12 Tax Filing Facts Every Business Should Know for January 2016

January 2016 will roll out in less than a month and we all know what that means—it’s time to map out your goals and business strategies! This, of course, will likely begin with taking care of a crucial aspect of your business: renewing your business permits and license. With the deadline set on or before January 20, 2016, the renewal of business permit must be done ahead of time should you wish to avoid the hassle of falling in line with other tax payers. Not only will you get penalties if you fail to renew, your business will also be prohibited from operating in your local government unit.

Don’t risk paying surcharges. Here are tax facts to emphasize how inherently important tax filing is in every business transaction:

1. Take note that application for SSS, PAG-IBIG and PhilHealth clearances is necessary if your business has 5 or more employees.

2. It is a must for freelancers to register and renew their business permits since they are considered sole proprietors. Freelancers like small business owners must file an Income Tax Return (ITR) declaring mixed income. To kick off the process, a freelancer must first declare that he or she is a Mixed Income Earner (MIE), which is how to tell the Bureau of Internal Revenue (BIR) that he or she has several sources of income aside from the compensation obtained from an employer as salaried worker.

3. Requirements and procedures are different for each local government unit (LGU). The steps you are required to accomplish when renewing a business permit in Makati City may be different from the steps in Quezon City. It is thus a must to research and educate yourself with the steps in the LGU your business will operate in prior to renewing your permit.

4. A business has to register and renew its head office and other branches. If you still haven’t started operating yet, you are still required to pay an annual registration fee of P500—regardless of being a head office or a branch. Failing to pay the annual registration fee has a corresponding penalty of P5,000 to P20,000.

5. Every business in the Philippines is required to pay a community tax certificate or cedula including businesses owned by non-Philippine residents. The community tax will be paid in the business owner’s place of residence or the jurisdiction of the business.

6. It doesn’t matter when during the previous year you registered your business. For instance, paying in December 2015 means you’re still required to renew your business permit on or before January 20, 2016.

7. It is unfortunate that government transactions in the Philippines are slow and inconvenient. Apart from preparing your requirements ahead of time, it is best to clear out your schedule for the day to accomplish renewing your business permit.

8. See to it that your business permit is up-to-date and current. Make sure to keep track of the administration work which is mainly duties related to paying taxes. Ensure that receipts are issued properly because without receipts, you can’t support claims on your income which can lead to issues during filing.

9. Entrepreneurs cannot offset their taxable income with their business loss. This is due to the fact that business tax must be differentiated from income taxes. Business taxes are composed of a percentage of tax on sales, receipts, and Value Added Tax (VAT) while income tax is derived from your annual income as an employee or your personal income.

10. It is important for business owners to itemize all income sources and include all the income received from different sources when filing taxes. Every single detail must be included and accounted for as much as possible.

11. Take note if you’re qualified for exemptions which means your total taxable income can be reduced. When filling out Form 1701, you need to include all of the gross income you received from various sources. You must note down the income you received from your business/freelancing work, as well as income from compensation as an employee. The total income can be qualified for exemptions, which are composed of Personal Exemptions and Business Expenses. Your taxable income will be the basis of your income tax. This is to avoid double taxation in your case when your employer has already paid and filed taxes on your behalf as a salaried employee.

12. Make sure to attach all requirements to the ITR. These may include a summary of taxes, duties, and licenses. For instance, BIR Form 2316 (Certificate of Compensation Payment or Income Tax Withheld) must be attached to the Annual Income Tax Return or BIR Form 1701, which is used for individuals with mixed income. Form 2316 is accomplished and issued yearly by the employer and given to employees whose income is subjected to final tax declaration. The form must indicate the total amount that was paid to the employee, as well as the corresponding taxes withheld during the calendar year.

Keeping track and filing your taxes can be a tedious, time-consuming task but it is your basic obligation as a citizen. Of course, you can opt to hire an accountant to help you properly fill out your paperwork and make sure you get the task done flawlessly. You can also opt to outsource these administrative tasks and have experts handle business related concerns like the renewal of business permits. This way, you can focus on being an excellent employee in your day job while making a great business for your freelance work as well.