Chapter 1 Introduction to Business Taxes

CONCEPT AND NATURE OF BUSINESS

Business is the regular conduct of commercial or economic activity with the primary motive of
profit or livelihood. The secondary concerns of business may fall under the categories of social
responsibility, environmental safety or promotion, and safeguarding of public welfare and interest.

The primary objective of business, therefore, is to earn profit and its coequal secondary
objective is the social responsibility to all stakeholders.

All businesses perform various activities daily. These may be classified as either business
activities or not. Business tax covers only those actions that are classified as business activities
especially those involving the sale of goods or services.

Requisites of a business activity

For an activity to qualify as a business activity, it should satisfy the following requirements:

1. It is intended for profit. The primary motive of an activity is to maximize profit or the interest of
the shareholders. Profit can be improved by increasing the volume of sales, reducing the cost of
manufacturing and selling the product, and improving its market share or developing effective and
efficient marketing strategy.

2. It is regularly undertaken. The activity must possess the quality of a continuing and progressing
economic act and not a mere single disconnected act. A business activity is carried throughout the
year, following the principle or the rule of regularity.

3. It is financial in character. The activity involves the exchange of values or transactions that are
financial in nature. Business activities can be further divided into non-financial activities and financial
activities. For example, the hiring of an employee is a business activity or transaction but it is not
financial in character. In short, no money or its equivalent is involved. Similarly, the payment of
salaries and wages of hired employees is a business activity which is financial in nature.

4. It is legally undertaken. A business activity is considered legal when it is not against the law,
public order, and public safety. The sale of illegal drugs is primarily intended to realize profit and
enrich the seller of goods financially. It can be r by those involved in such activity and it is financial in
character. However, the activity itself is against the law, and therefore, cannot be considered under
the realm of business activity.

WHEN IS AN ACTIVITY CONSIDERED A BUSINESS ACTIVITY?

GENERAL RULE: For an activity to be categorized as a business activity, it

should be (1) primarily intended for profit; (2) regularly undertaken; (3) financial in character; and (4)
legally undertaken.

Generally, a business activity is subject to business tax.

Thus, business activities or activities that meet the requisites mentioned are subject to business tax.
This general rule, however, is subject to certain exceptions as illustrated in the succeeding sections.

EXCEPTIONS:
The following are the basic rules of business activity and the respective activities that are exceptions
thereto:
1.For the basic rule that the activity is primarily intended for profit, the exceptions are:

a. the importation of goods for personal use (Sec. 107, NIRC, as amended); and
b. an overseas communication made that is either related or non-related
to business (Sec. 120, NIRC, as amended).

It can be clearly observed that the two preceding activities are not carried out for profit.
Consequently, they are not supposedly subject to business tax. Nonetheless, the provision of the law
on taxation mandates that they should be subject to business tax as exceptions to the basic rule.

2. For the basic rule that the activity should be regularly undertaken, the exceptions are:

c. the single service rendered by a non-resident alien in the Philippines

(Sec. 105, NIRC, as amended);

d. the sale of house and lot and other forms of residence or dwelling valued
over P3,199,200 (Sec. 7, RA 9337, as amended);

e. the single winning in horse race or jai-alai (Sec. 126, NIRC, as amended);
and

f. the only sale of shares through local stock exchange by one who is not
a security dealer (Sec. 127, NIRC, as amended).

Again, the above activities are isolated or not regularly undertaken. These activities should then
be classified as non-business activities and, therefore, not subject to business tax. However, the law
considers them as exceptions to the basic rule.

Simplified and Procedural Handbook on Transfer and Business Taxation

3. For the basic rule that the activity is primarily intended for profit and regularly undertaken, the
exceptions are as follows:

A regular conduct of business activity whose gross sales or receipts in any 12-month period do
not exceed P100,000 shall be considered as a means of subsistence or livelihood and shall not be
subject to business tax.

Individuals whose businesses do not realize gross sales or receipts exceeding P100,000 in any
12-month period are classified as marginal income earners and not subject to business tax (Sec. 2,
Rev. Reg. 11-2008, as amended).

It is clear that the aforementioned activities are for profit and regularly undertaken, and thus,
should be subject to business tax. However, if the gross receipts do not exceed P100,000, the activity
is considered for subsistence only. This particular exception is only applicable if the taxpayer is
classified as an individual taxpayer. It does not apply to partnerships and corporations.

It should be remembered, therefore, that an activity which meets the aforementioned requisites
subject to the exceptions mentioned is a business activity and thus, subject to business tax.

CLASSIFICATION OF BUSINESS ENTITIES

It is important to distinguish business activities for taxation purposes. Needless to say, taxation
primarily covers business activities or those transactions deemed as one.

The types of business entities are broadly classified according to nature and form or ownership.
1. According to nature

a. Merchandising. It is a business entity engaged in buying a product in one form and

selling it in the same form, the business does not alter the form or appearance of the product.
Merchandising business is subject to business tax based on the gross sales made during the period.

b. Manufacturing. The nature of a manufacturing business entity is to buy a product in

one form and to sell it in another. In manufacturing, there is a conversion of raw materials into a
finished product. Manufacturing business is subject to business tax based on the gross sales during
the taxable year.

c. Service. Normally, service entities are not engaged in buying and selling a product but
in rendering services to customers. This type of business is subject to business tax based on the gross
receipts made during the period.

d. Hybrid business. A business entity can be classified under this category when it carries
both the nature of manufacturing and service to customers. Hotels and restaurants can be classified
as a hybrid business. A hybrid business is generally subject to business tax based on either its gross
sales or its gross receipts during the taxable period.

2. According to form or ownership

a. Sole proprietorship. It is a form of business entity owned by only one person.

b. Partnership. It is a business entity owned by two or more persons and formed by an
agreement between partners and in which the profits or losses are divided among themselves.

c. Corporation. It is a form of business entity owned by five or more

persons. A corporation is created by the operation of law.

CONCEPT AND NATURE OF BUSINESS TAXES

Business tax is a tax imposed on the onerous transfer of product, property, and service.

Onerous transfer means that there is monetary consideration involved in the transfer of
goods or services between the owner and the buyer. However, if the transfer of goods or services is
without consideration (i.e., for free), the transfer is said to be gratuitous. Gratuitous transfer is
subject not to business tax, but to another kind of tax.

To sum up, onerous transfer of goods or services is subject to business tax while gratuitous
transfer is subject to transfer tax.

Both business tax and transfer tax are referred to as transfer taxes. It should be emphasized
that what is being taxed is not the goods or services transferred but the act of transferring the goods
or services itself. However, since the act can hardly be measured financially, the basis is made
through the amount of gross sales of goods or the gross receipts of services.

Kinds of business tax

The business taxes named in the National Internal Revenue Code (NIRC) of the Philippines or RA
8424, as amended, are:

1. value-added tax,

2. percentage tax, and

3. excise tax.
 A brief discussion of the business taxes follows. The lengthy discussions of value-added tax and
percentages are made in the succeeding chapters.

Coverage of value-added tax

The value-added tax is imposed on the following:

1. Sale of goods or properties in the ordinary course of the business (Secs. 105-106, NIRC,
as amended)

2. Sale of services and use or lease of properties in the ordinary course of the business
(Sec. 108, NIRC, as amended)

3. Importation of goods or properties whether or not in the course of business or trade (Sec.
107, NIRC, as amended)

Coverage of percentage tax

The percentage tax is generally imposed on services. The following taxes are among those
percentage taxes mentioned in Secs. 116-127, NIRC, as amended:

1. Three percent tax on any person whose sales or receipts are exempt from
payment of value-added tax
2. Tax on domestic carriers and keepers of garages

3. Tax on international carriers

4. Tax on franchises

5. Overseas communication tax

6. Tax on banks and non-bank financial intermediaries

7. Tax on finance companies

8. Tax on life insurance premiums

9. Tax on agents of foreign insurance companies

10. Amusement taxes

11. Tax on winnings

12. Tax on sale of shares of stock traded through local stock exchange

Coverage of excise tax

The excise tax within the context of business tax is imposed on following (Secs. 129–151, NIRC,
as amended):

1. Manufacturer of any of the products mentioned below or

2. Importer of any of the following products:

a. Wines
 b. Distilled spirits (like liquors) and fermented liquors (like beer)

c. Cigars, cigarettes, and tobacco

d. Automobiles, fuel and oils, mineral products, and non-essential goods

REGISTRATION OF PERSONS/BUSINESSES

(Rev. Reg. 7-2012)

Nature of business registration

Taxpayers subject to internal revenue taxes must register with the Bureau of Internal Revenue
(BIR).

Registration of a person or a business is broadly classified into two types, namely:

1. primary registration; and

2. secondary registration.

Primary registration refers to the process by which a person, whether an individual-including

estates and trusts-or a corporation and other juridical entities, upon application and full compliance
with the registration requirements, is registered with and consequently included in the registration
database of the Bureau of Internal Revenue (Sec. 3(1), Rev. Reg. 7-2012).

Secondary registration pertains to the subsequent registration activities after the issuance of BIR
Certificate of Registration (COR) relative to the printing and issuance of official receipts or sales
invoices; keeping or registering of books of accounts and other accounting records; applying for
certain accreditation requirements; and securing of other applicable registration-related permits (Sec.
3(2), Rev. Reg. 7-2012).

The succeeding sections discuss primary registration. Topics covering secondary registrations
are tackled in different areas like administrative provision of taxation.

Scenarios of primary registration

Primary registration may involve two scenarios depending on the purpose of the taxpayer for
applying for registration:

1. First scenario: Purely taxpayer identification number (TIN) issuance

This scenario refers to the issuance of TIN only to applicants under Executive Order No. 98,
series of 1998, which includes the following:

a. Individual taxpayers required to incorporate the TIN in all

forms, permits, licenses, clearances, official papers, and documents which they secure from other
government agencies like local government units (LGU), Department of Trade and Industry (DTI), Land
Transportation Office (LTO), etc.

b. Overseas Filipino workers (OFW)/overseas contract

workers (OCW), non-resident foreign corporations, and non-resident aliens not engaged in trade or
business in the Philippines subject to final withholding tax on income derived from sources within the
Philippines
2. Second scenario: TIN issuance and registration

This scenario refers to the issuance of TIN to all persons who will engage in business, practice
their profession, or get employed and who may or may not be subject to any national revenue, but
may be required to file the corresponding tax returns, statements, or other documents as required by
the Tax Code. These requirements include income tax, estate and donor's tax, value-added tax,
percentage tax, withholding tax, excise tax, and documentary stamp tax, as well as the registration of
its branches.

In other words, the first scenario of primary registration is purely the issuance of TIN to
applicable taxpayers, and the second involves the issuance and registration of TIN. Figure 2 is the
graphical representation of registration of person subject to business tax.

It can be observed that the taxpayer under scenario 1 does not have to proceed to secondary
registration. On the other hand, the taxpayer falling under the second scenario must proceed to
secondary registration once all the requirements for the primary registration are fully accomplished.

POLICIES ON THE APPLICATION AND ISSUANCE OF TAXPAYER IDENTIFICATION NUMBER

(Sec. 4, Rev. Reg. 7-2012)

Taxpayer identification number (TIN) pertains to the system-generated reference index number
issued and assigned by the BIR to each and every person registered in its database.

The TIN is a 9- to 13-digit numeric code. The TIN proper consists of the first nine digits. The last
four digits comprise the branch code in the case of business entities which may be increased
depending on future systems enhancements and policy declarations of the Commissioner of Internal
Revenue.

This reference index number should be indicated in all business and/or personal transactions of
the registered person in both government or private offices or institutions,

GENERAL RULES: The following are the general rules in the application and issuance of TIN:

1. The TIN, once assigned to a particular taxpayer, is non-transferable. There shall be no

instance where two or several taxpayers are holders of the same TIN.

2. Only one TIN shall be assigned to a taxpayer regardless of the variety of transactions
(e.g., an employee who, at the same time, is engaged in business).

3. Once assigned with TIN, a taxpayer is precluded from applying for another TIN, except for
banks with both regular banking unit (RBU) and with foreign currency deposit unit (FCDU) where each
unit is assigned with different TINS.

4. Any person who secures more than one TIN shall be subject to penalty of P1,000 for
every TIN acquired in excess of one, aside from the criminal liability that may be imposed.

5. The estate of a deceased person or a trust under an irrevocable trust agreement shall be
issued a TIN separate and distinct from the TIN of the deceased person and/or the trustee.

6. Minors who are earning and/or who are under the circumstances prescribed under
Executive Order No. 98, series of 1988, shall be supplied with TIN.

7. Non-resident aliens not engaged in trade or business or non-resident foreign corporations

shall be issued TIN for purposes of withholding taxes on their income from sources within the
Philippines. The withholding agent shall apply for the TIN on behalf of the aforementioned taxpayers
prior to or at the time of the filing of their monthly withholding tax return.

8. Branches of identified large taxpayers shall be registered at the large taxpayer service
(LTS) of the BIR branch where the head office is registered.

9. All incorporators of corporations or associations, whether stock or nonstock, partners of

partnerships, and members of cooperatives must have TIN.

Persons/Businesses who are required to or may secure TIN

The following persons, whether natural or juridical, are required to secure TIN:

1. Every person, including its branches, subject to any national internal revenue tax, namely:

a. income tax,

b. estate tax,

c. donor's tax,

d. value-added tax,

e. percentage tax,

f. excise tax, and

g. documentary stamp tax

2. Persons subject to taxes under one-time transaction such as but not limited to capital gain tax

3. Any person who, although exempt from the imposition of the taxes under the Tax Code, as
amended, is nevertheless required to withhold taxes on account of his/her income payments made to
taxable individuals or entities

4. Any person required to make, render, or file a return, statement, or other document whereby
he/she is required to indicate his/her TIN in such return, statement, or document filed with the BIR

5. Any person dealing with government agencies and instrumentalities including government-
owned or -controlled corporations and local government units

Individuals exempted from the TIN requirement

Pursuant to Executive Order No. 31 and as identified by the Department of Foreign Affairs
(DFA), the following are exempted from the requirement of TIN when they apply for any government
permit, license, clearance, official paper, or document:

1. Foreign personnel of diplomatic mission

2. Foreign personnel of international organizations

Documents that require TIN

TIN should be indicated on the following returns, statements, or documents:

 1. Sugar quedans, refined sugar release order, or similar instruments to reflect the TIN of
the owner or seller of the sugar

2. Domestic bills of lading to reflect the TINs of the owner of the ships and consignees of
commercial value shipment

3. Documents to be registered with the Registry of Deeds or Assessor's Office to reflect the
TINs of the parties to the real property transactions

4. Registration certificates of transportation equipment by land, sea, or air to reflect the

TINs of the owners

5. Documents to be filed or registered with the Securities and Exchange Commission (SEC)

6. Building construction permit to reflect the TINS of owners

and contractors of buildings and civil works

7. Application to open bank accounts and application for loan with banks, financial
institutions, and other financial intermediaries

8. Application for Mayor's permit

9. Application for business license with the Department of Trade and Industry (DTI)

10. Official receipts, invoices, and vouchers required to be issued by persons engaged in
business, non-governmental organizations, including nonstock, non-profit organizations or foundations

11. Application for franchise from the Land Transportation and

Franchising Regulatory Board (LTFRB), Maritime Industry Authority (MARINA), and other government
regulatory authorities

12. Application for accreditation with the Department of Education (DepEd), Commission on
Higher Education (CHED), and other agencies

13. Application for tax exemption and registration as donee institution 14. Application for tax
clearance for internal revenue tax liabilities

15. Application for business or travel passport with the Department of Foreign Affairs (DFA)
of persons who are gainfully employed

16. Application for community tax certificate with the local government unit of persons who
are gainfully employed

17. Such other documents similar to any of the above or as may be required (Sec. 4 (2), Rev.
Reg. 7-2012)

Securing TIN through other facilities

TIN is made through the concerned BIR district office. Under certain circumstances as may be
provided by the existing rules and regulations, TIN may be obtained either through the e-REG facility
on the BIR website or through the Securities and Exchange Commission (SEC) facilities.

Applicants whose TINs have been secured through the e-REG facility shall complete their
application with the BIR district office.
 In case of a partnership or a corporation, including government owned and/or -controlled
corporation (GOCC) which upon registration with the SEC has already been assigned with a TIN, the
"Application for Registration" (BIR Form 1903) shall be completed and submitted to the BIR district
office which has jurisdiction over its principal place of business.

Registration of business taxpayer

The submission of a Mayor's permit prior to registration is mandatory. Failure to comply shall
subject the taxpayer to ocular inspection for the purpose of verifying the existence of the taxpayer's
business.

To complete the registration of business taxpayers and those required to issue receipts, the
following documents shall be submitted:

a. Application for authority to print (ATP) receipts and invoices

b. Registration of manual books of accounts

c. Application for permit to use computerized accounting systems (CAS) or

components thereof, if applicable

d. Application for permit to use loose-leaf accounting records, if applicable

e. Application for permit to use CRM/POS machine and the like, if

applicable

f. Permit to operate for taxpayers engaged in activities or transactions

involving products subject to excise tax

Issuance of TIN card

TIN card issued for the first time shall be free of charge and shall contain the following
information: serial number, registered name of the applicant, TIN, address, birth date or date of
incorporation, date of issue, signature of the Commissioner of Internal Revenue, signature of TIN
owner or duly authorized representative in case of juridical person, and a picture for an individual
taxpayer.

Subsequent requests for the issuance of TIN card due to loss or damage shall be charged with a
fee amounting to P100.00 to cover the cost of printing.

REGISTRATION OF BUSINESS

Once the TIN requirements have been fully complied with, individuals engaged in business or practice
of profession and juridical entities, unless otherwise exempted, shall:

1. pay the annual registration fee, if applicable;

2. secure a Certificate of Registration (COR);

3. get an “Ask for Receipt” notice, if applicable; and

4. attend the taxpayer's initial briefing to be conducted by the BIR for new registrants
in order to appraise them of their rights, duties, and responsibilities.

The COR shall be issued by the revenue district officer for applicants who complied with the
registration requirements.
Persons required to register

The following persons are required to proceed to the second stage of primary registration:

1. Employees

2. Self-employed individuals, professionals, estates, and trusts, and their branches or

facilities

3. Corporations, partnerships, cooperatives, associations (whether taxable or non-taxable),

and their branches and facilities if any

4. Government agencies/instrumentalities (GAIS), government owned and/or -controlled

corporations (GOCCs), local government units (LGUS), and their branches or facilities, if any

A branch means a separate or distinct establishment or place on business where sales

transactions are conducted independently from the head office. A branch could be any of the
following:

1. A sales outlet or establishment covered by one business or trade name situated in one
location or building

2. Every line of business of an individual covered by a separate business name approved by

"DTI even though situated in one and the same location

3. A facility with an administrative office

4. Each franchise or certification of public convenience (CPC) which the transportation

operator owns or operates, regardless of the number of units under each franchise/CPC

5. A real property for lease with an administrative office

6. Each "exit/entry" gate, regardless of the number of booths accepting toll fees thereat

7. Unmanned sales outlets or service equipment such as automated vending machines

(AVM), automated ticket dispensing machines, automated teller machines (ATMs), and the like

8. Mobile store, stall, booth, or kiosk which does not maintain a fixed place of business

9. Other separate or distinct establishments which conduct

sales transactions independent of the head office

Prescribed period of registration

Every individual subject to internal revenue tax shall complete his/ her registration as follows:

1. For employees - within 10 days from the date of employment

This applies to individuals who are registering with the BIR for the first time by reason of
employment

2. For self-employed individuals, professionals, estates, and trusts, and their branches, if
any, and branches of corporations – on or before the commencement of business

In the case of pursuit of business or practice of profession, commencement of business shall be

reckoned from the day when the first sale transaction occurred or within 30 days from the day of issue
of the Mayor's permit/ professional tax receipt (PTR), whichever comes earlier, by the particular local
government unit (LGU) where the taxpayer is intending to hold the business transactions.

3. For corporations (taxable or non-taxable) – before payment of any tax due

Corporations where documentary stamp tax (DST) is required to be paid on the original
issuance of shares of stock to the shareholders or subscription of shares of stock shall register within
five days after the close of the month when any taxable transactions occurred.

4. For partnership, associations, cooperatives, government agencies, and instrumentalities

– before or upon filing of any applicable tax return, statement, or declaration as required by the Tax
Code, as amended

Annual registration fee

An annual registration fee in the amount of five hundred P500 for every separate or distinct
establishment or place of business shall be paid upon registration and every year thereafter on or
before January 31 by every person subject to any internal revenue tax (Sec. 8, Rev. Reg. 7-2012).

Separate or distinct establishment refers to an establishment where business transactions

occur at a place other than where the head office is located. It also refers to any of the various lines of
business pursued by a taxpayer which are operated and conducted at the same address and are
individually covered with business trade names secured from the DTI notwithstanding the fact that
such undertakings are owned by one and the same person and/or individual.

Separate or distinct establishment shall be treated as a branch whereby a registration fee of

P500 shall be imposed.

Entities exempted from annual registration fee

The following persons and/or entities shall be exempt from the imposition of the annual
registration fee of P500.

1. Cooperatives duly registered with the cooperative Development Authority

2. Individuals earning purely compensation income whether locally or abroad

3. Overseas workers

4. Government agencies and instrumentalities in the discharge of their governmental

functions

5. Marginal income earners

6. Local government units in the discharge of their governmental functions

7. Tax-exempt persons such as those enumerated under Section 30 of the Tax Code,
as amended, in pursuance of tax-exempt activities
8. Non-stock and non-profit organizations not engaged in business

9. Persons subject to tax under one-time transactions

10. Persons registered under EO 98, series of 1998

11. Facilities where no sales transactions occur

Place of filing the registration form

The prescribed application for registration shall be filed with the same revenue district office
(RDO).

However, for individuals who were previously issued TIN and will be engaged in the practice of
profession or a sole proprietorship, the submission of the prescribed registration update form shall be
with the RDO having jurisdiction over the place of business. If this RDO is different from the RDO that
previously issued the TIN, the TIN shall be transferred by the old RDO to the new RDO upon request of
the latter or the taxpayer.

In the case of a registration of a facility, the registration form shall be filed with the RDO having
jurisdiction over its physical location using the facility code.

Registration updates mean that the process by which the information supplied during the
primary registration process is changed upon either the taxpayer's or BIR initiative.

Facility may include but is not limited to place of production, warehouse, storage place,
garage, bus terminal, or real property for lease, which is required to be registered as a facility in the
RDO having jurisdiction over its physical location.

REGISTRATION OF EACH TYPE OF INTERNAL REVENUE TAX

(Sec. 9, Reg. Reg. 7-2012)

Every person who is required to register with the Bureau of Internal Revenue shall register each
type of internal revenue tax for which he/ she is obligated, file a return, pay taxes thereon, and update
such record of any change in the registration information.

Generally, registration of tax types by a business entity consists of the following internal
revenue taxes/fees:

1. Income tax

2. Value-added tax

3. Percentage tax

4. Withholding tax on compensation

5. Final withholding tax on certain income payments

6. Documentary stamp tax

7. Excise tax

8. Annual registration fee

The nature of the business to which the taxpayer belongs should be taken into consideration in
determining the type of taxes that should be registered.

Rules on registration of business based on its nature

For the purposes of determining the proper tax type based on the nature of the business
activity of the taxpayer, the succeeding rules shall apply:
 1. Any person who, in the course of trade or business, sells, barters, exchanges goods or
properties, or engages in the sale of services subject to value-added tax ( VAT) shall register with the
VAT tax type with the BIR district office having jurisdiction.

2. Any person who, in the course of trade or business, sells, barters, exchanges goods or
properties, or engages in the sale or exchange of services shall be liable (mandatory VAT registration)
to register the VAT tax type if:

a. his/her gross sales or receipts for the past 12 months, other than those that are
exempt under Sec. 109 A to U of the Tax Code, as amended, have exceeded P3,000,000: or

b. there are reasonable grounds to believe that his/her gross sales or receipts for the
next 12 months, other than those that are exempt under Sec. 109 (1) A to U of the lax Code, as
amended, will exceed P3,000,000.

3. Those not required to register VAT (non-VAT registration) as a tax type are:

a. persons subject to other percentage taxes.

b. those whose transactions are VAT-exempt as enumerated under

Sec. 109 of the Tax Code, as amended; and

c. marginal income earners.

4. VAT-exempt persons may opt to register under the VAT system.

5. Persons or entities who are liable to pay documentary stamp tax (DST) on a periodic
basis like insurance companies and banks shall register for the tax type of DST upon initial
registration with the BIR.

6. The registration for the tax type of excise tax shall only be applicable to those taxpayers
liable to pay the excise tax on domestically produced or extracted articles under Title VI of the Tax
Code, as amended.

7. Withholding agents shall register to the withholding tax types, and to the applicable tax
types based on their proprietary functions.

Registration of tax type of business entities with branches

With respect to business entities with branches, the succeeding rules on registration of tax
types shall be observed:

1. Registration shall be with the head office only on the following tax types:

a. Income tax

b. Value-added tax'

2. Registration, at the option of the taxpayer, shall be with the head office or in each and
every branch on the following tax types:

a. Percentage tax

b. Withholding tax on compensation

 c. Creditable withholding tax at source on certain income payments

d. Final withholding tax on certain income payments

e. Documentary stamp tax

f. Excise tax

3. For the annual registration fee, registration shall be made in the head office and in all the
branches and facilities with transactions.

Registration of tax type of large taxpayer

In case the registrant is a large taxpayer, the above rules giving the taxpayer the option to
register the tax type in the branches shall not apply.

Under the existing rules and regulations, large taxpayers are required to file tax returns and
pay taxes due thereon through electronic filing and payment system (EFPS) facilities, if applicable.
Otherwise, filing shall be done manually, reflecting the RDO Code under the Large Taxpayers Service
in all instances.

The value-added, percentage, income, and withholding taxes are required to be filed on a
consolidated basis while the excise and documentary stamp taxes are not provided that the filing and
payment are made through EFPS facilities. The registration fee can also be paid through EFPS,
provided that the payment form reflects the actual RDO having jurisdiction over the physical location
of the respective branches.

The classification as a large taxpayer is notified in writing by the Commissioner of Internal

Revenue if it satisfies any or a combination of any of the criteria below.

1. As to tax payment

a. Value-added tax. Any taxpayer with a net VAT paid or payable of at least
P200,000 per quarter for the preceding year

b. Excise tax. Any taxpayer with an annual excise tax paid or payable of at least P1 million for
the preceding year

c. Income tax. Any taxpayer with an annual income tax paid or payable of at least P1 million
for the preceding year

d. Withholding tax. Any taxpayer with annual withholding tax payment/remittance from all
types of withholding taxes (i.e., on compensation, expanded, final, and government money
payments) of at least P1 million. For taxpayers, business establishments, and government
offices with branches/units, the basis is the total taxes withheld by the head office and all
the branches/units.

e. Percentage taxes. Any taxpayer with percentage taxes paid or payable of at least P200,000
per quarter for the preceding year

f. Documentary stamp taxes. Any taxpayer with aggregate annual documentary stamp taxes
of at least P1 million

2. As to financial condition and results of operation

a. Gross sales/receipts. Any taxpayer with total annual gross

sales/receipts of at least P1 billion for the preceding year

b. Net worth. Any taxpayer with a total net worth at the close of each
calendar or fiscal year of at least P300 million

c. Gross purchases. Any taxpayer with total annual gross purchases of at

least P800 million for the preceding year

d. Top corporate taxpayers listed and published by the Securities and Exchange Commission

TRANSFER OF REGISTRATION

(Sec. 10, Rev. Reg. 7-2012)

In case a registered person transfers his/her registered address to a new location, it shall be
his/her duty to inform the BIR district office of such fact by filing the prescribed BIR form specifying
the complete address where he/she intends to transfer.

The following rules shall apply for the transfer of registration: 1. For non-business

individuals under E.O. 98, series of 1998, or

one-time transaction (ONETT) Taxpayers initially issued TIN for ONETT shall submit the proper
application form to the BIR district office where he/ she intends to establish his/her business address
or to the new employer's BIR district office, whichever is applicable. The transfer of registration shall
be initiated by the BIR district office where the request for transfer was filed.

2. For local employees

a. Individuals earning purely compensation income. In case of transfer due to a change of

employer, the new employer has the responsibility to notify the BIR district office. The transfer of such
employees shall be initiated by the BIR district office which received the application.

b. Transfer of employees of transferring employer. The registration of

employees should follow the BIR district office registration of the employer.

c. Employee intending to engage in business or practice of profession. An individual who is

registered as an employee in one BIR district office but subsequently applies for registration as a
business taxpayer in another district office shall submit the proper form to the BIR district office
having jurisdiction over his/her business address.

3. Taxpayers engaged in business or practice of profession

a. Branches or facilities. Request for transfer shall be filed at the BIR

district office where such branch or facility is registered

b. Head office. In transferring the registration of the head office, the

following specific guidelines shall be observed:

i. As a general rule, the transfer of a head office from one BIR district to another is
discouraged. However, request of transfer by a head office to a bigger office or establishment
can be allowed.

ii. A taxpayer requesting for a transfer of his/her head office should not be allowed to
transfer to a BIR district office where his/her previous RDO is currently assigned.
CANCELLATION OF REGISTRATION

(Sec. 12, Rev. Reg. 7-2012)

The cancellation of registration may pertain to the cancellation of either the business
registration and/or the assigned TIN. Application for TIN/registration cancellation shall take plaće
upon:

1. the death of an individual;

2. the full settlement of the tax liabilities of the estate;

3. the discovery of a taxpayer having multiple TINs; and

4. the dissolution, merger, or consolidation of a juridical person.

The cancellation of the head office registration shall result in the cancellation of all its
registered branches. Thus, if at least one branch will continue its operation, the taxpayer shall file an
application for update, making one of its existing branches as the head office. If the location of the
branch selected as the head office is under a different BIR district office, the rules on transfer of
registration shall apply.

REGISTRATION UPDATES

(Sec. 11, Rev. Reg. 7-2012)

Any person duly registered, whenever applicable, must update his/her registration with the BIR
district office where he/she is registered. The following instances require a taxpayer to update his/ her
registration:

1. A change in the nature of the business from sale of taxable goods and/or services to
being VAT-exempt

2. A person whose transactions are exempt from VAT but voluntarily registered under the
VAT system, and after the lapse of three years after his/her registration, applies for cancellation of
VAT registration"

However, the optional registration as a VAT taxpayer of a franchise grantee of a radio or

television broadcasting company whose gross receipts for the preceding year did not exceed P10
million shall be irrevocable.

3. A VAT-registered person whose, gross sales or receipts for three consecutive years did
not exceed the amount of P1,919,500.

Upon updating his/her registration, the taxpayer shall be liable to the percentage tax.

PENALTY ON BUSINESS REGISTRATION

(Sec. 15, Rev. Reg. 7-2012)

The following violations related to primary registration shall be penalized as follows:

1. Acquisition of multiple TINS - P1,000 for every TIN acquired in excess of one, aside from
the criminal liability that may be imposed

2. Failure to register (those who are found unregistered during Tax Compliance Verification
Drive) - subject to the penalties under prevailing revenue issuances
 3. Late registration (those who are voluntarily registering but beyond the prescribed period)
- compromise penalty of P1,000, in addition to the unpaid registration fee of P1,000 and penalties due
thereon for the years the person is already operating

4. Late payment of annual registration fee:- subject to 25% surcharge and 20% interest and
P200 penalty

5. Failure to register a branch or facility - subject to a penalty of P1,000 per unregistered

branch or facility

6. Failure to and/or erroneous supply of information - P1,000 for every error or omission, but
not exceeding P25,000

Erroneous encoding of material information by RDO personnel - subject to P1,000 per error committed