Small taxpayers and businesses may be subject to different types of taxes, including:

• Income Tax – Tax on business earnings

• Value-Added Tax (VAT) – A 12% tax on sales of goods and services

• Percentage Tax – A 3% tax for non-VAT registered businesses

• Withholding Tax – Tax deducted from employees' salaries and suppliers’ payments

• Excise Tax – Imposed on certain goods like alcohol, tobacco, and fuel

A micro taxpayer typically refers to businesses with gross sales not exceeding PHP 3 million annually. Businesses with annual sales below PHP 3 Million are exempt from VAT and are subject to 3% percentage tax. However, they have the option to choose VAT instead.

Taxpayer Classification under EOPT

Based on their gross sales, the new classification system categorizes business taxpayers into four distinct groups:

1. Micro Taxpayer: Less than ₱3 million.

2. Small Taxpayer: From ₱3 million to less than ₱20 million.

3. Medium Taxpayer: From ₱20 million to less than ₱1 billion.

4. Large Taxpayer: ₱1 billion and above.

Small taxpayers earning below PHP 3 million may opt to pay 8% income tax on gross sales or receipts instead of the regular graduated tax rates. This option is beneficial for businesses with minimal expenses.

Steps for registration:

• Secure a Barangay Business Clearance and Mayor’s Permit

• Register with the Department of Trade and Industry (DTI) or Securities and Exchange Commission (SEC)

• Obtain a Taxpayer Identification Number (TIN) from the BIR

• Apply for a BIR Certificate of Registration (COR) (Form 2303)

• Register official receipts and invoices

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• Monthly/quarterly filing of income tax returns

• Monthly/quarterly filing of percentage tax or VAT returns

• Annual income tax return (ITR) submission

• Submission of books of accounts and financial statements

• Filing and payment of withholding taxes (if applicable)

The BIR imposes penalties, surcharges, and interest for late or non-payment of taxes. These include:

• 25% surcharge on unpaid tax

• 12% annual interest on overdue amounts

• Additional penalties depending on the violation

If your annual gross sales exceed PHP 3 million, you must register as a VAT taxpayer and start filing VAT returns instead of percentage tax.

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Small businesses must maintain books of accounts, which can be manually written or computerized, to track financial transactions. These books should be registered with the BIR.

Need help with business registration? Contact us for hassle-free assistance!