Do you want to run your own business? Before going into that dream of becoming your own boss, you might want to review the requirements for responsible entrepreneurs, especially tax-wise.
After deciding how you want to conduct your business — whether as a sole proprietor, as a part of a partnership, or as a corporation — a responsible entrepreneur ensures that the business complies with tax requirements. You, as a business owner, must start your venture right.
The Bureau of Internal Revenue (BIR) recently released two issuances providing guidelines for new business registrants. Revenue Memorandum Circular (RMC) No. 28-2019 prescribes the use of Bureau of Internal Revenue (BIR)-printed receipts or invoices, while RMC No. 29-2019 provides guidelines on keeping, maintaining, and registering books of accounts. The aim of both RMC Nos. 28-2019 and 29-2019 is to make doing business in the Philippines easier pursuant to Republic Act No. 11032, otherwise known as the Ease of Doing Business and Efficient Government Service Delivery Act of 2018.
Why is it so important for entrepreneurs to be aware of these two recent regulations? Before commencing business operations, business entities are required by the Tax Code to issue duly registered accountable forms and to maintain duly registered books of account. Corresponding sanctions, at most criminal liabilities, may be imposed for failing to do so.
Under Section 237 of the Tax Code, as amended, all persons subject to an internal revenue tax must, at the point of each sale and transfer of merchandise or for services rendered valued at P100, issue a duly registered receipt of sale or commercial invoice. Under RMC No. 28-2019, new business registrants are required to secure Authority to Print (ATP) for principal receipts/invoices upon registering with the BIR. However, securing an ATP for duly authorized receipts or sales invoices may take time.
Securing the ATP may take one to two weeks from the time of application with the Revenue District Office where the business is registered. This because the BIR ensures that the official receipt or commercial invoice complies with invoicing requirements. After securing BIR approval for the proposed receipt or invoice, the business needs to find an accredited printer to produce the first few booklets of the receipt or invoice. This process will take another one or two weeks. You have already lost a month just to obtain the receipt.
RMC No. 28-2019 has now addressed this problem. For businesses to immediately commence business operations after BIR registration, they shall be allowed to use a BIR-printed receipt/invoice (BPR/BPI) while waiting for the registered receipts/invoices. The BPR/PBI is valid for 15 days from the date of registration. The number of booklets of BPR/BPI to be issued, though, is limited to the estimated number of transactions for the period. The business entity, however, may opt to use their own registered receipt or invoices once they become available, even before the lapse of the fifteen days.
The BPR/BPI shall be issued as principal evidence in the sale of goods, properties, or services or in the lease of properties. Thus, the BPR/BPI can be used for claiming expenses as a deduction from ordinary gross income or claiming input tax credit subject to existing rules and regulations on invoicing requirements for taxation purposes.
Please note that only the BIR is allowed to print and issue the BPR/BPI.
A business must maintain books of account. Pursuant to RA No. 11032, however, this is no longer required for registering with the BIR.
Maintaining books of account may be done in the following manner: 1) Manual books of account; 2) Loose-leaf books of account; or 3) Computerized books of account (with the permit to use) pursuant to Section 232 of the Tax Code, as amended. Under RMC No. 29-2019, books of account shall be kept at all times in the taxpayer’s place of business. Such books and registers, together with the records, vouchers, and supporting papers and documents prescribed by the BIR must be kept intact, unaltered, and unmutilated. Keeping two or more sets of records or books of account is prohibited.
The manual books of account must be registered before the deadline for filing the quarterly income tax or annual income tax, whichever comes earlier. Entries in the manual books must be handwritten. Computer printouts pasted/glued on or inserted in the manual books have corresponding sanctions under existing regulations.
If the business opts for a loose-leaf book of account, they must maintain a computer printout of the said books and have it permanently bound. Loose-leaf books of account and other accounting records, together with a sworn statement attesting to the correctness of the entries made, and the number of all invoices, receipts, and books of account used for the period must be submitted to the RDO where the business is registered. The business must submit these documents within 15 days after the end of the taxable year or within 15 days from closing the business, whichever comes earlier.
New businesses that opt to have computerized books of account must first secure a permit to use (PTU). Securing the PTU is a lengthy process. Thus, it is advisable for new businesses to first register either a manual or loose-leaf books of account. Filing computerized books of account and other accounting records shall be in electronic format (usually in CD format). Submit the records to the business’ RDO within 30 days from the close of the taxable year.
As your business grows, please be aware that businesses whose gross annual sales, earnings, receipts or output exceeding P3 million are required by RMC No. 29, 2019 to have their books of account annually audited and examined by an independent certified public accountant.
Making your first sale is fun. Remember, however, that you are required to comply, at least with the BIR. While it is true that complying with the regulations will not bring in revenue, neglecting them will definitely drain your funds.
Regulatory compliance is sometimes a struggle. For these matters, it is best to consult experts. After all, it is your business to sell your products and services, not to perfect compliance matters.
Many businesses say, “Happy selling,” but it is best if we say, “Happy compliant selling.”
Eliezer P. Ambatali is a manager of the Tax Advisory and Compliance Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.