Many of us Filipinos dream of setting up our own businesses. Whether it’s a side “racket,” a passion project or a small enterprise that we hope to grow in the future, many of us aspire for the independence, personal fulfillment, unlimited financial potential, and all the benefits that business ownership often brings.
However, many are also put off by the bureaucratic and legal hurdles of registering a new business entity. Let’s face it, starting a business in the Philippines is no walk in the park. It often requires countless hours spent filling out paperwork and having to deal with a few unhelpful employees in some cases. But, while the process can be tedious and sometimes complex, it’s not impossible, especially with a lot of patience.
If you’re a budding entrepreneur doing prep work for tax purposes, here are the steps involved in the process.
1. Business Name: Reserve your company name with the Securities and Exchange Commission (SEC). The business name you’ll be using must first undergo an electronic verification process through SEC’s online verification system.
Once the reserved name is approved, you must pay a Php40.00 reservation fee, which is good for 30 days. The name can be reserved for a maximum of 90 days for Php120.00, and is renewable after expiration as well.
2. Paid-in minimum capital deposit: A Php5,000.00 amount must be deposited in the corporation’s treasurer-in-trust account, as required by law.
3. Articles of Incorporation and Treasurer’s Affidavit: Have the articles of incorporation and treasurer’s affidavit notarized. According to applicable laws, notarization is required for the articles of incorporation and treasurer’s affidavit. This is necessary before filing with the SEC. Notarial services typically cost about Php500.00
4. SEC Registration: Business registration in the Philippines require the following documents for SEC registration:
- Company name verification slip
- Notarized Articles of incorporation and by-laws
- Notarized Treasurer’s affidavit
- Statement of assets and liabilities
- Registration data sheet with particulars on directors, officers, stockholders, etc.
- Notarized document of written undertaking to comply with SEC reporting requirements
- Notarized document of written undertaking to change corporate name
The cost will be a percentage of the subscription price, plus the research fee and other applicable charges. Upon registration, you will obtain the pre-registered Tax Identification Number (TIN). But, you should need to file a separate registration to the Bureau of Internal Revenue (BIR) for the following: identifying the proper tax type, paying an annual fee, obtaining and stamping of sales invoices, receipts, and books of accounts.
5. Barangay Clearance: You need to obtain a barangay clearance based on your business location. Corresponding fees would vary depending on the municipality, but they typically range between Php300 to Php1,000. Only the barangay captain is authorized to sign.
6. Obtain Community Tax Certificate (CTC) : The CTC can be obtained from the City Treasurer’s Office (CTO), and a basic and additional community tax is paid. The amount paid for the basic community tax depends on the legal form of the company and shouldn’t exceed Php500 while the additional community tax depends on the assessed value of the real property the company owns.
7. Obtain Business Permit: You can get the business permit to operate in the Philippines from the Business Permits and Licensing Office (BPLO). The fee will depend on the Local Government Unit (LGU) issuing the business permit.
Other permits might also be required depending on the type of business you will operate, which include fire and safety inspection certificate, sanitary permit, certificate of electrical inspection, etc. The business permit can only be obtained after getting your barangay clearance.
8. Obtain Books of Accounts: Books of accounts can easily be bought at bookstores, and most typically include four specialized books: cash receipts account, disbursement account, ledger, and general journal.
If you’ll be using a computerized accounting program, this needs to be registered with the BIR and evaluated by the BIR Computerized System Evaluation Team.
9. Certificate of Registration (COR) and TIN from BIR : A Php500 annual registration fee must be paid once a TIN is obtained. This can be deposited at an accredited bank using BIR form 0605.
The requirements needed when applying for the COR include but are not limited to the following: BIR form 1903, BIR form 0605, SEC Certificate of Incorporation, Articles of Incorporation, Contract of Lease, Doc Stamp, and Mayor’s permit.
10. Registration Fee and Doc Stamp taxes (DST) : This will be processed at the BIR, where the DST return shall be filed. Taxes are paid on or before the fifth day after the close of the month of approval of SEC registration.
11. Authority to Print Receipts and Invoices: Get the authority to print receipts and invoices from the BIR, and must be secured before printing sales receipts and invoices.
The following documents must be submitted to the Revenue District Office (RDO): Fully accomplished BIR form no. 1906 and accompanying requirements; job order, sample of receipts and invoices; duly accomplished BIR form no. 1903 and BIR form no. 0605.
12. Print out of receipts and invoices, and stamping with BIR: This is done at the print shop, where the minimum print volume is 25 booklets. This might set you back about Php3,500, which is based on the specs of an OR: 1/2 paper in duplicate, black ink, carbonless.
After printing, the printer issues a Printer’s Certificate of Deliver of Receipts and Invoices (PCD). This needs to be submitted to the appropriate BIR RDO for registration and stamping within 30 days.
The following documents must also be included: all required books of accounts, VAT registration certificate, SEC registration, BIR Form W-5, Certified photocopy of the ATP, notarized taxpayer’s sworn statement of responsibilities
13. Other Government Agencies: The government agencies include the Social Security System (SSS), Philippine Health Insurance Company (PhilHealth), and Home Development Mutual Fund (PAG-IBIG Fund). Registration takes place in each respective government agencies. Each has their own requirements and documentations needed to complete the process. The process is free of charge.
14. Additional Steps Moving Forward: After undergoing the initial steps to register a business, business permit and registration renewal and trademark/copyright registration must also be accomplished on a regular basis.
Business permits in the Philippines are valid for only a year and must be renewed within the first 20 days of the following year. A renewed Barangay permit or Barangay clearance is a prerequisite to obtaining a new mayor’s permit from city hall, where you have to bring the original copy of the previous year’s Barangay permit along with the official receipt to have this processed. It shouldn’t take more than a day to complete this.
As for renewing the mayor’s permit, you need to submit the needed documentation and wait for about one to two weeks before you can obtain it.
Finally, renewal of business registration can be done once you’ve obtained the renewed business permit and mayor’s permit.
Business registration is accomplished on an annual basis, and must be done not later than January 31 to avoid penalty fines that range between Php5,000 to Php20,000. You will need to submit a duly accomplished BIR form 0605 to renew your business registration.
Many start-up owners possess a DIY mentality of wanting to do everything themselves, including tax preparation work. While this might be feasible in the beginning stages, it might not be a sustainable practice in the long run.
Once the business picks up and other details demand your attention, insisting on doing all the legwork could take up too much of your time, often at the expense of neglecting other equally pressing business matters.
This is when hiring an accounting firm becomes a great investment. Let the experts take on the reigns of all your tax-related concerns. Having a competent group of professionals to do the all the tax-related tasks for you will give you the energy and time to focus on what you do best—making important decisions that will benefit your business, as well as improve the bottom line.
Danella Yaptinchay is the managing director of Full Suite, a service company providing back end support to small businesses. She is a cofounder of Co.lab, a coworking space, and of the media company Homegrown.ph. In constant pursuit of balance and self-development, she tries to apply the practices of yoga to her daily life.