The worldwide pandemic has left many people in the Philippines with a lot of free time at home, and with it, a lot of opportunities to make money on the side. One way Filipinos have put their free time to good use is by indulging their entrepreneurial spirit by starting their own online businesses.
Online shopping grew 57% in the first half of this year, according to a report by eCommerce platform iprice.ph. Starting an online business in the Philippines is an excellent way to get in on that action — and grow a brand that customers will truly love.
However, because more online businesses have sprouted up in the Philippines in 2020, the government has tightened its registration and tax rules. So, should you decide to start an online business now, you better make sure that you follow the proper protocols to avoid penalties and potential fines.
Not only will you be able to avoid penalties and violations, but officially registering your online business comes with a whole host of great benefits as well. Customers will find you more credible and legitimate — making them more likely to support your business. Plus, you'll gain access to exclusive seminars, services, and much more.
In this article, we will explain how to start an online business in the Philippines, with all the steps you need to take to make sure your business is correctly registered with the Philippine government.
Setting up an online business in the Philippines – 4 key things you'll need
At this point, you likely already have your business idea or product all planned out. If not, you can check out this guide that shows you how to set up an eCommerce blueprint before registering your business.
In the Philippines, the entire registration process can be a little tedious, consisting of many documents and procedures that can take around a month to complete.
The four essential business requirements you need are:
- Registration of Business Name with the Department of Trade and Industry (DTI)
- Barangay Business Clearance
- Mayor's Permit
- Bureau of Internal Revenue (BIR) Registration
You will have to get each of these requirements in order.
1. Registering your Business Name with the DTI
The first step you'll need to do is to register your business's name with the DTI. (You should have a good name for your online store already — if not, here's a handy guide that can help you come up with one.)
However, before you fill any forms, you'll need to check if your business name is available. There is a search tool on the DTI website that shows you all the Philippines' registered businesses.
If your name/idea is available, you can now fill the online DTI registration form.
Please take note of the reference code they give you.
Pay the registration fee, and once the payment is confirmed, the DTI will send you your digital DTI Certificate that you can download using the reference code.
2. Getting Barangay Business Clearance
The next step for your online business registration is to get a Barangay Business Clearance.
As this is for an online business, chances are you're operating from your residence. Go to your barangay hall with your DTI Certificate, two valid IDs, and a proof of address — either a contract of lease for a property you're renting or a certificate of land title if you own the property.
Fill in the application form and submit your requirements to get the Barangay Business Clearance.
3. Getting a Mayor's Permit
This step is similar to the previous step in your online business registration. This time, go to City Hall or the Municipal Office of your business address with two valid IDs, proof of address (as mentioned in the previous step), DTI Certificate, and the Barangay Business Clearance.
Fill in the application form and submit all the business requirements you have so far to get the Mayor's Permit.
4. Registering with the BIR
Registering your online business with the BIR is the most crucial step towards making it a legitimate business in the Philippines. However, it's also the step that will take the most time.
Note: due to the pandemic, this may take longer than you'd expect due to long lines and smaller indoor capacities.
Follow the steps outlined below to register your business with the BIR:
Register your business
The first thing you'll need to do is fill in three copies of the BIR Form 1901, which is the Application for Registration. You can find that document available on the BIR website.
After that, prepare all the business documents you've accumulated in the past few steps: your DTI Certificate, the Barangay Business Clearance, the Mayor's Permit, valid IDs, and your proof of address.
Take all of these to your respective Revenue District Office (RDO). This is the branch office of the BIR that has jurisdiction over your business. Finding your respective RDO is easy if you're running your business from your own home — simply search for your nearest RDO and go there. However, if you're not sure, you can still go to your nearby RDO or contact the BIR and verify where you should be applying.
Next, submit the requirements at the right RDO, then pay the registration fee in a BIR-accredited bank, which will give you a BIR payment form. You'll have to submit this payment form to the bank with your payment, and another business requirement called a Documentary Stamp Tax on Subscription and Lease.
Once these are paid, head back to the BIR to submit a photocopy of these payment forms and other documents.
Once that's all done, you can claim the Certificate of Registration on a date the BIR will set. It's worth mentioning that some RDOs may ask you to attend a seminar on how to file your taxes before giving you your certificate.
When you get the certificate, make sure you also get the BIR "Ask for Your Receipt" sign.
Register your Books of Account
Your Certificate of Registration does not automatically mean your online business is all set up. You're not done yet — there are a couple more steps you'll need to complete.
The next step in business registration is registering your Books of Account, which is your record of all your business transactions. There are three types of books: Manual (handwritten ledgers, journals, columnar books), Loose-leaf (printed books), and Computerized (software-based bookkeeping).
To register these, you'll need to purchase the kind of books you want to use and fill in three copies of the BIR Form 1905, which is also available on the BIR website. Submit these to the same RDO
Note: To save time, this can be done when you register the business.
Getting your invoices
Before you officially complete your online business registration, you'll need to sort out your invoices. For this, you'll need to apply for the Authority to Print (ATP) with the BIR.
You'll need your BIR Certificate of Registration for this one. Just fill in three copies of the BIR Form 1906 (you can find it on the BIR website as well), then submit these, your Certificate of Registration, and a sample of your invoices to your BIR RDO.
This will take a while as the BIR will release your ATP after a week. When you get your ATP, you'll have to submit it to an accredited BIR printer to have them make your invoices, which could take up to two weeks (find an accredited BIR printer on this list.)
The benefits of being an official online business in the Philippines
Once you're finally registered with the BIR and able to issue invoices, that's it! You're officially registered as an online business in the Philippines. You can legally sell your products and goods to anyone in the country, with the receipts to prove it.
While you may think it's tedious and time-consuming to register your online business, there are a whole host of benefits to being officially registered, beyond avoiding penalties and fines.
For one, customers and fellow business owners will find you credible and reputable. You also get services exclusive to registered businesses, such as access to corporate bank accounts and business insurance.
If you're thinking of registering your online business but don't have the time to do all the legwork in the different government offices, there is a more convenient option. There's Taxumo, a service that automates crucial business needs such as registration and tax filing for you. With Taxumo, all you have to think about is running your online store, as they'll handle the rest.
Start your online business today
Now that you know all the steps to register an online business in the Philippines, it's a great time to dive headfirst into the wild world of selling over the internet.
But if you want to make it even easier, why not try Shopify? For a monthly fee, you can start, sell, market, and manage your business on a platform that helps you do everything you need to build your own brand online.