Thursday, September 07, 2006

Expensive & Time Intensive to be an Entrepreneur in PI

According to recent study by World Bank. Click this for details. Those figures and timeline are just for Starters. Money and time spent before the doors are open for business for the entrepreneur.
Starting a Business in Philippines
Minimum Capital Requirement: 5,000
City: Manila
Registration Requirements:
1. Obtain bank certificate of deposit of the paid-in capital.
Time to complete: 1 day
Comment: Fees vary from bank to bank. Some banks in Manila do not charge any fee, some banks charge up to P105 for each certificate.
2. Register incorporation with the Securities and Exchange Commission
Time to complete: 3 days
Cost to complete: PHP 40 reservation fee of company name (30 days) + filing fee for articles of incorporation: 1/5 of 1% of the authorized capital stock, no less than PHP 1,000, plus Legal Research fee of 1% of filing fee, no less than PHP 10 + PHP 210 bylaws fee + PHP 150 - stock and transfer book registration fee + PHP 75 - membership book registration fee
Comment: Documents to be submitted: corporate name verification slip, articles of incorporation and bylaws, treasurer's affidavit, statement of assets and liabilities, bank certificate of deposit, authority to verify bank account, tax account number of incorporators, registration data sheet defining personal information regarding directors, officers, stockholders etc, and written undertaking to comply with the reporting requirements of the SEC.
SEC provides online registration through SEC-iRegister, the web-based Company Registration System. One can reserve a company. Forms for registration may be downloaded from the SEC website. One can search and research company name and register the company with the SEC on-line but payment must be made at the SEC itself. Same day payment is not possible.
3. Apply for a Barangay (district) clearance
Time to complete: 2 days
Cost to complete: PHP 800
Comment: No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the barangay where such business or activity is located or conducted. Some barangays collect a fee for the issuance of a barangay clearance. The fee is based on the area (size in sq. meters) of the place of business and the location of the place of business.
The fee charged by the barangay depends on the paid-up capital of the corporation and the land area it occupies—P500 minimum plus P300 for the barangay clearance plate.
4. Obtain mayor’s permit/municipal license to operate at the Licensing Section of the Mayor's Office
Time to complete: 11 days
Cost to complete: The fees vary depending on the local government unit (city/municipality) issuing the mayor’s permit (PHP 300, sanitary permit fee + 0.2% of capital for license fee + PHP 2000, permit fee for businesses engaged in retail + PHP 1,500 garbage collection fee + PHP 360, occupational tax + PHP 705, occupational police clearance/health clearance + PHP 750, plumbing inspection fee + PHP 100, electrical inspection fee + PHP 100 building permit fee + PHP 100 sign board permit fee)
Comment: Required documents: accomplished application for business permits and licenses in duplicate copies with sketch of location of building at the back; certification issued by the corporate secretary to the effect that the company has been duly authorized to engaged in the business; amount of paid-up capital; certificate of registration; receipts of payment of due fees; lease contract; Barangay Clearance/Permit.
5. Buy special books of account at bookstore
Time to complete: 1 day
Cost to complete: PHP 200-300
Comment: Special books of account are required for the purpose of registering VAT. The books of account are sold at bookstores nationwide. One set of journals consisting of four books, namely, the cash receipts account, disbursements account, ledger and the general journal, may cost about P200, or about US$4.
Procedure 6. Secure a tax identification number, register for VAT
Time to complete: 2 days
Cost to complete: PHP 500
Comment: After the taxpayer obtains the TIN, the company is required to pay the annual registration fee of P500 at any duly accredited bank by using the payment form (BIR Form 0605)
A Tax Identification Number (TIN) must be obtained from the nearest Revenue District Office having jurisdiction over the head office. Need to have "Barangay" clearance, mayor's permit, and copy of SEC registration certificate. Other documents may be required, e.g. homeowner’s clearance, contract of lease. There is a community tax, a local tax, VAT, and income tax. When a company registers as a taxpayer, it must indicate in the application for registration the types of taxes it expects to be liable for, including VAT. The Authority to Print Receipt/Invoices must be secured by the printer before the sales invoices/receipts may be printed. Philippine law does not require a company to have its official invoice forms printed at designated print shops. If a company has secured an Authority to Print Receipts and Invoices, it can ask any authorized printing company to print its official invoice forms. However, if a company wants to print its own invoice forms (i.e., it uses its computers to print loose-leaf invoice forms), the company must obtain a special permit from the Bureau of Internal Revenue for this purpose.
7. Payment of Documentary Stamp Taxes
Time to complete: 1 day
Cost to complete: no charge
Comment: Section 174 of the National Internal Revenue Code, as amended, requires the payment of documentary stamp taxes on the original issuance of shares of stock at the rate of P1.00 on each P200 or a fractional part thereof, of the par value of such shares of stock, within 5 days after the close of the month when the registration certificate is issued by the SEC or the shares are issued by the corporation.
8. Obtain the Authority to Print Receipt/Invoices with the Bureau of Internal Revenue
Time to complete: 14 days
Cost to complete: included in procedure 6
Comment: The Authority to Print Receipt/Invoices must be secured by the printer before the sales invoices/receipts may be printed. Philippine law does not require a company to have its official invoice forms printed at designated print shops. If a company has secured an Authority to Print Receipts and Invoices, it can ask any authorized printing company to print its official invoice forms. However, if a company wants to print its own invoice forms (i.e., it uses its computers to print loose-leaf invoice forms), the company must obtain a special permit from the Bureau of Internal Revenue for this purpose
9. Print receipts and invoices at the print shops
Time to complete: 1 day
Cost to complete: PHP 2250 (median of PHP 1,500 and PHP 3,000)
Comment: The minimum number to print is 25 booklets.
10. Submit receipts and invoices to the BIR for approval, have receipts/invoices and books of accounts stamped by BIR
Time to complete: 1 day
Cost to complete: no charge
Comment: In practice, the books of accounts are presented for stamping right after the application is filed. Books can be obtained from BIR. To register books of account and invoices, present the following documents: all the required books of accounts, VAT registration certificate, SEC registration certificate and BIR Form W-5.
11. Register with the Social Security System (SSS) and enroll with the government healthcare benefits system
Time to complete: 11 days
Cost to complete: no charge
Comment: For the social security application, file employer's Data Record, report of Employee-Members (those are 2 standard forms), and articles of incorporation, copy of SEC registration certificate. Obligatory for firms with 50 or more workers to register with the Department of Labor and Employment. The Philippine government healthcare system is administered by the Philippine Health Insurance Corporation ("PHIC"). Enrollment with the PHIC is done through the Social Security System ("SSS"). If a company is enrolled with the SSS, it is automatically enrolled with the PHIC, but contributions for participation in the government healthcare system must be remitted to the PHIC. Enrollment with the SSS normally takes one to two weeks.

Our personal experience establishing a corporation is 100% more expensive and time intensive than this study.
In the name of the LORD, we plod on.

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