Overview

Starting a business in the Philippines is an exciting endeavor, but it also comes with significant responsibilities, such as registering with the Bureau of Internal Revenue (BIR). Personally, I found myself in a lengthy decision-making process, often second-guessing whether or not I should register my small business with the BIR. After months of deliberation, I realized the significant benefits I would gain from registering my business. Here they are:

Importance of Registering Your Business with the BIR

1. Legal Compliance:
   • Tax Obligations: Conducting business is a privilege that comes with important responsibilities, including the obligation to pay the required taxes. By fulfilling tax obligations, businesses contribute to the community’s growth and development, ensuring they operate within legal and ethical boundaries.
   • Avoid Penalties: Registering with the BIR ensures that your business complies with tax laws, helping you avoid hefty fines and legal consequences such as charges of tax evasion or even closure of your business.
2. Business Credibility:
   • Builds Trust: Customers, suppliers, and investors perceive a registered business as more trustworthy. If you sense that your customers or clients are skeptical about your business, you can display your DTI certificate and Certificate of Registration from the BIR to enhance your credibility and demonstrate that your business is legitimate and recognized by government authorities.
   • Professional Image: With your DTI certificate and COR, your business’s professional image and reputation are enhanced, attracting more potential clients and customers.
3. Financial & Business Opportunities:
   • Bigger Company Clients/Customer: As a part-time programming service provider, the biggest advantage I see in registering my business is the ability to work with large companies. Big companies prefer to do business with registered businesses because of the financial requirements for recording income and expenses as mandated by the BIR. As a result, they only purchase products or services from those who can provide accredited receipts or invoices.
   • Access to Loans: Banks and financial institutions often require proof of BIR registration to approve loans and credit lines. This can be highly advantageous for your business if you plan to expand but lack sufficient funds.
   • Attracting Investors/Partnerships: Attracting investors and forming partnerships are clear indicators of a growing and expanding business. To build alliances with investors and business partners, one of the key factors they consider is whether your business is properly registered and compliant with regulations.
4. Implications To Employees:
   • Issuing Proper Payslips: Registration allows you to issue official payslips and withhold taxes correctly for employees.
   • Compliance with Labor Laws: Ensures compliance with labor laws and regulations, protecting both you and your employees.
   • Employee Benefits: Proper company registration ensures that employees receive the necessary documentation to smoothly claim tax-related benefits and deductions. By providing accurate and official records, a registered employer helps employees effectively demonstrate their employment history and income for loan applications, tax returns, and future job opportunities.
5. Government Incentives:
   • Access to Incentives: Registered businesses may qualify for government incentives, grants, and support programs. These includes:
     • Training and workshops to help MSMEs (Mico, Small and Medium Enterprises) enhance their business skills and knowledge as offered in Negosyo Centers and SME Roving Academy offered by DTI.
     • Income tax holidays (ITH), exemption from import duties, and accelerated depreciation for businesses in priority sectors as offered in IPP (Investment Priorities Plan) offered by BOI (Board of Investments)
     • Tax holidays, exemptions from local and national taxes, and other benefits for businesses operating within economic zones. (by PEZA – Philippines Economic Zone Authority)
     • Financial assistance, technical support, and training to help MSMEs adopt new technologies and improve productivity. (by DOST – Department of Science & Technology)
     • Skills training and development programs to improve the workforce’s capabilities from TESDA (Technical Education and Skills Development Authority)
     • Credit assistance program with low-interest loan and financial assistance from ACPC (Agricultural Credit Policy Council)
     • Agri-Business Support from Department of Agriculture which Provides financial aid, technical support, and training to farmers and agribusinesses.
     • Adjustment Measure Program by DOLE which offers financial assistance to businesses affected by economic changes and natural calamities to help retain workers and stabilize operations.
     • Tax breaks, permits, and financial aid tailored to local business needs as offered by various LGUs.
   • Participation in Government Contracts: Allows your business to participate in government tenders and contracts.

In summary, registering your business with the BIR is both a legal requirement and a strategic advantage that can greatly influence your business’s success and growth. Proper registration ensures compliance with tax laws and grants your business legal recognition. This comprehensive guide will help you easily navigate the BIR registration process. I found the walk-in registration at my designated RDO to be more efficient, as it allowed me to address any questions directly with the BIR officer. The entire process took me about half a day, and I preferred this approach over the online registration for the personal assistance it provided.

Disclosure: This article does not constitute tax or legal advice, as I am not a tax professional or expert. The definitions outlined here are based solely on my personal experience regarding researching the internet for tax information for my business purposes. It is therefore still advisable to seek guidance from your own accountant for advice tailored to your business’s specific needs.

Before we proceed further to the discussion, let’s first clarify some common used terms that you might encounter during the Business registration in BIR:

Glossary

• BIR (Bureau of Internal Revenue) – is the government agency in the Philippines responsible for the assessment, collection, and enforcement of national internal revenue taxes
• BIR Form 1901 – Application for Registration form For Self-Employed (Single Proprietor/Professional), Mixed Income Individuals, Non-Resident Alien engaged in Trade/Business, Estate and trust.
• BIR Form 1903 – Application for Registration form used for Corporations/Partnerships (Taxable / Non-Taxable)j, Including GAIs and LGUs
• BIR Form 1905 – is a form for Application for Registration Information/Update/Correction/Cancellation
• BIR Form 1906 – is a form for Application for Authority to Print Receipts and Invoices.
• ATP (Authority To Print) – is a formal document issued by the BIR that grants businesses the authorization to print official receipts, invoices, and other commercial documents. This ensures that all printed materials used for transactions comply with BIR regulations and contain the necessary information required by law.
• DTI (Department of Trade and Industry) – is a government agency in the Philippines responsible for promoting and regulating trade, industry, and investment activities in the country.
• SEC (Securities and Exchange Commission) – is the government agency in the Philippines responsible for regulating and overseeing the securities and investment markets.
• RDO (Revenue District Office) – is a local office of the BIR responsible for administering and enforcing tax laws and regulations within a specific geographic area.
• NBRO (New Business Registrants Officer) – the person who handles specific functions related to the registration of businesses and the issuance of certain tax-related documents
• BCR (Book of Cash Receipts) – is a book where we manually record all payment settlements received by the business. These settlements does not limit only to cash transactions but also include transactions made through cheques and transfers. Entries in the BCR contains columns for date of transaction, amount received, name of the buyer or client, receipts/invoice and other information about the sale transaction.
• BCD (Book of Cash Disbursement) – is a book where we manually record all expenses paid or outflows of made by the business. Entries in the BCD contains columns for date of transaction, amount paid, name of the seller or supplier, receipts/invoice and other information about the purchase transaction.
• BPI (BIR Printed Invoice) – are pre-printed official receipts and invoices issued by the Bureau of Internal Revenue (BIR). They can be obtained (optional) during the business registration process if the owner needs immediate access to invoices or has not yet selected a printer.
• Printer – is an accredited printing company or service provider that has been officially approved by the BIR in the Philippines to produce official business documents such as receipts, invoices, and other tax-related forms.
• COR (Certificate Of Registration) – is an official document issued by the BIR which serves as proof that a business, professional, or individual taxpayer is registered with the BIR and is authorized to conduct business within the Philippines.

Requirements:

Before you head to the BIR office, make sure you have all the necessary documents (better if you could also prepare photocopy of these documents). These typically include:

• Duly accomplished BIR Form 1901 or 1903. These forms can be downloaded from the BIR website. I recommended to download the form in advance so you can familiarize yourself with the information you will need to fill up. However, during your visit with BIR, the officer will give you an updated form in case your form is an older version.
• Valid Identification: Government-issued ID for the business owner or authorized representative.
• DTI Certificate or Business Name Registration: A certificate of business name registration from the DTI or SEC.
• Barangay Clearance: Proof that your business complies with local regulations. (Requirement by Mayor’s Permit)
• Mayor’s Permit: A permit from your local city or municipal hall. (While not mandatory during business registration, obtaining this may become necessary if you decide to close your business and need to return to the BIR.)
• Lease Contract: If you’re renting your business premises.
• Proof of Address: Utility bills or similar documents.
• Photocopy of ID with Signature: 2 IDs with 2 copies each
• Fees (P2,230.00): This fee will vary depending on the number/types of Journal/Cash books you are availing as well as the number of invoice/receipt books you are availing from BIR or your preferred printer.
  • Documentary Stamp – P30.00
  • Receipts/Invoice – P2,000.00 (10 Books of Sales Invoice & 10 Books of Service Invoice)
  • Cash Receipt Book – P100.00
  • Cash Disbursement Book – P100.00
• Ballpen – this is very important to fill up your forms

Now let’s start discussing the step by step procedure I took to register my business:

Steps to Registering Your Business with the BIR

Step 1: Visit the BIR Office

Go to the nearest BIR RDO that has jurisdiction over your business location. The office typically opens around 8:00 AM, so it’s advisable to arrive by 7:00 AM to avoid long queues, as the BIR is one of the busiest government agencies. Once inside the BIR, look for the help desk for assistance and assessment of your requirements. Submit your completed forms and the required documents. The BIR officer will review your application and provide you with an Application For Registration Form (BIR Form 1901) once everything is in order.

Step 2: Fill Out the BIR Forms

Once the helpdesk officer provides you with the correct form (Form 1901 or Form 1903), begin filling out the required information. The officer will typically indicate which sections you will need to complete. By the way, if you’re a new business owner, you will be issued a TIN by the BIR, you just have to inform the officer. If you already have a TIN, ensure it is updated to reflect your new business activity.

Regarding the section of the form that inquires whether you will choose the 8% income tax rate option, here‘s a clear comparison of the different tax rates in the Philippines. If you decide not to opt for the 8% rate, you will automatically be subject to the 3% graduated tax rate. Anyway, the NBRO officer will interview you about your current employment status and business details to determine your eligibility for the 8% rate.

Step 3: Proceed to NBRO

After completing your Application for Registration form, return to the helpdesk officer for assessment. If everything is in order, you will be directed to the NBRO section. There, an officer will further review your application and conduct an interview regarding your business details and current employment status. This information is crucial for updating your tax registration and identification. Be prepared to provide details about the nature of your business, such as the products you sell or services you offer, and whether you are currently employed or have employees. This will help determine your appropriate tax classification and the things you need to consider and apply.

Step 4: Pay the Registration Fee

Under Republic Act (RA) No. 11976, also known as the Ease of Paying Taxes (EOPT) Act, which seeks to streamline the Philippine tax compliance system, business taxpayers will NO longer be required to pay the annual BIR registration fee of ₱500.00 starting January 2024. With this, you are only required to pay the Documentary Stamp worth P30.00.

Step 5: Register Books of Accounts

With the nature of your business being known to the NBRO, he will recommend the books you need to have and get registered to the BIR. As a Mix Income Earner, I was told to avail 2 columnar books: one as BCR and the other one for BCD. With these, I have to pay a total of P200.00 to the officer and fill up the Form 1905 to register those books to the Books of Accounts section. These books must be stamped by the BIR to confirm registration. The books that will be required to you depends on your business and tax information so you need to be transparent with the officer about them. They might require other books like journals, ledgers and other financial documents used for recording of you business transactions.

Step 6: Obtain Authority to Print Receipts

When I filled out my Form 1901, I opted to use the BPI (BIR printed invoices). Unfortunately, they were out of stock, so they recommended a printer to me. The recommended printer requires a minimum order of 10 books of invoices. Since I need to issue both sales invoices for my online shop and service invoices for my programming service, I had to purchase 10 books of each, costing me a total of PHP 2,000. However, if you have a preferred printer in mind, you’ll need to prepare their details and fill them out in the BIR form 1901. This information includes the printer’s name, accreditation number, date of accreditation, registered address, contact number, and email address. If you want to find an accredited printer near you, here is a list of all the printers.

Now that you have your preferred printer, all you need to do is to apply for ATP (Authority to Print) by filling up the Form 1906 and submit it to ATP section of BIR. This ATP is the document you can present to your printer so they can start printing your receipts or invoices.

Step 7: Releasing of Documents

And Voila! With your registration complete, you are now just waiting for the release of you COR (Certificate of Registration) and your registered columnar books at the releasing section.

Step 8: Attend BIR Seminar

Included with the documents I received during my BIR business registration was a small leaflet that, according to the attending BIR officer, is a schedule of the on-site seminars conducted by the BIR itself. He explained that attending this seminar is essential for becoming fully aware of the BIR tax compliance requirements. The seminar covers topics such as issuing invoices to customers, filing taxes, and other BIR-related transactions pertinent to my business. For small business owners who are just starting, this seminar is an excellent opportunity to grasp the basic and fundamental knowledge needed to comply with BIR regulations. There is also a Question and Answer session where you can clarify any doubts you might have.

Step 9: Get Your Receipts or Invoice

If you choose to use the BIR Printed Invoice, you can obtain your invoices immediately from BIR and start issuing them to customers right away, which is a significant advantage. Additionally, availing BPI does not require you to get ATP and most of all it is cheaper than getting your invoice printed by other accredited printers. However, the design of the BIR Printed Invoice is very simple and generic and cannot be customized to include your business logo or any other design elements. On the other hand, if you opt to use your own printer, you will need to secure an Authority to Print (ATP) first. You must present the ATP to your printer so they can begin printing your invoices. The benefit of using your own printer is that you can customize the invoice design to fit your business needs. The downside is that printing typically takes about a month due to the volume of invoices they are printing, meaning you won’t be able to issue any invoices for your business during this time.

Step 10: Start Issuing Receipts and Paying Taxes

Now that you business is officially registered, you are now required to issue official receipts or invoices for all transactions and pay the appropriate taxes. Be sure to comply with BIR regulations and deadlines to avoid penalties. Again don’t forget to attend the BIR seminars as they are only free.

Reminders:

1. It’s important to attend the free BIR seminar to gain a deeper understanding of your tax obligations. This seminar will provide valuable insights into tax compliance and how it pertains to your business. Additionally, joining Facebook groups or other social media communities focused on BIR compliance can be beneficial, as they offer a platform to share experiences and seek advice from fellow business owners. If your business grows beyond your capacity to manage its financial records and tax filings, consider hiring a professional accountant to ensure accurate bookkeeping and compliance with tax regulations. This step can alleviate stress and allow you to focus on other aspects of your business.
2. Maintain accurate records of all business transactions and tax payments. Regularly update your books and ensure they are available for inspection if required by the BIR.
3. Ensure you stay compliant with BIR regulations by filing regular tax returns and making timely payments. It’s also important to stay updated on any changes in tax laws or regulations that may affect your business.

Final Thought

Registering your business with the BIR is a crucial step in ensuring your enterprise operates smoothly and legally. By following these steps and staying compliant with tax requirements, you’ll set a strong foundation for your business’s success. Wishing you the best of luck in your business endeavors!

If you want to know more about the updated BIR Withholding Tax, you can visit their official site here.

See other related tax topics in the Philippines below:

How To Add Tax Information For Google AdSense(Philippines) In Singapore

Guide To Paying Your Real Property Tax In The Philippines

Understanding the Difference Between 8% Deduction, OSD and Itemized Deductions in Taxation

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About Author

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chrisllorente@howbutingtingworks.com

https://www.howbutingtingworks.com