Registration with the Bureau of Internal Revenue (BIR) may not be a concern for enterprises that have been in business for a long time. However, for those who are just starting out or those who have operated their businesses informally and held back registration for quite some time, it’s certainly a task they should do as soon as possible.
BIR registration is one of the most important prerequisites to doing business in the Philippines. After all, you cannot operate without a tax identification number or TIN, which you can only get through registration. This nine-digit number is assigned by the bureau to every individual and corporate taxpayer in the country, one that they can use to identify and track registrants, as well as to keep records of them.
Working under the Department of Finance, the BIR defines its duties and mandate as follows: “assessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.”
Currently, more than half of the Philippine government’s revenues originate from the BIR’s collections. This responsibility of collecting taxes through the just enforcement of tax laws is ultimately carried out by the bureau for the noble purpose of nation-building and elevating the lives of Filipinos.
In order to ensure tax compliance and to be allowed to start business operations in the first place, businesses need to be registered with the BIR. It’s something all entrepreneurs and investors who are planning to set up a company in the Philippines must accomplish. It doesn’t matter if you intend to set up a business where you’re the sole proprietor or you’re looking at operating a partnership (professional, general, or limited) or a corporation (stock or non-stock) with other people—you have to register your business with the BIR if you desire to do business legally.
One might still need to be convinced to register with the BIR and it may help to know what benefits a business can gain from BIR registration? Here’s a list of the most important ones.
Running a business is already challenging enough as it is without the BIR nipping at your heels to add to the list of things that you need to worry about. You can certainly try to be a tax evader, but that doesn’t mean you won’t be facing consequences for making such a disreputable choice. In fact, operating an unregistered business is an offense that carries financial penalties and a prison sentence.
To be exact, the BIR notes that the penalty will be “fine of not less than PHP 5,000 but not more than PHP 20,000, and imprisonment of not less than 6 months but not more than 2 years.” The actual fine will depend on where your business has been operating, namely PHP 20,000 if your business is in the city, PHP 10,000 if in a 1st class municipality, PHP 5,000 if in a 2nd class municipality, and PHP 2,000 if in a 3rd class municipality.
While you might think that filing for a BIR Certificate of Registration is a waste of time and effort, doing it as early as possible can actually take a load off your shoulders in the long run.
Being BIR registered is also important if you want to take advantage of any number of business-critical financial services. For instance, you’ll certainly need your BIR Certificate of Registration (Form 2303) and tax identification number if you want to open a corporate bank account for your business. You’ll also need to be BIR registered if you intend to take out a bank loan or if you want to file applications for other types of financing. First Circle, for example, will only be able to underwrite your business for invoice financing and purchase order financing if it is registered with government agencies like the BIR.
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Customers are likely to see your business as a more reputable and trustworthy enterprise if it is registered with government agencies like the BIR. This is true whether you’re operating a business-to-business (B2B) enterprise or a business-to-consumer (B2C) enterprise, but more so if you’re serving other businesses. After all, other enterprises are likely only going to be willing to enter into transactions that involve huge sums of money if you can offer official receipts, which, in turn, you can only acquire if you’re already registered with the BIR.
Since customers will be more inclined to transact with your business if it is BIR-registered and if they see it as a legitimate enterprise that can provide official documents, then it stands to reason that you can also leverage your status in order to land more contracts and more lucrative projects. You’ll even be able to explore other opportunities in sectors or markets that you haven’t tapped previously. For instance, you can submit bids for government contracts, or you can also consider exporting your products to clients based overseas.
Because you won’t be hiding under a veil of secrecy for fear of being discovered and charged by the government for operating an unlicensed business, you’ll certainly have more confidence marketing your business. This can give you a tremendous advantage in terms of increasing the visibility and reach of your company.
The taxes that businesses like yours pay the government are essential in the maintenance of the whole gamut of government services offered in the country. They are used to fund schools, hospitals, museums, libraries, government offices, uniformed services, and many others.
Notwithstanding the current state of governance in the Philippines, taxes remain as the primary source of indispensable capital for these services.
The BIR registration process can be time-consuming, but it’s pretty straightforward, especially if you’re registering as a sole proprietor. However, you do have to make sure that you have the necessary documentary requirements on hand to avoid delays in your application. After submission it usually take 3-5 working days to claim your registration certificate.
The registration mainly takes place at the BIR Revenue District Office (RDO) that has jurisdiction over the address where your business will be operating from. In this office, you need to submit a duly accomplished BIR Form 1901 or Form 1903, depending on the type of business you are registering. Form 1901 is the application form for sole proprietors, while Form 1903 is the one for partnerships and corporations.
On top of the application forms, you also need to submit a number of supporting documents. For sole proprietors, these include the DTI Certification, Mayor’s Permit or Application for Mayor’s Permit (if still pending), Contract of Lease or Certificate of Occupancy (if you’re renting office space), and Land Title/Tax Declaration (if you own the property where your business will have its office). You will also be asked to submit mostly the same documents if your company is a partnership or a corporation, but instead of DTI Certification, you will have to present your Securities and Exchange Commission (SEC) Certificate of Registration and your Articles of Incorporation or Articles of Partnership.
There are other documents that you need to submit besides those mentioned above. These include the Franchise Agreement if you’re setting up a franchise business, a Certificate of Authority if you are registered as a Barangay Micro Business Enterprise (BMBE), and Proof of Registration or Permit to Operate from other government agencies like the Board of Investment (BOI), Philippine Export Zone Authority (PEZA), Bases Conversion Development Authority (BCDA), and Subic Bay Metropolitan Authority (SBMA). It’s best to practice to keep abreast of the required primary documents by visiting the BIR website or by calling the BIR office at 8981-7000 or 8929-7676.
After submitting the required documents, you’re going to be asked to pay the Annual Registration Fee, Certification Fee, and Documentary Stamp Tax (DST) on Subscription and Lease. Note that for some of these, you may be asked to complete the payment at an Authorized Agent Bank (ABB) that works with your RDO. Afterwards, you’ll have to await notice from the BIR that your Certificate of Registration (Form 2303) is finally ready. After you receive this certificate, you will then be required to complete the Application for Authority to Print Receipts and Invoices using Form 1906, to register your books of account, and finally, to attend the taxpayer's initial briefing.
Registering your company with the BIR is a necessary step to take if you want to formalize and legalize your business operations. Doing so also allows you to take advantage of a number of important benefits. Not only will you be conducting your business in full compliance with the law, you’ll also be contributing to the BIR’s goal of building the financial foundations of the country.
You may also want to read about how to register your business with the SEC here.
Need business financing today? Apply for one with First Circle by clicking here.
