Let’s Talk Tax
By Mark Ebenezer A. Bernardo
The IATF adjusted the COVID-19 alert levels of certain areas such as that of the National Capital Region, where the alert level is now at 3. Through a resolution, the authorities relaxed quarantine restrictions over the coming days to provide more mobility to people in certain trades. According to the 2021 Asian Development Outlook update, the Philippine economy is recovering and rebounding at a growth rate of 11.8% from the second quarter due to the government’s expansionary fiscal policy, which it resorted to in order to fund the pandemic response, vaccination, and infrastructure projects. From these economic indicators, businesses and investors may expect that the Philippines to get back on track soon.
The government needs to attract investors to the Philippines, and one handy tool for doing so is the Ease of Doing Business Act. As such, government agencies and some Local Government Units (LGUs) are currently introducing virtual registration processes for new businesses. The Securities and Exchange Commission (SEC) has online portals which corporations, partnerships, and other entities can use to register in various platforms such as the Company Registration System (CRS) for foreign corporations and partnerships and the Electronic Simplified Processing of Application for Registration of Company (ESPARC) for domestic stock and non-stock corporations, as well as One Person Corporations. These registration pathways offer electronic application platforms in which applicants can provide company information and upload documents. These platforms generate simplified Articles of Incorporation, By-Laws, cover letters, and licenses to do business in the Philippines. Payments can be made online through another platform created by the SEC. A sole proprietor the person may register business names online through the Department of Trade and Industry’s (DTI) New Business Registration System, which processes applications, payments, and certifications.
Within 30 days of registration, the new business entity must register and secure a Tax Identification Number (TIN) from the Bureau of Internal Revenue (BIR). The BIR has introduced “NewBizReg,” an alternative option in which applicants can submit the scanned copies of documents online through BIR e-mail addresses for registration and which requires the same documents for onsite registration. By attaching the BIR application form, SEC or DTI documents, tax type questionnaire, sample receipts and invoices, and other required documents through the e-mail address that the BIR may provide, the application for registration of a newly established business may be processed online through e-mail. There is a registration fee and documentary stamp taxes to be paid. Thereafter, a Certificate of Registration may be secured.
At the local government level, some cities and municipalities are now considering online applications, including Quezon City through its QC-eServices, Manila through GoManila, San Juan City through Makabagong San Juan, and other LGUs which use similar virtual platforms. The required documents for registration may vary for each LGU. It is recommended to visit your LGU office for the list of requirements and forms, including how much business tax and permit fees need to be paid. The initial business tax for new entities is usually tied to the level of capitalization. In various revenue ordinances, the rate of initial business tax and permit fees in various cities and municipalities may be different. This is due to the decentralization and autonomy of LGUs in the Philippines.
Despite varying requirements and procedures, the Department of Interior and Local Government (DILG) encourages the public to note the LGU’s compliance with the Ease of Doing Business Act in registering businesses. To comply with these guidelines, most LGUs have introduced the Business One-Stop System (BOSS) in order to streamline the requirements and procedures for registration and other local service needs.
Despite the effects of the pandemic, the economy is poised to bounce back. The authorities continue to find solutions and improve procedures to provide the private sector an environment that fosters improved trade, opportunities for growth, and returns on investment. As the Philippine Constitution provides: “The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments.” The government is improving policies to encourage the private sector to establish businesses for trade and employment and usher in investment to grow the economy. We are still feeling the effects of the pandemic but as long as we find new solutions and continue to see improvement, we making progress and may soon be back on track.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Mark Ebenezer A. Bernardo is an associate of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.