Starting the year right

Starting the year right by: Lesley Noreen G. Lato

Happy New Year! Hope all went very well during your New Year “salubong”!

“The secret of getting ahead is getting started. The secret of getting started is breaking your complex, overwhelming tasks into small, manageable tasks, and then starting on the first one.” Following this mantra, you can get your business way ahead this 2012 by starting off the year with small manageable tasks such as ensuring that you are authorized to continue conducting your business in the locations where you operate.

Renewal of business registration

The 20th day of January 2012 marks the deadline for the renewal of a business entity’s registration with the local government units (LGUs). Under Section 167 of the Local Government Code (LGC), all local taxes, fees and charges shall be paid on or before January 20 or within the first 20 days of each subsequent quarter as the case may be. These include business tax, mayor’s permit fee, sanitary inspection fee, garbage fee, building inspection fee, electrical inspection fee, mechanical inspection fee, plumbing inspection fee, fire inspection fee, personnel fee, business plate registration fee and other charges imposed by the different LGUs.

Local business tax for the current year is based on the amount of gross sales or receipts of the business entity for the preceding year 2011 using the rates of taxes provided under Section 143 of the LGC for each type of business.

For purposes of computing local business tax, business establishments are required to submit a Declaration/Certification of Gross Sales/Receipts, Income Tax Returns (ITRs) and Financial Statements (FS) for the preceding year. The amount declared as the previous year’s gross sales/receipts, must accurately correspond to the figures stated in the audited FS. Otherwise, the entity may be assessed deficiency local business tax based on the amount of the discrepancy noted.

The failure to pay local business tax, fees and other charges within the prescribed deadline will result in the imposition of 25% surcharge and 2% interest per month of the unpaid taxes, fees or charges. Moreover, the concerned business entity may be prohibited from operating within the territory of the LGU if they fail to renew their business permit and license.

The 31st day of January 2012 signifies the deadline of payment for the annual registration fee with the Bureau of Internal Revenue (BIR). Under the Philippine Tax Code, an annual registration fee of Php 500.00 for every separate or distinct establishment or place of business -- including facility types where sales transactions occur -- shall be paid every year on or before the last day of January. The renewal only requires filling up of BIR Form 0605 and payment of the fee with an Authorized Agent Bank (AAB) located within the revenue district where each place of business, branch or facility is located.

Under Revenue Regulations No. (RR) 11-2008, the phrase “separate or distinct establishment or place of business” contemplates a case where a person who, although engaged in only one particular class of business, nevertheless maintains two or more separate and distinct establishments for the operation of his business. In which case, the annual registration fee is imposed upon each of the separate and distinct establishments where the business subject to the fee is conducted.

Late registration shall attract compromise penalty of Php 1,000.00, in addition to the unpaid Php 500.00 registration fee, and penalties due thereon for the years the person is already operating. On the other hand, late payment of annual registration fee will subject the offender to 25% surcharge, 20% interest, and Php200.00 penalty.

Submission and Registration of specific documents

The 15th of January signals the last day for manual filers to submit the monthly remittance return of creditable income taxes withheld-expanded (BIR Form 1601E) and the monthly remittance return of final income taxes withheld (1601F). These returns are filed by every withholding agent/payor who is either an individual or non-individual, required to deduct and withhold taxes on income payments subject to expanded/creditable withholding taxes and final withholding taxes, respectively. Likewise, these returns should be substantiated by the corresponding Monthly Alphalist of Payees (MAP) for the month of December 2011. The amounts stated in the monthly alphalist of income payees must correspond to the amounts actually remitted to the BIR. Otherwise, this could be a source of assessment for deficiency taxes during tax audit.

The 15th of the month is also the deadline for business entities to register their permanently bound computer-generated or loose leaf books of accounts and other accounting records. These records include but are not limited to receipts and invoices together with the affidavit or certificate under oath as to the type of books, number of pages and leaves used as well as the volume number during the taxable year.

Notably, the 15th of January falls on a Sunday. Although there is a rule that the due date falling on a Saturday, Sunday or holiday shall be moved to the following working day, nevertheless, taxpayers, whether filing manually or electronically, are advised to follow the deadlines as provided in the rules and regulations to avoid the risk of being assessed corresponding penalties for late filing of tax returns. Taxpayers filing manually are advised to file their tax returns not later than the Friday before the last day for filing the tax return in case the deadline falls on a Saturday, Sunday or legal holiday.

On the other hand, the 30th of January signals the last day for the submission of the inventory list of finished goods, work in process, raw materials, supplies and stock-in-trade of taxpayers for the taxable year ending December 31, 2011. This requirement gains significance on business entities operating within the manufacturing/processing industries wherein inventory plays a major role in their operations. Further, the amount so reflected in the inventory listing should correspond to the amounts reported in the final/audited FS of the company. Otherwise, the company may be assessed with deficiency taxes on the basis of the discrepancy.

The 30th of January is also the last day for the registration of computerized books of accounts and other accounting records in CD-R, DVD-R or other optical media properly labeled with the information required under existing revenue issuances together with an affidavit attesting to the completeness, accuracy and appropriateness of the computerized accounting books/records.

On the 31st of January, all owners or sub-lessors of commercial establishments/buildings/spaces who are leasing or renting out such commercial space to any person doing business therein are required to submit to the BIR in hard and soft copies the following documents and reports: the building/space layout of the entire area being leased with proper unit/space address or reference; Certified True Copy of the Contract of Lease per tenant; and the Lessee Information Statement in accordance with RR 12-2011. This report shall cover tenants as of the 31st of December, 2011.

The failure to submit, willful submission of false or falsified information, or knowingly dealing with taxpayers who are not duly registered with the BIR subjects the owner or sub-lessor to a fine of not less than Php 10,000.00 and to imprisonment of not less than 1 year but not more than 10 years, if convicted.

Finally, the 31st of January is the deadline for the submission of the annual information return of income tax withheld on compensation and final withholding taxes (BIR Form No.1604CF) together with the alphabetical list of employees/payees for both EFPS and manual filers. This return is filed by every employer or withholding agent/payor who is either an individual, estate, trust, partnership, corporation, government agency and instrum entality, government-owned and controlled corporation, local government unit and other juridical entity required to deduct and withhold taxes on compensation paid to employees and on other income payments subject to final withholding taxes.

The failure to submit and register the abovementioned documents with the BIR subjects the taxpayer to a penalty of Php 1,000.00 for each failure, provided, however, that the aggregate amount to be imposed for all such failures during a calendar year shall not exceed pesos Php 25,000.00.