But because freelancing isn’t widely accepted (yet), there exist few resources about it. So if you’re looking for an updated guide on how you can register your freelance business, this guide is for you.

Under the eyes of the Philippine government, any income you earn is taxable. That includes income coming from freelancing projects. That’s why it’s essential you register your freelancing business early on in order to avoid unnecessary headaches later.

Here’s an overview of what you’ll learn in this guide:

• Why should you register
• Registration requirements
• How to register
• What’s next after registration
• FAQs

Why register your freelancing business

Aside from the legal consequences, there are a lot of benefits of registering your freelancing business:

1. Show credibility—when you register your business, you will have a document called the Certificate of Registration (also known as BIR Form 2303) that serves as proof that you are a legitimate business
2. Ability to issue receipts—most companies here or abroad require official receipts as proof of their expense. Without it, they cannot legally use it in their business, that’s why they are looking for this.
3. Updated tax records—while you may not think about it now, but you may need a bank loan or get a travel visa in the future. One of the requirements for these things is always an income tax return (ITR) for at least the previous year. If you are not registered, you will not have an ITR to produce.

Registering your freelancing business with the BIR solves these and other potential headaches later on.

Do you have any questions? Or did you notice any discrepancies from your experience? Let me know in the comments so I can update the article. Today, there is no single and reliable source of information for everything related to the government agencies. With your help, we can transform this website to help others like you overcome the same challenges you’ve faced before.

Other information you need to know about being a freelancer

A freelancer is a self-employed, skilled professional who offers their services or specialized craft for a fee and it could be a part-time or full-time working relationship. There is no expectation of a permanent single client unlike in the field of regular employment or corporate jobs.

Freelancers get paid either per hour, per project, per contract, or depending on the agreement between the employer and freelancer. Being the most rapidly growing business market in the world, it is no wonder that many people jump the fence to carve their own career paths.

In the Philippines, freelancers fall under what the government calls self-employed individuals. They are defined as:

• Persons engaged in business and derive their personal income from such business;
• Professionals such as (1) “persons who derive their income practicing their profession” like lawyers, and those registered with the Professional Regulation Commission (PRC) such as doctors, dentists, certified public accountants, and others; and (2) those “who pursue an art and make their living therefrom,” including writers, athletes, and others.

These include popular freelancing jobs like virtual assistants, graphic artists, content writers. Bloggers, vloggers, and podcasters all fall under this category too.

Freelancer registration requirements

There are a couple of requirements and documents that you need to prepare beforehand.

Below is a high-level overview of the documents and information you need to have/know. In the next section, you’ll see how they all work together. And as with most requirements, you need the original and photocopies of them throughout the entire process.

1. Tax Identification Number (TIN) - You normally get your TIN from your first employer. If you don’t have any yet, BIR has made an easier and faster way using BIR eReg and you may follow these steps on this website.
2. Revenue District Office (RDO) - If you are a freelancer then you need to make sure that your TIN is in your current RDO that also covers your current home address. Generally speaking, your current RDO is where you last worked. You can ask your previous employer about this. If it is different from the address that you will use in your registration, you will need to transfer your RDO using BIR form 1905 first.
3. Birth Certificate - If you don’t have any, you may request from the nearest Philippine Statistics (PSA) office or order it online. Make sure that you have a photocopy of your birth certificate as BIR will not get the original copy.
4. Any government-issued ID that has your name, address, and birth date.
5. Barangay Certificate stating you are working as an online freelancer and need to be registered as a self-employed professional
6. PRC ID (if applicable)
7. Occupational Tax Receipt (OTR) or Professional Tax Receipt (PTR**) – for licensed professions under the Philippine Regulatory Commission or OTR for professions where PTR is not required. You can get this in the city hall in which city you are planning to register (usually home address).
8. BIR Form 1901 (Application of Registration) – 2 original copies
9. BIR Form 0605 (Payment for Application of Registration) - 3 original copies
10. BIR Form 1905 (for RDO change if applicable) - 2 original copies
11. Books of Accounts***

*Barangay Certificate is different from Barangay Clearance and you need to bring your COE with you when applying for this

**Since online freelancers don’t need DTI Registration and Mayor’s Permit, BIR will require you to get PTR or OTR from your city hall or municipal hall. Just a bit of advice, because you don’t have a license then it is better to get an OTR and is relatively cheaper than PTR.

***For online freelancers, you only need two books of accounts: Journal and Ledger

Step-by-step process to register your freelancing business with the BIR

Please take note that this registration process is for individuals or freelancers only and doesn’t apply to non-individual or companies or firms.

However, if you register a business to offer these said services, for example setting up your photography studio or a graphic design agency, then you might want to register a company (like an OPC) instead of yourself.

1. Update your TIN through BIR Form 1905

If you have your TIN as an employee from your first employer, you need to update it and fill out a different form and you can download it here: BIR Application for Registration Update Form 1905.

You can either register your TIN online or go to the nearest BIR office.

Here are the two different scenarios you will most likely encounter:

1. If you have an existing TIN under an employer and will be transitioning to a full-time freelancing career, you need to change your status from employed to self-employed.
2. If you are still in a corporate world and freelancing at the same time, you can declare yourself as a mixed-income earner, indicating you earn from both being employed and self-employed means.

2. Update your personal information and RDO through BIR Form 1905

When filling out the form from Step 1, make sure that you have also updated your other personal information such as your registered address and Regional District Office (RDO), if applicable. That form is also for information update, correction, or cancellation.

Your RDO should have jurisdiction over your place of business (if with establishment) or residence. If not, you need to request a transfer of RDO in BIR.

For example, if you previously worked in Makati but you live in QC (and this is the address you plan on using), you need to also transfer your RDO.

This also applies even if it’s within the same city. Let’s use Makati again as an example. If your company is in Legaspi Village (RDO 47), but your home is in Salcedo Village (RDO 50), you will need to transfer your RDO.

There are two ways to do this: Either go to your old RDO and personally request from there or go to the new office where you want your RDO to be, fill out a BIR Application for Registration Update Form 1905, and request them to fax it to your old RDO.

Here’s a list of RDOs on the BIR website and has a detailed list of areas and information within the RDO’s jurisdiction.

3. Accomplish BIR Form 1901

Fill out a BIR Application for Registration Form 1901 and print it out in two copies.

4. Accomplish BIR Form 0605 and pay the annual registration fee

This form is for printing receipts, invoices, and proof of payment of annual registration fee.

Fill out BIR Payment Form 0605, print it out, have three copies, and pay the annual registration fee of Php 500 at the BIR’s cashier or any accredited bank within your district.

This will be paid every January of every year. You will need to show BIR Form 1901, BIR Form 1905, and the Barangay Certificate upon payment.

Here’s a list of Authorized Agent Banks (AAB) that can also accept the payment. Don’t forget to photocopy the payment form and receipt from the bank and have it in 3 copies.

5. Pay other fees

Pay for the Php 15 certification fee and the Php 15 documentary stamp tax.

Payment receipt and taxpayer’s verification slip will be given to you together with forms 1901 and 0605 after.

Keep all of these as you need to attach to the Certificate of Registration later on.

6. Submit requirements together with BIR Forms

Collate all BIR Forms 1901, 1905, and 0605 and submit these together with the required documents above* to your RDO. Head to the New Business Registrant Counter. Don’t forget to also present your receipt from the bank, both original and photocopy.

*see requirements for BIR Certificate of Registration

7. Attend the required seminar

Attend the taxpayer’s seminar and initial briefing which will be conducted at and by the RDO for new registrants. It is free and you need to know your rights and responsibilities as a taxpayer.

This will also guide you on how to file your income taxes properly. If you are unable to attend the seminar, an officer-in-charge is present daily at your RDO to assist you with your concerns and clarifications.

8. Claim BIR Certificate of Registration Form 2303

Usually a day after, the RDO will issue you the Certificate of Registration or BIR Form 2303 together with the “Ask for Receipt” notice and Authority to Print (ATP).

9. Apply for invoices or official receipts using the BIR Form 1906

You are also required to issue an official receipt for client earnings whether you are earning locally or internationally. You need to have an official receipt printed by a BIR-accredited printing press facility.

This Official Receipt (OR) is what makes you a legitimate professional. Along with your COR, these government-issued documents are needed to be issued to your clients in the future when you receive compensation for services rendered.

Fill out the BIR Form 1906 by downloading the form here: BIR Authority to Print Form 1906. You need to following requirements to for BIR Official Receipts:

• BIR Form 1906
• Barangay Certificate
• One government-issued valid ID
• Photocopy of your BIR Form 0605 with receipt from the bank
• Photocopy of COR and payment receipt
• Money to be used as payment for your OR orders

This may take weeks before you can claim your official receipt booklets. The receipts are valid for 5 years and price varies depending on your chosen printing press.

10. Register Books of Accounts

Once you have your OR and COR, you need to learn how to manage your books. As an online freelancer, you’ll be given a Journal or a Ledger. Subsidiary Professional Income Book, Subsidiary Purchases, or Expenses Books will do as well.

Register your Books of Accounts and have it signed and stamped by the same RDO where you are registered at.

What to do after completing the registration process

After receiving your BIR form 2303 and your receipts/invoices, take note of these reminders:

• Issuance of registered Sales Invoice or Official Receipt for every sale of goods or services to clients/customers/buyers;
• Keeping of registered Books of Accounts and other accounting records of business transactions;
• Withholding of taxes, as applicable;
• Filing of required tax returns; and
• Payment of correct taxes due on time.

If you are unfamiliar with the different taxes, when you should file, or how to fill-out your receipts, check these out. Of course, nothing beats talking to a qualified accountant who has helped other freelancers before.

Do you have any questions? Or did you notice any discrepancies from your experience? Let me know in the comments so I can update the article. Today, there is no single and reliable source of information for everything related to the government agencies. With your help, we can transform this website to help others like you overcome the same challenges you’ve faced before.

Frequently asked questions

What are the benefits of registering my freelancing business?

When you register your freelance business, you have the ability to issue receipts that most companies are looking for. You also demonstrate your credibility and trustworthiness. After all, if you register with the BIR, you are showing that you are a legitimate business. Lastly, by registering, you’ll also be able to obtain income tax returns (ITRs) which can be used later for loans or visa applications.

What’s the difference between OTR and PTR?

Occupational Tax Receipt (OTR) and Professional Tax Receipt (PTR) is a receipt you pay to the city hall you plan on registering with, which is usually where your home (or office) address is. Their function is the same except the main difference is PTR is used for professionals covered by the Professional Regulation Commission (PRC). Think nurses, lawyers, and the like. If you’re not covered by the PRC, you’ll use OTR.

Is a freelancer the same as a sole proprietor?

In some cases, yes. But from a legal standpoint, a sole proprietor is the owner of a company, while a freelancer is an individual. There are different laws and policies that apply to a company and an individual. For example, a sole proprietor can have an employer-employee relationship (hire people) but a freelancer can’t.

When should I file my taxes

You must file your income tax on time to avoid penalties. Here are some important dates to remember:

• January 30 of every year - Payment of annual registration fee
• April 15 - Annual income tax of the previous year
• May 15 - 1st quarter income tax
• August 15 - 2nd quarter income tax
• November 15 - 3rd quarter income tax

Not only it is essential to register yourself as a self-employed professional, but it is also ethical to file your taxes. Taxes are an integral part of the development of the economy and also the lifeblood of many government employees and public school teachers.

Conclusion

With this sought after laptop-lifestyle, a freelancing career empowers individuals to take pride in what they do and offers them the freedom and flexibility that they have been dreaming of.

It comes with immense privilege and independence to work anytime, from anywhere in the world as long as the freelancer delivers quality work on time.

But learning the ropes of being a bonafide freelancer or skilled professional is not easy. With great freedom comes with even greater responsibilities and legal obligations.

Two of those duties are registering as a self-employed professional and keeping a good record of your income taxes.

When registered with BIR in the Philippines, you will receive an annual income tax return which is also proof of your earnings. This can prove helpful for other transactions that will need authentication of your income such as bank loans, travel visas, and credit cards. Being registered also establishes a better reputation and trust among your clientele because you are a legitimate business entity already.

If taking full ownership over your own success is interesting to you, then this new lease of life will also open many opportunities, connections, even failures to learn from, and eventually, a self-made success.

In this guide, you’ll learn everything you need to know about registering a stock corporation with the SEC from name reservation, submission guidelines, and even what you need to do after getting your certificate of registration.

But first, let’s discuss something very important.

SEC Registration in the Philippines

When people think of SEC registration, they usually mean registering a domestic stock corporation. Or more specifically, a Filipino-owned corporation with stock ownership.

But there’s more to it than that.

The Securities and Exchange Commission (SEC) is the government agency that handles “supervision over the corporate sector, the capital market participants, and the securities and investment instruments market, and the protection of the investing public.”

In plain English: they take care of corporations and both sides of the investment/securities market. This includes both foreign and local investors who want to establish corporations, partnerships, or associations in the country.

To give you the full picture, the SEC is in-charge of different business entities, namely:

• Stock Corporation
  • Domestic Corporation—this is the most common type of company when you hear about registering a corporation with the SEC. This is also what we’ll cover in this post.
  • One Person Corporation (OPC)—this is the latest addition to the business entities under the mandate of the SEC
  • Foreign Corporation
    • Branch Office
    • Representative Office
    • Regional Headquarters (RHQ)
    • Regional Operating Headquarters (ROHQ)
• Non-Stock Corporation
  • Non-Governmental Organizations (NGOs)
  • Foundations
  • Associations
  • Religious Organizations
• Partnerships
  • General Partnership
  • Limited Partnership

Businesses outside the types or entities described above will most likely fall under the Department of Trade and Industry (DTI)—whose primary mandate is empowering micro, small, and medium enterprises (MSMEs). But that’s for another post.

So, the next time you hear someone say they want to register a business or a company with the SEC, ask them exactly what they are referring to because every one of those types has different processes, requirements, and guidelines.

With that out of the way, here are the requirements and process for registering a stock corporation with the SEC.

Requirements for SEC Registration

The documentary requirements for registering a corporation with the SEC differs depending on the industry or nature of the business. But generally, here’s what you need to prepare:

1. Articles of Incorporation
2. By-laws
3. Registration Data Sheet
4. Cover Sheet—you can download a copy here.
5. Joint Affidavit of Undertaking to Change Name—don’t let this string of words scare you. It’s just a document that the owners sign saying that you will change the name if the name you applied for is already taken.
6. Endorsements / Clearances from other government agencies (if applicable). Some businesses or industries that require endorsements are banks, insurance companies, and pawnshops.

You can download a PDF copy of these documents here. But don’t fill them up right now. More on this in the steps below.

Just remember that these documents have to be printed in A4 size, signed by the incorporators, and notarized.

And if you noticed, there isn’t a Treasurer’s Affidavit and Bank Certificate listed anymore. This is only necessary for foundations.

Other requirements—DON’T SKIP THIS PART

While not a documentary requirement, make sure that you go through this list to avoid inconveniences later during the registration process.

1. Commercial address

An address for commercial purposes is different from a residential one. If you don’t know, you can ask your building admin, association, or Barangay.

The reason is simple: when you proceed to the next step in the business registration process, you may get disapproved. That means you have to revise your articles of incorporation which will result in wasted time and money.

If you don’t have one or not sure, the best way is to use a virtual office address. This guarantees that you will have all the necessary documents you need in the next steps (specifically a lease agreement or a tax declaration if you own the property).

2. Company officers and their roles

Here’s a list of all the officers you need for a corporation:

• President
• Chairman of the Board of Directors
• Treasurer
• Corporate Secretary

Some roles can be fulfilled by the same person. But there are some that can’t. Here are the scenarios that aren’t possible:

• President and Treasurer
• President and Corporate Secretary

For example, someone can both be a treasurer and corporate secretary, but can’t be the president.

How to Register a Stock Corporation in the Philippines

1. SEC name reservation

The first step of the process is to reserve your name online. Visit the SEC website, create an account, and reserve a name.

There are a few important things you need to do here:

1. Make sure you research different company names
2. Don’t forget to check online as there may be brand names that aren’t registered
3. Review the list of name guidelines (find the resource/link)

2. Complete the documentary requirements

After reserving the name, complete the documentary requirements listed above. You need to: 

• Print in A4 size paper
• Sign by everyone listed as the incorporators, as well as sections for the treasurer and corporate secretary
• Notarize

Note that the address you use here should be a commercial address as mentioned earlier. If you use a residential address, you might encounter issues at the barangay or city level when you get asked for some requirements. 

This matters because a lot of business owners tried using their home addresses, but eventually get rejected at the local government. What happens is they end up amending their SEC papers which adds a few more days and unnecessary expenses to their registration process. 

3. Payment and submission of notarized documents

After having the documents notarized, the next step is to submit them to an SEC satellite office near you. If you are in Metro Manila, 

You can find a list of SEC satellite offices here. 

4. Release of SEC certificate of registration

Depending on the contents of your Articles of Incorporation and other documents, your application may or may not be accepted. If it doesn’t, you will need to make some revisions then submit it again. 

But if there aren’t any issues, you will receive your SEC certificate of registration. This is your proof that you have already registered your business name with the Securities and Exchange Commission. 

Just remember, this only means you reserved your name with the SEC. It doesn’t mean that you are allowed to operate legally yet. You have to complete the entire registration process. 

What you need to know after

1. Make sure you complete your registration process
2. BIR already removed city permits as requirements, but that doesn’t mean you can skip them
3. Corporation’s life is indefinite unless otherwise stated. Originally, a corporation has a 50-year term, after which you need to renew again. 
4. Every movement of stocks (buy and sell) need to be logged in Stock and Transfer Book (STB)
5. Need to submit AFS annually Within 120 calendar days after the end of the fiscal year, as indicated in the Financial Statements
6. Submit General Information Sheet (GIS) Within 30 calendar days from date of the actual annual stockholders’ or members meeting . You can download a copy here.

For more information, visit the SEC repertorial requirements page.

Frequently asked questions

Can a corporation be classified as a micro, small, and medium enterprise (MSME)?

Yes. The MSME classification is based on total asset size and employee count. This means your business type or classification (single proprietorship, partnership, corporation) doesn’t matter.

What do I need to do after I receive my SEC Certificate of Registration (COR)?

The next step you need to do after you receive your SEC COR is to complete the entire business registration process—which is to get a barangay permit, business permit, and your BIR Certificate of Registration. If your company falls under a special business type, for example a lending or financing institution, you also need to acquire a permit from the Banko Sentral ng Pilipinas (BSP). You also need to complete your registration with other government agencies such as SSS, PhilHealth, HDMF, and DOLE.

Can I operate once I get my SEC registration certificate?

You can operate, but that doesn’t mean you have a legal business already. The SEC registration is only the first step in the process. This means you only reserved your name.

Unless otherwise disqualified from claiming the deduction, the business or enterprise which incurred net operating loss for taxable years 2020 and 2021 shall be allowed to carry over the same as a deduction from its gross income for the next five (5) consecutive taxable years immediately following the year of such loss.

The net operating loss for said taxable years may be carried over as a deduction even after the expiration of RA No. 11494 provided the same are claimed within the next five (5) consecutive taxable years immediately following the year of such loss.

Here’s what it means in plain English

When you incur a net operating loss in years 2020 and 2021, you may use that (carry over) as an additional expense for the next 5 years. Initially, this net operating loss carry over (NOLCO) is only for a period of 3 years, which was amended by RA 11494.

But first, let’s clarify a few things first:

The numbers here apply to your income statement and applicable to income taxes. VAT or percentage taxes aren’t applicable.

In income statements, there are a couple of important line items there:

• Sales or revenues
• Cost of goods sold or cost of sales
• Revenues minus cost of goods sold equals gross income
• Operating expenses which includes your rent, utilities, and other expenses
• Gross income minus operating expenses equals Net Taxable Income or Net Operating Loss.

Sample scenarios and computations

Let’s say Mang Juan Restaurant has a net income of PhP 50,000. So, no NOLCO applicable.

For 2021, here’s how their income statement looks like:

• Sales = 1,000,000
• Cost of Services = 700,000
• Gross Income = 300,000 (sales - cost of services)
• Expenses = 500,000
• Net loss = 200,000

Then in 2022, Mang Juan Restaurant had a good year and earned a net income of 300,000.

Based on RR 25-2020, they may carry over the NOLCO of 200K from 2022 2026 as further deduction from the subsequent net income. Here’s what that may look like in their 2022 income statement:

• Net income = 300,000
• NOLCO = 200,000
• Net taxable income = 100,000 (300k - 200k)

If Mang Juan Restaurant is not able to use the NOLCO up to 2026, then it expires and it can no longer use it in 2027 onwards. This only happens if they incur net loss until 2026.

Here’s another example:

If Company A in 2022 has only 150k net income instead of 300k, then the NEW net income is 150k net income less 150k net loss from 2021 = zero.

The unused balance of 50k (200k less 150k used in 2021) may be further used as deduction in 2022 to 2026.

In 2022, you can not use the whole 200k since you only have 150k from where you can deduct the NOLCO. After 2026, the remaining 50Kk if still unused shall expire.

Other relevant reading

1. RA 11494 — An Act Providing for COVID-19 Response and Recovery Interventions and Providing Mechanisms to Accelerate the Recovery and Bolster the Resiliency of the Philippine Economy, Providing Funds Therefor, and for Other Purposes

Where can I learn more?

You can learn more about the RR 25-2020 from the BIR website. Here are some important links:

• Digest
• Full Test

Here are the key points in this article:

• What is withholding tax
• Who should fill up this form
• Who should not use this form

Given its importance, this is definitely something you need to familiarize yourself with if you want to avoid issues later.

So let’s break it down.

A good way to understand the form 2307 is to look at it from two different perspectives:

1. As the withholding agent or the issuer of the certificate
2. As the recipient of the certificate

But first, what in the world is withholding tax?

Withholding tax is a tax on income that is withheld by the payor and is remitted to the government on behalf of the payee.

The most common example of this is in the employer-employee relationship where the company withholds a portion of the employee’s salary or income. The company then remits this to the BIR on behalf of the employee.

From a business perspective, if you have suppliers, then you’d most likely issue 2307 to them. If you are a supplier or providing goods and services to other business, they will most likely issue you a 2307.

Why this form matters?

Form 2307 functions as an income tax credit to the recipient. Meaning, it is a “legal” way to lessen the taxes you pay to the BIR.

Technically speaking, you already paid for it in advance. Remember the concept of withholding tax above? The company who is supposed to pay you (which would then be subject to income tax) already withheld a certain portion and paid it in advance to the BIR on your behalf.

For example, the company who is supposed to pay you, let’s say, for PhP 50,000 only paid you PhP 49,000 in cash, while the PhP 1,000 is via the BIR form 2307.

While you still report the total sales in your returns, you will be able to deduct the 1,000 in your income tax payable.

Who should fill up this form?

The withholding agent is the one who will always fill out the BIR 2307.

Depending on your business, you may either be the issuer or recipient of this form.

A Certificate to be accomplished and issued to recipients of income subject to expanded withholding tax paid by a Payor/Withholding Agent including government money payments made by a government office showing therein the monthly breakdown of the total income payments made and the total taxes withheld and remitted during the quarter/period.

Bottom line: if the payment is subjected to expanded withholding tax, you should issue this certificate.

Who should not fill out this form?

If the payment is not subject to expanded withholding tax, like payment to general professional partnership, then this is not the form to be used.

If you are the issuer or withholding agent

As the issuer of the income tax certificate, here’s what you need to know:

How to fill out the BIR form 2307

1. Download the Excel or PDF file from the BIR website
2. Fill out the following information:
   • Part 1 - Payee Information
   • Part 2 - Payer Information
   • Details of Monthly Income Payments and Taxes Withheld
   • Printed Name of the Payor/Authorized Representative
   • Printed Name of the Payee/Authorized Representative

Deadlines for issuing the certificate and payment

The BIR Form 2307 should be issued to the payee on or before the 20th day of the month following the close of the taxable quarter when the accrual or payment was made, which ever came first. Upon request of the payee, however, the payor must furnish such statement to the payee simultaneously with the income payment.

For example, Company A has acquired the professional services of Mr. CPA during June 15, 2020. Mr. CPA sent the billing to Company A on June 25 after completion of the service. Mr. CPA allows Company A to pay him in 30 days after the billing date. Hence, Company A has a liability to Mr. CPA as of June 30 payable in July 25.

In this case, the 2307 must be issued on July 20 (20 days close of the quarter when the accrual was made)

Important notes and reminders

As the payor or issuer of the certificate, you need to summarize the details of all 2307 issued for the quarter and must tally to the 1601EQ and QAP (Quarterly Alphalist of Payees).

You should also keep your copy of your form 2307 for reference.

As for the payment of the taxes withheld, you do this using the BIR Form 0619E.

Lastly, you should also include the details in your VAT Summary List of Purchases (SLP) and reconcile as needed.

If you are the recipient

As the recipient of this income tax certificate, you have to remember the following:

• Keep and attach this form to Quarterly Income Tax Returns and Annual Income Tax Returns
• Deduct the tax withheld in the proper period
• Include the details in summary alphalist of withholding taxes (SAWT)
• Include the details in VAT Summary List of Sales (SLS), reconcile as needed

Downloadable templates

In case you need a copy of the form, you can download it directly from the BIR website. You can find both a PDF and Excel version there.

But for 90% of businesses, you shouldn’t need this 90% of the time. Use the eBIRForms instead.

Other relevant reading

1. RMC 50-2018
2. RR 2-1998
3. RR 11-2018
4. RMC 10-2018

Have other concerns about the BIR form 2307? Let us know in the comments below.

It’s one of the BIR Revenue Memorandum Circulars (RMC) that is supposed to clarify certain laws and policies, but is often taken out of context and misunderstood by other people.

What is the RMC 57-2020 all about?

According to the BIR website, RMC 57-2020 “prescribes the updated policy and revised checklist of documentary requirements on business registration and other types of application.”

In summary, RMC 57-2020 removes the requirement of the mayor’s permit/business permit in the registration with the BIR.

BUT it does not say anything that you can skip it at all.

It just means that you can process the BIR and get your receipts ALONGSIDE the business permit.

Why it matters?

Before, business registration is done sequentially like this:

1. SEC/DTI
2. Barangay
3. City Hall — this is where you get the mayor’s permit/business permit
4. BIR

Requirements for the next step includes the documents you got from the previous one. That is why you do them in a specific order and cannot proceed to the next step without finishing the previous one. For example:

• In order to apply for your barangay permit, you need your SEC certificate or DTI certificate.
• To apply for a business/mayor’s permit, you need your barangay certificate.
• To register for the BIR, you need your business permit.

RMC 57-2020 removes the mayor’s permit requirement to register with them.

This change is welcomed by people in the industry because there’s a little known policy within the BIR that you should complete your BIR registration within 30 days of your business registration. But because the mayor’s permit often take weeks to process, when you reach the BIR stage, you’d have no choice but to pay the penalty for late registration.

Now, after getting your SEC certificate or DTI registration, you can simultaneously proceed with the BIR registration alongside your barangay permit or business permit.

You can find more information by downloading the annexes provided by the BIR to see which one applies to your business specifically.

Where can I learn more?

You can learn more about the RMC 57-2020 from the BIR website. Here are some important links:

• Digest
• Full Text
• Annexes A1-A11

As with most tax forms, the best way to file is through online (via eBIRforms). And when you also need to pay for something, like a tax due, doing it via online banks or mobile wallets like GCash can help save you a lot of time.

In this guide, you’ll learn:

• Common uses of the BIR Form 0605
• Who should use this form
• Who shouldn’t use this form
• When to file and deadline
• How to file the form with examples
• Downloadable templates
• Some important notes and reminders
• Other relevant reading

Common uses of the BIR Form 0605

The payment form is commonly used for payment of the registration fee of your business with the BIR—whether that’s for new businesses or renewals. But did you know the form 0605 is also used for other purposes? Here are some of its other uses:

• Payment for penalties due to late registration of books
• Payment for penalties due to late printing of receipts
• Payment for penalties due to lost Certificate of Registration (COR)
• Payment for other penalties (late registraion of business, late submission of inventory list)

There is one common theme among them: all for payments to the BIR; thus, properly named as the payment form.

Who should fill up this form?

If your purpose falls into any one of the items above, you need to use the BIR form 0605.

When you register a business—corporation, partnership, freelancer, or a new branch—you need to use this form.

Who it’s not for

If you are a regular employee with no sideline or own business, you need not concern yourself with this form. This also applies for overseas Filipino workers (OFWs) without their own businesses.

When to file

For new businesses, the payment is made on or before 30 days of registration with the Securities and Exchange Commission (SEC) or Department of Trade and Industry (DTI) if you want to avoid incurring penalties for late registration.

For existing businesses, the payment needs to be made on or before January 31st of every year. Remember that this also holds true even if you finished registration in November of the previous year and paid the annual registration fee for a new business.

For all other situations, the 0605 form needs to be paid and filed before you accomplish what you need to. For example, you need to complete the 0605 before you can get your COR reprinted and handed over to you.

How to fill up the BIR FORM 0605 properly

Filing the BIR form 0605 involves 3 main steps.

1. Fill-up the form

The following fields are the most important ones you need to edit:

1. TIN
2. RDO code
3. Line of business
4. Registered name
5. ZIP code
6. Email address
7. Calendar/fiscal year
8. Due date
9. ATC
10. Return period
11. Tax type
12. Individual or non-individual
13. Manner of payment
14. Amount

After filling out all the required fields, click on validate. This is a simple check done by the eBIRForm software to check for errors. If there are errors, make sure you fix them because you won’t be able to proceed to the next step.

2. File the form

If there are no errors, save the form and submit. Then, download a PDF copy for your reference.

After submitting the final copy, the BIR will send you a confirmation email within the next 24 hours. Keep this for your reference.

What I typically do is create a PDF out of this email then save it in a folder together with the actual form so I can find it later if I have to.

3. Pay the necessary amount

The last step in the process is to pay the amount due. If you’re paying for the annual registration fee, which is due every 31st of January every year, then you’d have to pay for PhP500.

My preferred method of payment is via GCash since I can do it wherever I am as long as I have an internet connection. Here’s how it may look like:

Of course, you can still go through the traditional route of payment via an authorized accredited bank (AAB) if you don’t mind waiting in line for a few hours just to pay a small amount.

This is usually a bank near your RDO, so if your business uses a virtual office and you live somewhere else, you’d have to travel there. Or get someone from your team (or outsourced personnel) to do this for you.

Downloadable templates

In case you need a copy of the form, you can download it directly from the BIR website. You can find both a PDF and Excel version there.

But for 90% of businesses, you shouldn’t need this 90% of the time. Use the eBIRForms instead.

Important notes and reminders

Apart from the deadlines mentioned for business registration and renewal, the only other thing you need to remember about the payment form is that you need to have it stamped by the BIR with “late filing” if you are paying penalties.

That means you need to go to your registered regional district office (RDO) first BEFORE you pay the form. Otherwise, the bank will not accept it.

Have other concerns about the BIR form 0605? Let us know in the comments below.

Other relevant reading

1. RR 7-2012: Amended Consolidated Revenue Regulations on Primary Registration, Updates, and Cancellation
2. RMC 57-2020: Streamlining of Business Registration Requirements and Revised Checklist of Documentary Requirements

Frequently asked questions

How do I file the BIR Form 0605

Whether you’re a new business or an existing one, you file the BIR form 0605 using the eBIRForms software. You fill it out with the important details like the examples shown here, then submit it within the system directly.

How do I pay the BIR Form 0605

To pay your annual registration or renewal fee, you can opt to go to an accredited bank (called Authorized Agent Bank or AAB) or use online banking like Union Bank or GCash instead.

Luckily, the Securities and Exchange Commission (SEC) now eases the process of doing business and created a new juridical entity under the newly-passed amended Corporation Code.

In this post, you’ll learn about the newest type of corporation, and how you can fully benefit from it so you can successfully kickstart your venture.

• What is an OPC
• Difference between OPC and Single Proprietorship
• Registration requirements
• How to register
• What to do after
• FAQs

What is a One Person Corporation (OPC)

A One Person Corporation (OPC) is a corporation with a single stockholder who can be a natural person, trust, or estate. It offers the full control of a sole proprietorship and the limited liability of a corporation.

Unlike a regular corporation that has a need for at least four other incorporators or the existence of a board of directors, OPCs need only a single stockholder—i.e. the owner who will act as the president and sole director of the company. 

The removal of this requirement is a game-changer.

Before, the OPC used to be limited to religious corporations wherein the chief archbishop or presiding elder of the religious organization can apply.

Now, entrepreneurs no longer need to find dummy incorporators if they want to register a corporation.

There is also no minimum authorized capital stock required unless otherwise provided by a special law. Also, unless otherwise required by applicable laws or regulations, no portion of the authorized capital of a One Person Corporation is required to be paid-up at the time of incorporation. More on this below.

Don’t forget—OPCs are also corporations, which means they have a fixed income tax rate of 30%. But we’ll talk about taxes some other time.

Regardless, these changes are better. The Corporation Code of the Philippines has recently been repealed by the Revised Corporation Code or the Republic Act 11232 in 2019. The former Corporation Code was untouched for almost 40 years, and the Revised Corporation Code lightens the registration process and makes it easier for Filipinos to pursue their entrepreneurial aspirations. This also aims to support micro, small, and medium enterprises (MSMEs) which makes up 99.6% of all registered businesses in the Philippines.

What is the difference between an OPC and a Sole Proprietorship

The One Person Corporation and Sole Proprietorship may sound similar but they have unique provisions, exceptions, and structure that only applies to each one. For example, an OPC allows a single person to run a company limited by shares while a Sole Proprietorship defines the owners and the business as a single entity.

Watch this video by SKY Law.

Before the approval of the Revised Corporation Code, entrepreneurs have to get four other incorporators to meet the five-person requirement. Their only two options are to register as a sole proprietorship or find dummy incorporators.

While being registered as a sole proprietor is the simplest form of business, it also entails the highest risk to the owner as there is no distinction between the owner and the business.

For example, if a sole proprietor’s business goes under debt or bankruptcy and they don’t have money to pay, the creditor can go after the owner’s personal assets (house, car, etc.). On the other hand, OPC’s personal assets are treated separately from the owner. That means creditors can only go after the assets of the company.

Below you’ll find a table of the major differences between the two business types:

Important notes and reminders

Do note that while in the OPC, you may have limited liability, this has to be proven: A sole shareholder claiming limited liability has the burden of affirmatively showing that the corporation was adequately financed.  Where the single stockholder cannot prove that the property of the One Person Corporation is independent of the stockholder’s personal property, the stockholder shall be jointly and severally liable for the debts and other liabilities of the One Person Corporation.

Costs above are also estimates. There are a lot of factors that affect business registration costs such as capitalization. Another would be whether you’ll do it yourself or outsource/hire a third party to do it for you.

Who can and who can’t apply as OPC

The One Person Corporation or single shareholder of an OPC must be one of the following:

• A natural person
• Trust*
• Estate**

The OPC, also known as an incorporator, must be of legal age as well and must reside in the Philippines. The OPC shall be the sole director and president. 

Foreigners may register as OPC but are still subject to foreign ownership limits, applicable capital requirement and constitutional, and statutory restrictions on foreign participation or as specified in the Foreign Investment Negative List (FINL).

The following are not allowed to form an OPC unless provided under special laws:

• Natural persons who are licensed professionals
• Banks, non-bank financial institution, and quasi-banks 
• Pre-need, trust, and insurance companies
• Public and publicly-listed companies 
• Non-chartered government-owned and government-controlled corporations (GOCCs)  

If the applicant passes the qualifications, he or she may proceed with the registration process.

*The trust does not refer to a trust entity, but to the subject being managed by a trustee. 

**It is the estate of the deceased that is allowed to form the OPC and not the administrator.

What are the requirements for registering an OPC

Under the guidelines of the SEC, all applications and transactions should be filed manually or online with the SEC’s Company Registration and Monitoring Department or its affiliated website.

Of course, the best choice is to register online.

The documentary requirements for registering an OPC are as follows:

• Cover sheet
• Articles of incorporation
  • You can download a Word (docx) sample of the Articles of Incorporation for OPCs here
• Written consent from the nominee and alternate nominee
  • You can find a template for this here

If you noticed, by-laws aren’t included in this list because it is optional for OPCs (unlike for regular corporations).

Below are the other requirements that you may prepare if applicable:

• Proof of authority to act on behalf of the trust or estate
• Foreign Investments Act Application Form (for foreign natural persons)
• Affidavit of Undertaking to Change Company Name, in case the chosen one isn’t approved
• Tax Identification Number for Filipino single stockholder
• Tax Identification Number or Passport Number for Foreign single stockholder
• Capitalization details – Maximum number of shares, per value, subscribed amount, and paid-up.
• Accounting year-end preference—calendar or fiscal year

Entrepreneurs registering as OPCs are not required to submit and file corporate bylaws or the official regulations of a company.

The designated nominees will replace the single stockholder if they die or become incapacitated to operate the OPC. At any time, the single stockholder may change its Nominee and Alternate Nominee by submitting to the SEC the names of the new nominees and their corresponding written consent. For this purpose, the Articles of Incorporation need not be amended.

How to register an OPC: A simple 5-step process

Registering an OPC is not rocket science. And it only involves three phases:

1. Online name reservation
2. Prepare documents and other requirements
3. Submit manually to a SEC office

Look, I know it may seem daunting to register your business, but doing so also avoids any potential business problems in the future. And with the SEC releasing a memorandum last April 2020 allowing online registration of OPC, everything just becomes a breeze.

By the way it’s always best to consult a lawyer who is knowledgeable about corporate law so you can discuss your specific needs. Don’t rely on stuff you read online (yes, including this one).

1. Research possible business names

You should prepare at least three names for your business and check if the proposed name is still available. You can do this easily by heading to the SEC’s website and type in the names you want. If something matches, your name might get denied.

You can skip this step, but know that your application may get denied. You can submit a Letter of Appeal when that happens, but why risk wasting time, right?

Also note that a requirement is that you business name will have a suffix of “OPC.” For example, Juan Dela Cruz OPC or JDC Marketing OPC.

Pro Tip: Go beyond this step by making sure your proposed name is also available online for your website. Google your proposed name to see if a website comes up. Or even better, check for its availability directly here.

2. Fill out the application form online

This step is really self-explanatory. Visit the SEC Registration Application Form and fill out the form completely and accurately. The more details you provide, the higher your chances of getting approved.

You will be advised of the status through the email address indicated on the application form within 3 working days. An application reference number will be provided once the form is successfully submitted and can be used for tracking.

PS: Check your spam folder as the email may get flagged by your email provider.

3. Pay the filing fees

Once approved, the next step is to pay the necessary fees

You can pay the registration fees specified on the payment assessment form (PAF).

For your reference, here’s a breakdown of the fees you can expect:

• Name Reservation - Php 100.00 per company name or trade name
• Articles of Incorporation - ⅕ of 1% the authorized capital stock but not less than Php 2,000.00
• Legal Research Fee - 1% of the registration fee but not less than Php 20.00
• FIA Application Fee - Php 3,000.00 if the single stockholder is a foreigner and Php 30.00 for the documentary stamp.
• Documentary Stamp - Php 30.00

If your application is disapproved…

Take note of the corrections made by the reviewing officer. This will be included in the notification sent to you.

You can fill-up the registration form again after making the necessary changes.

4. Prepare and submit notarized hard copies with proof of payment

After the necessary fees are paid, prepare the necessary documents, sign it, have it notarized, then submit it manually to the SEC office you chose in the registration application form. You’ll need three (3) sets of hard copies of these documents along with the proof of payment.

At the moment, payment and submission of these documents are required within 30 working days from the lifting of the Enhanced Community Quarantine (ECQ).

5. Claim your certificate of registration

Once everything is cleared and approved, the final step is claiming the Certificate of Registration (COR) from the SEC. 

For inquiries and assistance, please email crmd_registration_opc@sec.gov.ph or crmd_registration_234@sec.gov.ph.

What to do after you receive your certificate of registration

Once you received your SEC Certificate of Registration, you still need to go through the entire business registration process. Remember, the SEC COR is only the first step—the business name registration.

The following permits are essential for you to fully operate a business in the Philippines:

• Barangay Clearance
• Mayor’s Permit
• BIR Registration

The incorporator must also submit the following documents and reportorial requirements within the period required by SEC:

• Annual audited financial statements within 120 days from the end of its fiscal year as indicated in its Articles of Incorporation. The financial statements should be certified under oath by the corporation’s appointed treasurer provided that the total assets or liabilities of the corporation are less than Php 600,000.00.
• A report on all explanations or comments by the president on the qualification, reservation or adverse remarks made by the auditor in the financial statements.
• A disclosure of all self-dealing and related party transactions entered into between the OPC and the single stockholder.
• Other reports that the SEC may require.

Don’t forget that your permits have to be renewed annually. You can check the validity and renewal deadlines with your city or municipal business permits and licensing office (BPLO).

The SEC may also place a One Person Corporation under delinquent status if it fails to submit the requirements three times, consecutively or intermittently, within five years.

Lastly, you might also want to register with the different government agencies such as SSS, PhilHealth, HDMF, and DOLE.

Additional SEC Requirements

Once you have been issued with the certificate, the single stockholder must appoint within 15 days a Treasurer, Corporate Secretary, and other officers. He or she can appoint himself or herself as the treasurer too but not as the Corporate Secretary.

If the single stockholder assumes the position of the Treasurer, they must post a surety bond that is computed based on the authorized capital stock of the OPC as shown in the table below:

The stockholder should notify the SEC within 5 days of the appointment. The bond is a continuous requirement as long as the single stockholder is the Treasurer and it is subject to renewal every 2 years.

Regular or special meetings are not needed if your business is registered as an OPC. An OPC shall also maintain a minutes book wherein it contains all actions, decisions, and resolutions taken by the One Person Corporation. Whenever an action is needed on any matter, a written resolution is enough prepared by the single stockholder. It should be signed and dated as well. 

Frequently asked questions

Why am I being asked for the capital requirements? I thought I didn’t have to pay anything

The authorized, subscribed, and paid up capital in the form is a requirement that you need to declare. Normally, the paid up capital is the portion you need to have in your bank. But this isn’t necessary for OPCs generally speaking.

What is the term of existence?

The SEC Memorandum Circular No. 7, Series of 2019, entitled Guidelines on the Establishment of a One Person Corporation provides that the term of existence of the said corporation shall be perpetual. However, in case of the trust or estate, its term of existence shall be coterminous with the existence of the trust or estate.

Over to You

Local and foreign individuals seeking to set up a company in the Philippines can take advantage of the OPC as the incorporator has full control and authority to their business. OPC has an ideal setup for those wanting to run their own corporation without associated risks of incurring personal liabilities, having business partners, and having less control over their business.

It also provides greater traceability and transparency. Since your business will be seen as a legitimate business, customers are more inclined to transact with you and you can also leverage your status to land more contracts, projects, or untapped markets in the future.

The OPC also empowers and enlivens the start-up and entrepreneur ecosystem as it now provides a simple and straightforward online process. The e-commerce and business sector is taking the lead in the current climate of the industry amidst the pandemic. With the creation of legal identity in the Philippines made more accessible and seamless through their online platform, aspiring entrepreneurs can easily register their business which can provide greater consumer protection and confidence in the long run-both beneficial for the business and the economy of the Philippines.

While that is the dream, to get a business up-and-running as quickly added possible, the ease of doing business in the Philippines still has a long way to go.

Completing a business name registration, either through the Department of Trade and Industry (DTI) or Securities and Exchange Commission (SEC), is simply the first step of legalizing your business.

What the business registration process looks like

The complete business registration process involves four key steps:

1. Name reservation and approval via the governing entity
2. Obtaining a barangay permit
3. Securing the local government (city) clearance
4. Getting a certificate of registration and your receipts/invoices

If you will employ some staff, you’d need to register with different government agencies; Or if you have special licensing needed like if you’re a financing or lending company; but generally speaking, once you complete these four steps, you already have a legal business with all the necessary permits and licenses to operate.

A common misconception

Search through Facebook and other groups and you’d find this prevalent. Take a look at this conversation I had a few days ago who was asking about DTI registration.

There’s a lot of blame to go around, but that won’t solve the problem. The only thing we can do is move forward and find the information that really matters. You can find everything you need to know right here.

But here’s where I draw the line: journalism. They have the responsibility to share accurate news. After all, that’s the job itself.

Here’s a snippet of the article mentioned in that thread.

Screenshot of the article with misleading headline

When Juan already doesn’t know where to get the proper information for his business and when you add misleading headlines from reputable newspapers, you’ve got a recipe for disaster.

Unfortunately, these newspapers wear their marketing hats more than their journalist ones. The try garnering more clicks and views and shares without thinking through the repercussions of misleading headlines.

The article is correct technically. But it’s presented in a format that’s difficult to understand. And if you don’t go past the headline, which 80% of people don’t, people will think the headline as true.

That’s why I decided to start making this website so everyone who needs information about starting their business will have the right answer.

Registration is different from taxation

DTI registration only reserves your name, it doesn’t legalize your business

A key concept that online sellers (or anybody who plans of starting a business) need to know is that registration is different from taxation. That’s really the two concepts the article was trying to say:

1. Online sellers need to register with the Department of Trade and Industry
2. But they don’t necessarily have to pay taxes

Registering your eCommerce shop with the DTI is the first step in legitimizing your business. Whether you’re only selling through Lazada or Shoppee, if you earn income from it, that is taxable. And the only way to be taxed is to register it with the proper governing entity.

The same principle applies with businesses covered by the Securities and Exchange Commission (SEC). When you complete a SEC name reservation, you only finished that first step. You are not a company nor a legal business yet.

Check domain name availability before you register your name

One tip I recommend is you check the availability of your chosen brand or company name online. Doing this extra step helps you build your brand later on.

A website is no longer a nice-to-have. It’s a requirement for businesses who want to succeed. Rarely will you find a business—large or small—that is successful without a website. That’s why it’s essential that you go through this step.

Just type in your brand name and you can see if it’s available or not. You’ll also

You can either reserve the name now, or do it immediately after your name is approved in either the DTI or SEC registration. This way, no one else can use it aside from you.

And while you’re there, start canvassing some web hosting providers. That way, you can get an idea as to what your next steps are once your name is approved.

Web hosts are where your website lives. Think of it as choosing a storage provider like Dropbox or Google Drive or iCloud. You may use different devices, but all your files are in one place. That’s essentially what web hosts are.

One that I have been using since 2011 is InMotion Hosting. They aren’t the best, but they aren’t the worst either. It’s a good starter web host that has great customer support.

Business registration and paying taxes isn’t just a hassle to small businesses, it’s your duty

Again, simply going through social media and you’ll find a bunch of comments on how registration is a hassle (alongside the misinformation).

Whenever I read at comments like these, I just roll my eyes because clearly these people don’t know how businesses fit in the bigger picture.

Yes, I agree registering a business isn’t as easy as it should be. There’s no denying that. It can take a weeks to finish the entire registration process. Compare that with singapore where you can complete an incorporation within 24 hours.

Different cities, municipalities, and government agencies all have different policies and procedures. In most cases, it also comes down to the individual person processing the application.

But despite all that, there’s no reason for you not to comply with these requirements. It’s the law. If you engage in business and don’t have the proper permits, you’re only putting yourself in unnecessary risks.

Businesses pay taxes to the government. The government provides essential services to its people. That’s how the economy works.

A great way to think about whether a decision is justified or not is using a concept from utilitarianism.

Utilitarianism is a family of normative ethical theories that promotes actions that maximize happiness and well-being for all affected individuals…the basic idea behind all of them is to in some sense maximize utility, which is often defined in terms of well-being or related concepts.

—Wikipedia

Ask yourself this question: “if every business doesn’t pay taxes, will this be beneficial for everybody?”

The answer is most likely no. The government will not have funds for its projects, which will then lead to more debt, which will eventually lead to a financial crisis. And financial crisis, if you don’t know, are usually accompanied by high unemployment rates. Meaning, there’s be less money available for spending overall.

Bottom line: you have to register your business. There’s no way around it.

You can get away with not registering your business and paying taxes, but why put yourself at risk?

On the other hand, I understand where Pinoys are coming from. A lot are skeptical.

• I’m only a small business
• I’m not earning millions
• My taxes will just go to corrupt government officials
• If my neighbor is not registered, why should I register?

All are valid points. But they are irrelevant.

Go back to the utilitarianism exercise above.

Look, the fact is, those stories you hear are merely the tip of the iceberg. There’s a lot of things that go unnoticed. For example, I recently saw in another Facebook group about what laws do you want to pass that’s specific to businesses. People commented on specific startup laws like government assistance, etc.

Did you know there’s already one called the Innovation Startup Act? It was authored in 2018 and passed in 2019.

That’s why you also have to do your part.

You’re only putting yourself and your business at risk if you engage in business without permits and licenses. At the minimum, you’ll face late penalties for registration. Worse, you could be charged for tax evasion, which is a criminal offense (aka potential jail time).

Over to You

Reserving your name via DTI or SEC is only the first step. Don’t stop there. You still have to complete the entire registration process if you want to eliminate the risk to yourself and your business. Plus, it’s also your duty.

Also remember that registration is different from taxation. When you register a business, you don’t necessarily have to pay taxes. There are specific laws and criteria for these. If your sole proprietorship business earns less PhP 20,000 a month (< PhP 250,000 annually), you don’t have to pay income taxes. You might be liable for other taxes though.

Also, if you opt to register an OPC, taxation will be different from a sole proprietorship. I discuss more about the difference in the article above.

Running a business is not easy. It takes a lot of time and effort in order to grow and succeed. Thankfully there are tools that you can use in your business to help you achieve your goals. Take a look at the ones I use and recommend here.

Discover the tools I use to run my business

Having properly defined terminology helps prevent misunderstandings which often leads to wasted time, effort, and in some cases, money. Here are the most basic info you need to know.

Business

A business is an entity that is engaged in the process of buying or selling products and/or services. It’s a generic term that’s used to describe what you do.

Example: Jollibee Foods Corp, MNLGrowkits Corporation, Juan Dela Cruz

Company

A company is a legal or business structure. It’s often used interchangeably with a business, but the key difference is that a company is only a subset of businesses.

What that means is not all businesses are companies; while all companies are businesses.

One other qualification of a company is it’s ability to scale and hire employees.

Individual as a Business

An individual can be a business, e.g. freelancer or online seller or a professional. The difference between an individual business from a company is the number of people involved.

A company can hire employees, but an individual business can’t, at least from a legal perspective. An individual can partner and/or outsource to other businesses though.

Example: Graphic design freelancer, lawyer, accountant

Professional

A professional is someone who is licensed under the Philippine Regulation Commission (PRC). If there is a PRC license for it, you are considered a professional.

Example: doctors, lawyers, dentists, accountants

Sole Proprietorship

A type of company that is registered with the Department of Trade and Industry (DTI). Also known as single proprietor.

It is one of the business structures that has the highest legal risk because the owner and the business is treated as one.

A sole prop is different from an individual registered as a business.

Corporation

A corporation is the most common type of company structure. There are different types of corporation as well, like a stock- or non-stock corporation. A new type of corporation, the one person corp (OPC) is another one.

Brand

A brand, from a legal perspective, is a short name for your brand name. Think of it as an alternative name that you use when doing business.

A brand, from a marketing perspective, is different. You can use any brand name you like in your collaterals, but your receipts and official documents need to mention your complete company name.

The only time the marketing and legal perspective aligns is when you have completed an IPO filing that allows you (the company) to do business as your brand name.

Example:

• Jollibee is the brand name, while Jollibee Foods Corp. is the complete company or business name

The vast majority of businesses use their brand name for their websites and drop the legal suffix. For example, Meralco is short for Manila Electric Company and its website is meralco.com.ph. It’s unique to them. Of course, that is entirely up to you.

If you’re in the process of starting a business, I strongly suggest that you check the domain availability of your chosen name so that you can use it later on. If you skip this step and finished your registration without checking, you might regret it since someone else might have registered the domain already.

Also note that Googling the name is not the same as doing a domain search. You might come up with zero results when you search on Google, but end up with a domain that’s already registered. There is a thing called domain parking where other people buy domains that are widely used then wait for others to buy it from them at a huge profit. Typically, domains range from $10 or PhP 500 per year. But I’ve seen domains being sold 10x or more.

Unless you want to be in this situation, make sure that you do a domain search first. Then once you finish the name registration, even if you haven’t completed the entire business registration process, buy and register the domain right away to prevent others from using it.

Paying Taxes vs Filing Tax Returns

You pay taxes and file tax returns. You don’t file taxes. Remember that.

You only pay taxes if there is a tax due; but you have to file tax returns every single time. Yes, even if there are no sales or no operations. It’s a requirement. Failure to do so will result to an open case with the BIR, which means penalties and headaches.

The amount and deadline is different for each type of tax. Generally speaking, below are the most common tax types, frequency, and its deadline.

Sample Tax Schedules and Deadlines

These dates are subject to change depending on certain circumstances.

For example, if the deadline falls on a weekend or a holiday, it’s moved to the next business day. Another instance where this may change is when the coronavirus pandemic hit. All deadlines were moved. Depending on your registration with the BIR, the due dates will also be different.

• Increase their income
• Stop working for somebody else
• Support their family

And many more. But starting a business in the Philippines isn’t as simple as you might think. There are various laws and regulations you need to know beforehand. Otherwise, you could end up facing penalties or incurring unnecessary risks that could hamper your business’ growth.

Freelancers, investing, consulting, buy-and-sell, graphic design, franchising, marketing agency, or any other type of business—here are the 8 things you absolutely need to know if you want to start a business in the Philippines.

1. All income are taxable

Let’s start with the basics.

A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines

—National Internal Revenue Code

This is the main reason why your salaries are taxed. This is why businesses are also taxed. It’s also the reason why you pay taxes for selling properties. It’s why the interests you earn from banks are also taxed.

There are specific guidelines for different entities such as the top 20,000 companies or OFWs. But generally speaking, if you have any form of income, that is taxable.

View the Philippine Tax Code

2. But you need to register to be taxed

Taxes are handled by the Bureau of Internal Revenue (BIR).

Whether you’re a freelancer or a business owner, obtaining a BIR registration certificate is a must for you.

—Taxumo

Despite seen an “additional burden,” it is the current law, and citizens must abide by it.

Learn more from Taxumo

3. There are lots of options

Business registration can be complex. For Filipinos, you generally have two choices: registering as an individual or a company.

The BIR covers individual registrations. This includes licensed professionals (like lawyers and doctors) and non-licensed individuals (like freelancers and online sellers).

When choosing a company, the most common options are sole proprietorship, partnership, corporation, and the most-recent business type—the one person corporation (OPC).

There are pros and cons for each of these business registrations that’s why it’s imperative you understand them.

Learn more from InCorp

4. A name reservation is not a company

The first step of registering a company is reserving a name with either the Department of Trade and Industry (DTI) or the Securities and Exchange Commission (SEC).

A lot of people stop at this stage thinking that they already have a business. But if you do that, what you did is simply reserved a name. You are not a legitimate business yet.

You need to register with the BIR. That is the final step before you can call yourself a business from the Philippine government’s eyes.

Read our step-by-step guide to registering with the BIR

5. Know the different taxes you need to pay

Once you finish your BIR registration, you will get a BIR Form 2303 (also called the Certificate of Registration). This document will dictate which taxes you need to comply with.

Depending on your business type and industry (among other factors), you might be liable to two or more types of taxes. Here are the most common:

Income tax—quarterly and annually VAT—monthly and quarterly Percentage tax—monthly and annually

6. Paying taxes and filing tax returns are different

Don’t get confused between the two.

• You pay taxes
• You file tax returns

With that out of the way, you are only required to pay taxes which you are liable for. If your BIR Certificate of Registration says your business is required value- added tax and you do not have any sales, you do not need to pay VAT.

But that doesn’t mean you can skip on filing. You still need to file the appropriate tax returns; otherwise, you will face penalties.

Check out Mon Abrea’s article on Rappler

7. Don’t forget to renew your permits and licenses

Having a business means you have to report back to the government. Apart from the tax returns, you are also required to renew your permits and licenses annually.

Depending on your business type (i.e. Sole Proprietorship, Freelancer, Corporation), you will have to submit certain requirements and pay the necessary fees to various government institutions.

Deadlines for these renewals are in January of every calendar year. Yes, even after finishing your registration in October, you still need to renew in January.

Look at these reminders by MPM

8. Close your business formally

Statistically speaking, not all businesses will succeed. There are many factors that affect any business’s performance such as a global pandemic or this in the industry. Regardless, you can’t just call it quits when this happens.

This means you have to formally close your business. And there is a specific process for doing so.

Unless officially closed, from the eyes of the government, your business is still business as usual.

So, if you don’t renew your permits or file your tax returns, you will be liable for penalties. Yes, even if you are not operational anymore for a number of years. This includes no income or sales.

Check out this guide by FilipiKnow

Owning a business is one of the dreams many Filipinos aspire. But it’s different from being an employee. There are rules and regulations that cover businesses that’s why you need to know what they are beforehand.

I’ve spoken with dozens of business owners who have incurred thousands of penalties and other unnecessary costs because they didn’t know these things beforehand. If you are planning to start your own business, it’s best to familiarize yourself with these things.

If you know someone who has a business or is planning to start one soon, feel free to share this post. Save them the headache. They’ll thank you for it. And if you’re looking for a proven suite of tools used by thousands of other businesses to help you manage and grow your business, you can find them all here.

Do you have any questions?

Frequently asked questions

Do I have to register my small online shop?

Yes. According to the National Internal Revenue Code (of the BIR), if you earn any income, that is taxable. And the only way you can be taxed is if you register your business.

But I’m only a freelancer/online shop seller

It doesn’t matter whether you are earning PhP5,000 a month or PhP50,000 a month—if you are engaged in buying or selling products/services, you have to register your business.

Do I have to pay taxes?

The answer is it depends. A common misconception is that if you register your business, you are liable to pay taxes. You only need to pay taxes if you meet certain criteria. For example, a graphic design freelancer who’s registered with the BIR only needs to pay income taxes if he/she exceeds PhP 250,000 sales in a given year.

I just completed my registration in November, do I still need to renew my permits next year?

Yes, you have to. Business permits are only valid for any given quarter or year. If you do not renew your permits before the due dates, you are liable for two things: penalties for late renewal or

What taxes should I pay? How much does it cost?

There are different types of taxes businesses are liable for. What taxes to pay is dependent of its BIR Certificate of Registration (COR) or form 2303. How much to pay is also dependent on several factors like your sales level, valid expenses, etc.

I have a business, but it’s not operational. Can I stop filing tax returns?

Theoretically, yes. BUT this means you are opening yourself up for penalties in the future. Remember, from the eyes of the government, you are still operating and simply not complying with the monthly tax requirements. Unless you officially close your business, you will have to continuously file nil/zero tax returns if you want to avoid penalties and issues in the future.