Registering An I-Café With BIR

This is one step in the registration and legal operation of a business that many forget to do or intentionally do not do because they want to evade paying taxes. It is not only the i-café owners who are guilty of non-registration with the Bureau of Internal Revenue (BIR) but mostly those in businesses who believe they can escape paying taxes or pay their way out when caught. The guilt in the commission of the crime of tax evasion is not one-way. Many times, the BIR people are themselves to be blamed for not doing their jobs of running after the tax evaders, big or small.

An i-café or any business for that matter must be registered with the BIR within thirty (30) days after its registration with the Department of Trade and Industry (DTI) for single-owned enterprise or Securities and Exchange Commission (SEC) for a corporation. A one thousand (PhP1,000.00) peso penalty will be charged to the business who fails to register his business with BIR within the 30-day prescribed period. The same amount of penalty (PhP1,000.00) will have to be paid by a business owner if he fails to pay and/or file the appropriate BIR Forms for the various taxes that will be specified in his certificate of registration (COR).

A contract of lease will be required for a first-time registrant of a business with BIR if the place where the enterprise will be located does not belong to the business owner. Proof of ownership of the place of business will also be required if the registrant owns the place. This is needed in order for BIR to determine whether expanded withholding tax will be among those that a business owner will have to remit monthly to the agency. The amount of monthly lease will also be the basis of the documentary stamp tax that an i-café owner will pay one-time upon registration of his business.

Depending on the monthly revenues, an i-café can be registered as VAT (Value-Added Tax) taxpayer if its annual gross income will reach one and a half million (PhP1.5M) pesos or a percentage taxpayer if the yearly revenue is lower than PhP1.5M. The classification of an i-cafe as a taxpayer will be reflected in its COR. All said, an i-cafe business registered with the BIR will have to have the following taxes listed in its COR:

1) Registration Fee - payable annually and currently pegged at PhP500.00 only.

2) Expanded Withholding Tax Withheld At Source - five (5%) of the lease amount payable monthly.

3) Value-Added Tax or Percentage Tax - twelve (12%) of gross sales or three (3%) percent only depending on the annual revenue of an i-café as discussed above.

4) Income Tax - paid quarterly at a rate specified in the tax table if the business makes money. Percentages of the net income vary from five (5%) percent to thirty-two (32%) of the taxable income of the owner of the i-café.

Registering a business with BIR normally comes first before applying for a business permit with the local government unit (LGU) but do not be surprised if the BIR personnel will ask for your LGU permit before they process you registration with the agency. If they ask for it, tell the BIR personnel that your LGU is asking for your BIR registration before the process your business permit. This is a "chicken and egg" situation that sometimes occur in our deals with government agencies. One or the other usually gives in so you should just tell them the situation as it occurs.