The holidays are over, people are staggering back to work and the business owner now faces January. It’s the start of the year and that means permits need to be renewed and quickly, before the lines at City Hall get longer and longer.
Here are the usual permits that need to be renewed every year for a business in the Philippines.
1. Registration Fee with the Bureau of Internal Revenue (BIR) – Every year a business has to pay PHP500 to the BIR in order to renew its registration.
This is a silly requirement and an example of the government charging a fee simply because it can.
Are individual taxpayers required to pay this fee? No.
Moreover, it puts a further burden on inexperienced tax payers who do not know about this fee and then when they need to transact with BIR later on in the year, they’ll be told they first need to pay the registration fee plus a penalty for being late.
Lastly you need to keep the BIR return (your proof of payment) for an entire year. This is yet another piece of paper that is easy to lose and yet if you lose it the BIR can’t just simply look up in its records and see if you’ve paid the registration fee or not. (I know, one year I paid the fee twice since I couldn’t my return from the first payment and BIR insisted that being the case, I need to pay again.)
The annual fee with the BIR is a fine example of how the Philippines likes making a lot of niggling rules which add to the burden of record keeping and compliance which businesses, especially small business owners, need to deal with.
2. Business Permit from your local Barangay – You’ll need this before getting your mayor’s permit. Usually this is easy to get.
Note also that some barangays will outright refuse to issue you a business permit. In the village I was living in before I wanted to incorporate an internet business. Everything would have be done online, no actual business would have occurred in the village.
My barangay refused the permit on the grounds that I couldn’t run a business from my home.
So much for registering that business and making it legitimate.
3. Business permit from City Hall – The difficulty and aggravation of getting a permit really depend on which city you live in.
Many city assessors like to question unimportant facts about the permit such as how many employees do you have. I truthfully put in my application that the business had 5 employees. When it got to the assessor he questioned the number and reasoned that a business of my size should only have 2-3 employees.
I’m not sure what business acumen the assessor drew upon that he magically reduced the number of employees I needed by 50%.
More importantly, so what if my business has 3 employees or 5 or 100? It makes no difference to the amount which you will be assessed.
Dealing with government offices (both on the local and national levels) in the Philippines can be frustrating in large part because we tend to get hung up on details which do not matter.
The decisions of city assessors regarding a business can be dumbfounding. To illustrate, when I first registered the Makati apartments as Alcoves I wanted to register in Manila as I already had an office there. I wouldn’t need to shell out the rent for a new office elsewhere.
Manila and Makati are two different cities. Manila and Makati are geographically right beside each other. So my business address/office would be in Manila and the apartments I would be renting out would be in Makati.
Manila refused my business permit application on the ground that my business was not based in Manila.
From a legal point of view this is incorrect as the situs of my business would have been in Manila. This is where the office in which I would accept all bookings and reservations would have been. All transactions would have occurred via the internet, from Manila.
From a practical point of view Manila’s denial of my application caused the following negative effects:
a. Manila lost out on the fees and taxes my business would have paid
b. I lost money because, instead of using an already existing office I had in Manila, I had to put up an office in Makati. The monthly rental I’m paying for this office which I do no need is PHP11,000; money which instead of going to my landlord could be going to an employee who actually works for me and earns a salary.
4. General Information Sheet (GIS) with the Securities and Exchange Commission (SEC) – This is only for corporations.
Along with the regular annual business housekeeping, don’t forget to file your GIS with the SEC.
The actual date of the filing depends on the date of the annual shareholders meeting indicated in the corporation’s by-laws but most corporations have that around the end of January.