau of Internal Revenue (BIR).
We’re talking about the term “professional.”
It’s one of the first set of tick boxes you face when you’re filling out the BIR business registration form as a solo entrepreneur. Do you register as sole proprietor or professional?
“Well, it must be sole proprietor, by simple process of elimination. I’ve never taken a licensure exam, so I can’t possibly register as professional,” you may be thinking.
But it’s not as simple as that because, in fact, you can register as a professional even if you are not a licensed professional.
You see, in BIR lingo, “professional” simply means you’re doing business as an individual doing skilled work. You don’t have a formal office and no employees. You are simply practicing a skill.
That skill may be backed up by a licensure exam, such as medicine, accounting, engineering, etc.; or it may be a non-licensed skill, like photography, writing, coding, etc.
Why NOT register as professional
Now you may be thinking, “In that case, the correct option for me to tick must be ‘Professional’ because I am a freelance writer.”
But again, it’s not as simple as that. Even if you work solo, you might still want to register as sole proprietor for one important reason: income tax exemption.
You see, sole proprietors can apply for this privilege under the Barangay Micro Business Enterprise (BMBE) law if their total assets are worth less than P3m. (Learn more about the BMBE law in this post.)
Professionals cannot apply for BMBE certification. You need to be a sole proprietor because one of the law’s objectives is to provide more jobs to people.
Professional registrants are not expected to provide jobs to others; they are expected to work alone.
Why register as professional
Conversely, there are also substantial advantages to registering as professional. First and foremost is that you won’t need to renew your municipal/city business permit annually.
I could stop at that. That is reason enough to consider registering as professional.
Because, believe me, the annual business permit renewal process is enough to make anyone dread the month of January. (The deadline for renewing local government permits is January 20, and the earliest you can start the process is on January 2, if it’s a work day, because of course, January 1 is a national holiday. No, you can’t start in December.)
As a sole proprietor, every January means you’ll have to queue at the barangay hall to renew your barangay permit, and then at the municipal/city hall to renew your mayor’s permit.
Unfortunately, the process of renewing mayor’s permits can mean (in less streamlined towns) getting your papers signed by
- the fire department,
- the sanitation department, and
- the health department,
before you can submit them to the municipal/city hall for payment of local government business taxes, garbage collection fee, etc.
Business taxes are based on your gross annual income, so you may be asked to bring all your tax filings in the previous year to show how much your gross annual income was, along with a Gross Sales Declaration Form. The business tax can easily cost you P10,000 for gross annual earnings that don’t even reach a million pesos in total.
Now remember, in the tiny window of time between January 2 and 20, every single business (sole prop, partnership, and corporation) in your locality will be flocking to the mayor’s office to renew their permit.
The result is a line longer and more chaotic than what you see on the April 15 income tax return (ITR) filing deadline of the BIR. After all, for the ITR filing, people actually have a 3.5-month window for filing (January 2 to April 15); and nowadays, ITR filing can be done online.
So yes, the annual mayor’s permit renewal can be hell on earth.
Conversely, if you register as professional, all you need to do annually is pay your professional tax receipt (PTR) for around P500 (yes, that’s for the whole year already).
So now you know: if you work alone, whether licensed or not, you can register as a professional rather than a sole proprietor. Just weigh the pros and cons and decide.
