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Renewal of business registration with LGUs and BIR

Renewal of business registration with LGUs and BIR by: Roy N. Relato

Happy New Year!!! I hope everyone is safe and well after the customary revelries to welcome the year 2010 – the year of the Tiger.

At the start of the New Year, business establishments are tasked to comply with one of the statutory requirements – the renewal of business registration with the local government units (LGUs).

As a general rule, all local taxes, fees and charges shall be paid within January 20 or within the first 20 days of each subsequent quarter as the case may be (Section 167, Local Government Code or LGC).

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 is imposed on the amount of gross sales or receipts of the business establishment for the preceding year using the rates of taxes provided under Section 143 of the LGC for each type of business.

“Gross Sales or Receipts” include the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged or materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding discounts, if determinable at the time of sales, sales return, excise tax and VAT (Section 131(n), LGC).

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 calendar year.

Failure to pay local business tax, fees and other charges within the prescribed deadline will result to the imposition of 25 percent surcharge of the amount of taxes fees or charges not paid on time and 2 percent interest per month of the unpaid taxes, fees or charges, including surcharges, but the total amount of interest shall not exceed 36 months.

Furthermore, business establishments will not be allowed to operate within the territory of the LGU if they fail to renew their business permit and license.

In addition to the renewal of business registration with the LGUs, every separate or distinct establishment or place of business, including facility types where sales transactions occur, is also required to pay an annual Registration Fee of P500 on or before January 31 with an authorized agent bank of the Revenue District Office of the Bureau of Internal Revenue (BIR) that has jurisdiction over the business establishment.

Under Revenue Regulations 11-2008, the term “separate or distinct establishment” includes a branch, as well as the following:
     a.    Sales outlet or establishment covered by one business/trade name situated in one location or building; 
     b.    Every line of business of an individual covered by a separate business name approved by the Department of Trade and Industry even though situated in one and the same location;
     c.    Facility with administrative office;
     d.    Each franchise/Certificate of Public Convenience (CPC) which the transportation operator owns or operates, regardless of the number of units under each franchise/CPC;  
    e.    Real properties for lease with administrative office;
     f.     Each "exit/entry" gate, regardless of the number of booths accepting toll fees thereat;
    g.    Unmanned sales outlets/service equipments such as automated vending machines (AVMs), automated ticket dispensing machines, automated teller mach ines (ATMs), and the like;
    h.    Mobile store/stall/booth/kiosk which does not maintain a fixed place of business; and,
    i.      Other separate or distinct establishments which conduct sales transactions independent of the head office.

Under Section 258 of the Tax Code, any person who carries a business without paying the registration fee shall be punished by a fine of not less than P5,000 but not more than P20,000 and suffer imprisonment of not less than six months but not more than two years.

Recently, the BIR, the Bureau of Local Government and Finance (BLGF) and the Philippine Association of Local Treasurers and Assessors, Inc. (PHALTRA) signed a Memorandum of Agreement (MOA) to improve the service to taxpayers and enhance tax collection and administration.

Under the MOA, the BIR shall establish Taxpayer Service Areas or BIR Help Desks in city and municipal halls to assist taxpayers in securing their Taxpayer Identification Numbers (TINs), registering with the BIR, and paying Registration Fees, and to respond to queries of taxpayers during the application or renewal of mayor’s permits and business licenses.

The BIR shall also share information with local treasurers on the names and addresses of the taxpayers.

Furthermore, the MOA provides that treasurers of LGUs, through PHALTRA, shall require the presentation of the BIR Certificate of Registration (BIR Form No. 2303) and proof of payment of Registration Fee (BIR Form No. 0605) for the preceding year in securing or renewing business permits.

Presentation of TIN shall also be required not only in securing and renewing business permits and licenses but also in all applications for government permit, license, clearance, official paper or any other similar document.

Lastly, treasurers of LGUs are required to share information with the BIR on the declared amount of gross sales or receipts and other data provided by taxpayers.

Complying with the requirements of renewing the business registration with the LGUs and the BIR is a good way for business establishments to start the year 2010.

As the saying goes, “it is better to start the year right so that you’ll end the year right.”

This article is not intended to be a substitute for professional advice.  For comments and inquiries, you may e-mail the author at Roy.Relato@ph.gt.com.  For other tax concerns, please check out our other tax services.