After soul searching, listing down pros and cons you have decided and took action to register your business with the Department of Trade and Industry (DTI) – if you are a sole proprietor, or with the Securities and Exchange Commission (SEC) if you established a partnership/corporation, then after registered it the Bureau of Internal Revenues (BIR) and with the City Hall having jurisdiction over your business.
So you happily look at your permits thinking that you are now a responsible entrepreneur. Good for you!
However, soon after you are now informed that you have to be tax compliant. But does what does being tax compliant mean?
Let us help you in figuring out how to be tax compliant so that you could avoid paying hefty penalties thru this blog series.
BIR Compliance
This unfortunately, is one of the biggest source of penalties hurting the pockets of many entrepreneurs especially the start ups. Most of the time the reason for this, is they are not informed that there are obligations after registration from the simplest up to the more complex filings.
Here is a quick list to give you an overview what are the things that needs to be done to avoid those BIR penalties:
- Posting of BIR Documents.
- Submission and Payment (if applicable) of Tax Returns
- Submission of Required Attachments
- Issuing of BIR accredited Receipts / Invoices
- Keeping of Books of Accounts
Let us discuss them one by one.
Posting of BIR Documents
Once you have registered your business you will need to conspicuously display these documents -all in originals (Ito yung madalas na naka frame sa mga business establishments):
- Certificate of Registration (BIR Form 2303)
Persons whose business and/or profession has been registered with the BIR will be issued a BIR Form 2303 or commonly called a Certificate of Registration -COR (which can be it orange or blue in color) . This is a proof that your business/profession is registered with the BIR (so kapag may humingi ng proof of registration mo with BIR eto yung papakita nyo tulad ng banks, clients/customers, suppliers, etc.)
2. Payment form BIR Form 0605 and Proof of Payment of Annual Registration Fee
This is the form (BIR Form 0605) you use to pay the Annual Registration Fee with the BIR which is Php 500.00. Reminder, this will be filed and paid on or before January 31 of every year. This should be posted together with the proof of payment. So every year you have to take out the old payment form and replace with the new.
3. Notice to the Public to Issue Receipt/Invoice
So you might of have heard or seen the ASK FOR RECEIPT cardboard usually displayed in establishment. Well by virtue of Revenue Regulation (RR) 10 -2019, it had a make over instead of obligating the buyers to Ask For Receipt it is now a NOTICE TO THE PUBLIC” that it is the OBLIGATION of every seller to issue out a BIR Accredited Receipt for every transaction whose amount is Php 100 and above(as per TRAIN LAW).
How will the BIR check your compliance?
Every now and then the BIR officers steps out of their offices and into the field armed with Mission Orders given by their respective Regional Director(RD) and conducts Tax Compliance Verification Drives aka Tax Mapping by virtue of Revenue Memorandum Order (RMO) 9-2006 as amended.
In this activity the BIR officers shall check the compliance of each establishment within their respective jurisdiction. This includes checking if the establishment is registered with the BIR and will also check its compliance one of which is posting the above mentioned BIR documents.
What will be the consequence/s for failure to display these documents?
First, the requirement is to conspicuously DISPLAY… by definition conspicuous means OBVIOUS to the eye (according to https://www.merriam-webster.com). This has to be given emphasis since most (if not all) BIR officers will not consider just mere presentation of these documents . There are too many times that the BIR did not consider just showing the documents which were kept in a drawer or clear book or was displayed however not in a conspicuous manner.
Also be reminded that what needs to be displayed is the ORIGINAL of all the above mentioned documents.
Now let us go to the consequence. Annex A of RMO 7-2015 has provided the list of penalties for each non compliance which is shown below:
Three thousand may not sound much to someone six digits , but it is pretty hefty price to pay if you are just starting up.
Filing and Payment of Tax Returns
So registration is just one part, filing and payment of taxes is another thing.
Once you are registered with the BIR you are now mandated to file and pay (if applicable) corresponding taxes which are reflected in your Certificate of Registration (COR) or any other transaction that has a corresponding tax.
Failure to file and pay can mean, but of course penalties which may include:
- 25% /50% surcharge on Basic Tax Due
- Interest on late Payments (today @ 12% p.a.)
- Compromise Penalties as per RMO 7-2015
For guidance on how to file and pay your taxes you can read our previous article : Taxes, How Do I File (and Pay) Thee? -RMC 4-2021
These are the two basic obligations that every BIR registered business needs to know and comply. Watch out for Part 2 of this blog for the rest of the compliance requirements.
Wania and Partners, CPA provides tax compliance services where we assist business owners in their tax filing and other compliance requirements. Contact us to know more.
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