What You Need to Know about Business Permits in the Philippines

Philippines Business RegistrationEvery business whether a corporation or partnership registered with the SEC or a sole proprietorship registered with the DTI is under the obligation to immediately obtain business permits in the municipalities where they operate.
Corporations whether PEZA registered or not operating without the necessary business permits will incur fines, penalties or closure from the BIR or City Hall.

Registration is required for every separate or distinct establishment or place of business including facility types where sales transactions occur and warehouse where inventory of goods for sale are kept, and must be obtained before commencement of business and payment of any tax due.

BIR FINES

Failure to Register

– Fine of not less than P5,000 but not more than P20,000 and imprisonment of not less than 6 months but not more than 2 years.

Compromise Fees

a. Cities 20,000
b. 1st class municipalities 10,000
c. 2nd class municipalities 5,000
d. 3rd class municipalities 2,000

Official Receipts

Failure to issue receipts/invoices 1st violation 10,000 – 2nd violation 20,000
Refusal to issue receipts/invoices 1st violation 25,000 – 2nd violation 50,000

The above are just a few of the penalties that the BIR may impose.

Mayor’s Permit

None registration with City Hall has its own penalties;

Makati City Penalty example:
SEC. 3A.11. Penalty – Any violation of the provisions of this Article shall be punished by a fine of not less than One Thousands Pesos (P 1,000.00) nor more than Five Thousands Pesos (P 5,000.00), or imprisonment of not less than one (1) month not more than five (5) months, or both, at the discretion of the Court.

The above does not includes a surcharge of 25% for late payments and a 2% monthly interest on the unpaid taxes, fees or charges including surcharges.

The documentation required varies according to the municipality, below are listed :

– Barangay Clearance/Permit for the new year
– Previous Year’s Business Permit
– Financial Statement/ Income Tax Return for the preceding year
– Latest Community Tax Certificate
– Contract of Lease/ Lessor’s Permit
– Comprehensive General Liability Insurance
– List of Company Employees with Medical Certificates

Documentary requirements may vary from year to year, we recommend that you check for changes before filing your business permit renewal with City Hall.

Annual Mayor’s Permit Fees (business tax) vary according to the nature of the company’s business, the company’s preceding years gross sales are used to calculate the amount of tax due which can be less than 1% to 3% or more, regardless of when the business started to operate .

In the case of a newly-started business the initial tax for the year shall be calculated on the capital investment or paid up capital, contract of lease and size of office.

All business permits should be prominently displayed in every location where business is transacted.

Starting a Philippine Business as a Foreigner

Philippines Business Registration
Philippines Business Registration

It doesn’t not matter whether you’re a foreigner or a Filipino, it really is difficult to start a business in the Philippines.

Tips for foreigners who want to register a company in the Philippines

Do your homework! There are many restrictions on foreign equity ownership of businesses in the Philippines. The percentage of foreign ownership will also dictate the allowed number of foreign directors and officers of the company.

There are exceptions; up to forty percent Foreign ownership of educational institutions is allowed as stated in the 1987 Constitution and in the Foreign Invest Negative List; but Presidential Decree No. 176 issued in 1973 disallows any foreigner from being a director or officer of an educational institution.

The Philippines Foreign Investment List (which is revised every few years) states the restrictions on foreign ownership but does not provide any information on other restrictions which may apply to your business, such as the number of allowed foreign directors, officers, residency obligations, secondary licenses or the minimum paid-in capital requirements for certain industries.

Obtaining the necessary and correct information to register and run a business in the Philippines is a difficult task and entails inquiring with multiple government agencies with some giving outdated facts.

Anti Dummy Law

To avoid foreign ownership regulations many people try to find schemes to circumvent the Philippines Foreign Investment Act. All these schemes using nominee shareholders (anti-dummy law) or misstating the primary purpose of the business in the articles of incorporation are illegal.

Registering a Business on Your Own – Unless you’re a frequent visitor to Philippine government agencies, there is no way to be sure that the forms you downloaded from their website are current and that application processes and fees haven’t changed. The multiple visits to the SEC and frustrations will make you regret not having hired a Philippine business consultant to guide you and process your documents.

Local Business Permits

Once a business has been licensed to transact business in the Philippines by the SEC, the company must still register with the local municipality where its principal office is located (Mayors’ Permit), BIR, SSS, HDMF and PhilHealth.
The new Unified Registration Record (URR) touted by the SEC as incorporation made easier and faster does not simplify registration with any government entity as a business will still need to go each and every government office to register and process application forms. Only the government will benefit from the URR as they will use it to insure compliance in filings and payments of fees and taxes.

All businesses registered in the Philippines must comply with BIR (Bureau of Internal Revenue) regulations and file monthly, quarterly and annual reports as well as an audited financial statement. Bookkeeping may only be computerized by submitting a special request with the BIR.

Payroll is quite complicated in the Philippines and it’s essential to have an extensive knowledge of taxation and labor laws to correctly compute it.

Starting a Philippine business, contact Dayanan now, to discover how we can remove the annoyances and exasperation of doing business in the Philippines.

Steps in Registering Your Corporation with the BIR

BIR RegistrationThe Bureau of Internal Revenue (BIR) is the Philippines’ primary taxation agency. It is authorized to assess and collect taxes from all income-generating entities in the country.

Before any business can commence operations, they are required to register with the BIR or be penalized in accordance with Philippine law.

Here are the steps to registering your corporation with the BIR:

1. Fill out the required application forms, specifically,

• BIR Form 1903, or the Application for Registration for Corporations/Partnerships;
• BIR Form 0605, i.e., the Payment Form, for tax type RF (i.e., registration fee); and
• BIR Form 2000, for documentary stamp tax.

2. Submit the required documents at the revenue district office (RDO) in charge of the area where your office is located. These documents include

• your filled-out BIR Form 1903;
• your SEC certificate;
• your business/mayor’s permit; and
• your contract of lease.

You may also be asked for a sketch of your head office location.

Note that in some RDOs, you will need to bring your original business permit plus a photocopy of the same, while in others, even just the official receipts (OR) of the payments you made for your business permit application will suffice.

You may also be asked for a sketch of your head office location.
Note that in some RDOs, you will need to bring your original business permit plus a photocopy of the same, while in others, even just the official receipts (OR) of the payments you made for your business permit application will suffice.

3. Pay the annual registration fee. This is a fixed cost of ₱500 every year.

You will also need to pay for documentary stamps; the BIR will advise you on the exact amount you will need to pay for that.

In some places, RDOs will accept these payments onsite; in others, you will be asked to make the payments at the nearest authorized agent bank (AAB).

Each RDO has a list of its own AABs – but not all AABs actually do accept BIR payments.

4. Attend the BIR seminar. Some days after you submit your application requirements, your Certificate of Registration (COR) will be ready for pickup. Before the RDO will release this certificate, you or your authorized representative will need to attend a 1–2 hour seminar about your tax duties, the different kinds of taxes you need to file and pay, and the various tax deadlines. CORs will be given out after the seminar.

5. Register your accounting system. With your COR on hand, you are practically done registering your business.

The next step is to register your accounting system using the BIR Form 1900 (Application for Authority to Use Computerized Accounting System or Components thereof/Loose-Leaf Books of Accounts).

Or if you will be using manual books of accounts fill out BIR Form 1905.

6. Get your receipts and invoices printed. This involves another application process, and it should be done promptly because you need to begin issuing ORs and sales invoices (SI) within 30 calendar days from the date of registration indicated in your COR.

To get BIR-authorized ORs and SIs, you need to apply for an Authority to Print receipts using the BIR Form 1906. Submit this to your RDO along with a clear sample of the receipts you intend to get printed.

ORs and SIs must be printed by BIR-authorized printers only. These receipts will be valid for a period  five years from the date of printing, after which any unused ones will need to be destroyed and you will need to obtain a new authority to print.

The BIR registration is the last step in legalizing your corporation’s business presence in the Philippines. Your next steps – registrations with the Department of Labor and Employment, etc. – will come when you are hiring your first employees.

 

Doing Business in the Philippines

Philippines Business Registration
Ayala Avenue Makati City Central Business District

Dayanan Business Consultancy assists individuals and foreign companies of all sizes in setting up their business operations in the Philippines. Doing business in the Philippines has many advantages as well as a large amount red tape.

Once we know your goals and the kind of business you want to launch in the Philippines,  DBC will recommend the best structure for your KPO, Call Center, IT or Web Development Outsourcing, Back Office Operation or Import and Export. DBC will advise you how to register your investment with PEZA or BOI to obtain tax incentives.

Get the Leading Business Process Outsourcing in the Philippines

We will also ensure that you will get the best Business Process Outsourcing in the Philippines. BPO is a cost-saving measure which is a method of subcontracting business-operations to a third party. One category of BPO is outsourcing of back office services, and Dayanan can help you starting from your business registration in the country.

DBC’s knowledge of the Philippine’s business environment and government agencies allows DBC’s clients to reach their objectives quickly. Personalized service is our commitment, whether your intention is to establish a:

Once the SEC has issued your License to Transact or Certificate of Incorporation, DBC will still be there to help get local business permits and licenses and register with other government agencies when necessary.

Other services DBC provides Business Development and Marketing, Business Plans, Visa Processing, Bookkeeping and Payroll.

Your Business Registration in the Philippines will be done quickly and professionally through Dayanan Business Consulting services.

Contact the DBC Team now for a free consultation.

Philippines Business Registration Back Office Operations Setup

The Philippines is a popular destination for Back Office Business Process Outsourcing (BPO). Back Offices are usually setup for data entry, accounting, bookkeeping, human resources, financial services, marketing, software development and anything that could be competently at a lower cost in the Philippines.

100% foreign ownership of back office operations is allowed in the Philippines. The business may be setup as a Branch Office or a Philippines Domestic Corporation. Both are required to register with the SEC before starting operations. Back office operations are considered an export business and therefore can be started with a lower paid-in capital than required by companies serving the domestic market.

The advantages of starting a back office in the Philippines
are to expand quickly with lower manpower costs. And with a highly educated, trainable, English speaking workforce that is available in most of the country.

Many large foreign banks such as Citibank and JP Morgan have sizable back office operations in the Philippines and employey thousands of qualified employees.

We will examine what you intend to operate and advise you on the best way to start your company in the Philippines. Certain BPO operations are eligible for tax incentives from either the Board of Investments or PEZA. DBC will help you in setting up your back office operations in the Philippines, guide you through the red tape and make sure you obtain all the business permits you need to operate legally.

Contact DBC now for a free assessment of your outsourcing operations in the Philippines.

Philippines Back Office BPO

Permis d’Opérer aux Philippines

Philippines Business Permits

Dès  l’obtention de votre Certificat d’Incorporation ou de votre Licence d’Opérer en tant que Succursale ou Bureau de Représentation aux Philippines émis par la SEC des Philippines, la compagnie doit s’enregistrer auprès du Bureau du Trésor Public (BIR), obtenir une Autorisation Barangay et le Permis du Maire.

1 – Bureau du Trésor Public (Bureau of Internal Revnue BIR)
Le BIR attribue à votre entreprise un Numéro d’Identification de Contribuable, l’autorisation d’imprimer des reçus officiels et d’enregistrer vos livres et programmes de comptes.

Documents nécessaires pour obtenir votre enregistrement au BIR:
a) Certificat d’Incorporation & Articles d’Incorporation de la SEC, Statuts/Articles de Partenariats
b) Enregistrement du nom commercial auprès de la DTI, si applicable
c) Permis du Maire
d) Contrat de franchise, si applicable
e) Carte d’emplacement de l’entreprise
f) Contrat de bail / Accord / Certificat
g) Formulaire 1903 du BIR (Formulaire de demande)
h) Formulaire 0605 du BIR (Paiement des droits d’enregistrement)
i) Formulaire 2000 du BIR (Paiement des timbres administratifs)

2 – Autorisation Barangay (Barangay Clearance)
Cette autorisation est obtenue du Barangay où votre compagnie est située.
Documents à présenter:
a) Photocopie du Certificat d’Incorporation & Articles d’Incorporation de la SEC, Statuts/Articles de Partenariats
b) Carte d’emplacement de l’entreprise
c) Contrat de bail / Accord / Certificat
d) Formulaire de demande d’Autorisation

3 – Permis du Maire ou Permis d’Affaires Municipal (Mayors’ Permit)
Autorisation d’emplacement
Les documents suivants sont nécessaires pour l’obtention de l’Autorisation d’emplacement:
a) Carte d’emplacement de l’entreprise
b) Autorisation Barangay
c) Contrat de bail / Accord / Certificat
d) Certificat d’Incorporation & Articles d’Incorporation de la SEC, Statuts/Articles de Partenariats
e) Certificat d’Occupation du Bâtiment/Unité
f) Formulaire de demande du Permis d’Exercer

Permis du Maire
Les documents suivants sont nécessaires pour l’obtention d’un permis d’exercer:
a) Certificat d’Incorporation & Articles d’Incorporation de la SEC, Statuts/Articles de Partenariats
b) Autorisation d’Emplacement
c) Contrat de bail / Accord / Certificat
d) Autorisation Barangay
e) Assurance Responsabilité Civile

La procédure et l’ordre peut varier d’une ville à l’autre.
Il sera nécessaire de se rendre au BIR, Barangay et à l’Hôtel de Ville plusieurs fois pour obtenir tous les permis et autorisations requis.

Un Barangay, aussi connu sous son ancien nom espagnol, le barrio, est la division administrative la plus petite aux Philippines et est le terme philippine pour un village ou quartier. Barangays sont encore subdivisé en secteurs plus petits appelés Puroks (une Zone en français). Un sitio est une enclave territoriale à l’intérieur d’un Barangay, particulièrement dans les zones rurales. Les municipalités et les villes sont composés de Barangays. Souvent Barangay est abrégé comme “Brgy”. Ou “Bgy”. Au 31 décembre 2006, on comptait un total de 41,995 Barangays  dans l’ensemble des Philippines.

Branch Office Registration

Philippines Branch Office

One of the ways for a foreign corporation to start business in the Philippines is to register a branch office. A Philippines branch office may start its operations as soon as the SEC has issued its license to transact business.

SEC Branch Office Registration Process

1 – Name Verification Slip (The SEC will conduct a name search to check if the corporate name has any similitude with a corporation already registered with the SEC).

2 – Authenticated copy of Board resolution authorizing the establishment of an office in the Philippines: designating the resident agent to whom summons and other legal processes may be served in behalf of the foreign corporation and stipulating that in the absence of such agent or upon cessation of its business in the Philippines, any summon of legal processes may be served to SEC as if the same is made upon the corporation at its home office.

3 – Financial statements

A. For those whose home country requires audited financial statements, the applicant shall submit the audited financial statements (AFS) as of date not exceeding one (1) year immediately prior to the filing of the application;

If the date of the AFS exceeds the one-year requirement, the following shall be submitted:
i. Audited financial statements that are available as of date of filing of the application; and
ii. Unaudited financial statements (UFS) as of date not exceeding one (1) year immediately prior to the filing of the application.

B. For those whose home country does not require audited financial statements, the applicant shall submit the unaudited financial statements (UFS) as of a date not exceeding one (1) year immediately prior to the filing of the application provided that the UFS shall be accompanied by a Certification signed under oath by an officer of a responsible regulatory institution or by the applicant’s legal counsel that the applicant is not required to prepare and submit audited financial statements, with a citation of the law or regulation on which it is based.

The aforementioned AFS and UFS must be signed under oath by the president or any other person authorized by the corporation. No authentication shall be necessary if the signatory to the said financial statements is the same as that in the corporation’s application.

Pursuant to Section 125 of the Corporation Code, the applicant’s financial statements must show that it is solvent and in sound financial condition.

4 – Certified copies of the Articles of Incorporation/By-laws/Partnership/Memorandum and Articles of Association with an English translation thereof if in a foreign language.

5 – Proof of Inward Remittance such as bank certificate of inward remittance or
credit advices. *

6 – Resident Agent’s acceptance of appointment (not necessary if agent is the signatory in the application form.

7 – Copy of passports, names and addresses of the present Corporate Directors and Officers with English translation.

Advise when setting up a branch office:

All documents must be in English and authenticated by the Philippines Embassy/Consulate of the home country.

* Minimum inward remittance of USD 200,000.00 as capital investment. Branches which use advanced technology or employ a minimum of 50 direct employees may be allowed a reduced paid-in capital of USD 100,000.00. Companies which export more than 60% of their products or services may apply for an exemption.

The SEC requires that within sixty days from the issuance of the license to transact business in the Philippines a foreign corporation (except foreign banking or Insurance Corporation) is obligated to deposit with the SEC satisfactory securities with an actual market value of P100,000 in order to secure present and future creditors of the licensee in the Philippines. That within six (6) months after each fiscal year of the licensee, the Securities and Exchange Commission shall require the licensee to deposit additional securities equivalent in actual market value to two (2%) percent of the amount by which the licensee’s gross income for that fiscal year exceeds five million (P5,000,000.00) pesos. (Corporation Code of the Philippines Section 126)

We recommend that the inward remittance be registered with the Central Bank of the Philippines, Bangko Sentral ng Pilipinas.

A foreign corporation transacting business in the Philippines without having been licensed by the SEC does not have the right to file any action, suit or proceedings in Philippine courts of law.

Eligible companies may apply for Philippine tax incentives by registering with the PEZA or BOI.

After the SEC has issued the License to Transact Dayanan Business Consultancy will assist you in obtaining local business permits.

The corporation code of the Philippines in Title XV gives the definition and rights of a foreign corporation in the Philippines to conduct business.