All businesses in the Philippines need valid and up to date permits to renew their registrations annually.
This article will guide you on what you need to know to complete the requirements of various government agencies, and to avoid corresponding penalties.
The following documents are required for annual renewal:
Deadline: January 20
This is essential as it serves as a verification of your business compliance with the requirements set forth by the local government unit (LGU). It is also a requirement when securing the Mayor’s Permit.
Deadline: January 20
This certifies that your company complies with the ordinances of the city or municipality it operates in. Take note that each city or municipality has its own rules to comply with.
Deadline: January 31
The BIR issues a Certificate of Registration (COR) to a company upon its establishment. This certificate will give your business the continuous right to print official receipts, register books of accounts, pay business-related taxes and give Tax Identification Number to employees.
Note that these dates apply to all businesses regardless of their date of establishment.
LGUs can collect Local Business Tax (LBT), fees for the mayor’s permit, and other fees and charges.
Section 143 of the LGC provides that the LBT is imposed on the gross sales or receipts of an establishment depending on the nature of its business. As the basis for computing LBT, business establishments must submit a declaration or certification of gross sales or receipts for the previous year, the most recent Income Tax Return (ITR), and the Financial Statements for LGUs to validate the certification.
The deadline for the renewal of registration and payment of LBT in all cities and municipalities is on the 20th of January each year.
Late payment of LBT is automatically penalized with a 25% surcharge on the base taxes, fees or charges, while an additional 2% monthly interest will be charged on the basic amount and the 25% surcharge.
On the other hand, the BIR collects an Annual Registration Fee (ARF) of PHP 500.00 for every separate place of business, on or before the 31st of January each year. A compromise penalty of PHP 1,000.00 plus a 25% surcharge and 12% annual interest will be imposed in case of delay or failure to pay.
These penalties are imposed by the Local Government Code of 1991.
All corporations, companies, partnerships or persons required by law to pay internal revenue taxes shall keep a journal and a ledger or their equivalents such as subsidiary ledgers, simplified books of accounts.
Three formats for books of account:
Often referred to as journals or ledgers, this book of account is written by hand, and pre-printed formats.
Must be registered before the deadline for filing of the first quarterly income tax return or the annual income tax return whichever comes earlier (Revenue Memorandum Circular 29-2019).
Taxpayers may use computerized accounting system (CAS) for faster and accurate recording of transactions. Once you obtain a permit to use a CAS, you will be required to submit your accounting records to the BIR in soft copy through CD-R, DVD-R, or other optical media, annually, within thirty (30) days from the close of the taxable year.
Taxpayers who use computerized versions should also file an application for PTU (Permit to Use). Venues for filing PTUs for CAS are currently transferred to the National Accreditation Board (NAB).
Taxpayers shall maintain encoded details of the accounting records in the computer and shall generate copies in print using the duly approved format of the BIR. These loose-leaf forms must be bound as accounting records and submitted to the BIR on or before fifteen (15) days after the end of the taxable year or within fifteen (15) days from the closure of business operations, whichever comes earlier.
In accordance with Revenue Memorandum Order (RMO) No. 7-15, a compromise penalty not exceeding fifty thousand pesos (Php 50,000.00) will be imposed in case of failure to keep books of account or records, depending on the level of gross sales, earnings, or receipts.
On the other hand, failure to timely submit the books of account for both CAS and loose-leaf books of accounts will have a maximum penalty of twenty-five thousand pesos (Php 25,000.00).
Under Revenue Memorandum Circular No. 73-2019, there are three annual information returns which taxpayers are required to file:
In the Philippines, employers are required to compute, deduct and withhold part of the value of an employee’s compensation before it is paid to employees.
Employers are required to file monthly withholding tax on compensation returns to the BIR through the completion of BIR Form 1601-C and then remit the relevant tax payments to the BIR. BIR Form 1601-C should include the compensation tax withheld from all employees during the previous month.
At the end of each year, employers are required to submit an annual report to the BIR which summarizes the total amount of income tax withheld on compensation from employees during the previous year. The method of filing this annual return is via BIR Form 1604-C.
This form needs to be filed by every Withholding Agent/payor required to deduct and withhold taxes on income payments subject to Final Withholding Tax.
This form must be filed on or before the 31st of January of the year following the calendar year in which the final withholding taxes were accrued or paid.
This form shall be filed by a withholding agent who is required to withhold taxes on income payments which are subject to Expanded Withholding Taxes.
Every year, individuals and enterprises in the Philippines pay their taxes on or before April 15. You can either file manually or electronically.
BIR Form No. 1700 (Annual Income Tax Return)
BIR Form No. 1701A (Annual Income Tax Return)
BIR Form No. 1701 (Annual Income Tax Return)
BIR Form No. 1701Q (Quarterly Income Tax Return)
BIR Form No. 1702-EX (Annual Income Tax Return)
BIR Form No. 1702Q (Quarterly Income Tax Return)
BIR Form No. 1702-RT (Annual Income Tax Return)
BIR Form No. 1702-MX (Annual Income Tax Return)
The deadline for the filing and payment of the annual ITR is the 15th day of the fourth month following the end of the taxable year. Failure to file and pay the corresponding tax due exposes the taxpayer to a 25% surcharge on the tax due, while 12% interest per annum will be imposed from the deadline of the payment until the time of full payment, plus a compromise penalty.
Under Rule 68 of the Revised Securities Regulation Code (SRC), the submission of financial statements shall be required for all corporations and organizations registered with the Commission as of the fiscal year end including those newly incorporated during the said year. Corporations and organizations with a fiscal year end of 31 December must submit their annual financial statements in accordance with the annual schedule of filing of financial statements. For those with a fiscal year end other than 31 December, their annual financial statements shall be due within one hundred twenty (120) days after the end of their fiscal year.
Submission of these documents ensures that Philippine businesses provide a clear and accurate picture of the company’s financial and compliance activities to two of the primary regulators of businesses in the Philippines.
The BIR and SEC requires that these have been independently certified, or audited, by an independent party. Once the company has prepared their yearly Financial Statements, before submitting to the BIR, and then to the SEC, the Financial Statement must be audited, certified and signed by an independent Auditor. Please note that there is an exception to this if the assets or liabilities of the company is no more than PHP 600,000.00, then the financial statements shall only be certified under oath by the company’s treasurer (Section 177 of the revised Corporation Code).
Once the Financial Statement has been audited, it can be referred to as an Audited Financial Statement (AFS) and submitted to various governmental agencies.
The deadline for filing the AFS with the BIR will depend on the registered financial year of the company. In the Philippines, the Annual Income Tax Return (AITR) must be filed by the 15th day of the fourth month after the company’s financial year-end date. This will be the trigger for the filing of the Audited Financial Statement.
The filing with the SEC comes after the filing with the BIR. Generally, companies are required to file their AFS with the SEC in accordance with deadlines based on the last numerical digit of a company’s SEC registration numbers or license numbers. Then, the SEC will usually release a memorandum in December or January confirming the specific filing deadlines for each category of SEC registration/license numbers.
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