Who Needs to Register, and With Which BIR Form
Anyone earning income from a trade, business, or profession in the Philippines is required to register with the Bureau of Internal Revenue (BIR) before starting operations. This applies whether you are a sole proprietor selling goods online, a freelance consultant, or a newly incorporated company. Registration is what gives you a Certificate of Registration (COR), a Tax Identification Number (TIN) tied to your business, and the legal right to issue receipts or invoices.
The BIR form you file depends on your business structure:
- BIR Form 1901 — for self-employed individuals, sole proprietors, freelancers, and professionals (including mixed-income earners who also hold a job).
- BIR Form 1903 — for corporations, partnerships, cooperatives, and other juridical entities registered with the Securities and Exchange Commission (SEC).
- BIR Form 1905 — used later for updates, such as changing your registered address, adding a branch, or closing the business.
Before filing either form, you generally need your business name or entity already registered elsewhere: a Certificate of Business Name Registration from the Department of Trade and Industry (DTI) for sole proprietors, or a Certificate of Incorporation/Partnership from the SEC for corporations and partnerships. A Barangay Clearance and Mayor's/Business Permit from your local government unit (LGU) are typically required as well, since the BIR will ask for proof of these when you register.
The Step-by-Step Registration Process
Once your business name or entity is secured with the DTI or SEC, registration with the BIR follows a fairly consistent sequence. Many of these steps can now be started online through the BIR's Online Registration and Update System (ORUS), though in-person filing at your Revenue District Office (RDO) is still common, especially for first-time registrants.
The correct RDO is the one that has jurisdiction over your principal place of business, not necessarily where you live. Filing at the wrong RDO is one of the most common causes of delay, so confirm your RDO code before submitting documents.
An important update from the Ease of Paying Taxes Act (RA 11976, or "EOPT Act") is that the ₱500 Annual Registration Fee — previously paid every January using BIR Form 0605 — has been removed. New and existing businesses no longer need to file or pay this annual fee, which simplifies the registration and renewal process considerably.
Certificate of Registration (Form 2303) and Your Tax Type
Once your application is approved, the BIR issues your Certificate of Registration, commonly called "Form 2303" or "COR." This document lists your registered business name, address, RDO, the specific tax types you are liable for (such as income tax, percentage tax, VAT, or withholding tax), and your filing frequency. You are required to display the COR, along with your DTI/SEC certificate and Mayor's Permit, prominently at your place of business.
Your COR will indicate whether you are registered as VAT or non-VAT (percentage tax). This depends largely on your expected or actual gross sales or receipts:
- Businesses with annual gross sales or receipts exceeding ₱3,000,000 are required to register as VAT taxpayers and charge 12% VAT on their sales.
- Businesses at or below that threshold may register as non-VAT and pay percentage tax instead — currently 3% of gross sales or receipts, filed quarterly on BIR Form 2551Q.
This ₱3,000,000 VAT threshold, along with other peso figures in this article, is set under the TRAIN Law and subject to periodic adjustment, so always reconfirm current thresholds and rates on the official BIR website before filing.
Books of Accounts and Invoicing After Registration
Registration does not end with the COR. Every registered business must also maintain books of accounts — at minimum a General Journal and General Ledger, or subsidiary sales and purchase books depending on your business size and complexity. Small businesses commonly use manual bound books purchased from bookstores, while growing businesses use loose-leaf books or a Computerized Accounting System (CAS), the latter requiring either a Permit to Use (PTU) or an acknowledgment certificate from the BIR. Under the EOPT Act, the previous requirement to have books re-stamped every year has also been removed; books are now registered once and simply retained and preserved for the required period, with a new registration only needed when a book set is fully used.
You must also secure the right to issue invoices, either through an Authority to Print (ATP) for manual receipt booklets or through a BIR-accredited CAS or point-of-sale system. Under the EOPT Act, the old distinction between "Official Receipts" for services and "Sales Invoices" for goods has been phased out — registered businesses now issue a single type of document, generally referred to simply as an Invoice, for both goods and services sold.
Keeping these records consistent is often the hardest part for new business owners, since every sale, purchase, and expense needs to trace back to a properly issued document. In Kontabler, invoices issued to customers and expenses recorded from receipts are posted to your books automatically, so your General Journal and Ledger stay updated in real time instead of requiring separate manual entry at month-end.
Choosing 8% vs Graduated Rates, and Avoiding Penalties
Self-employed individuals and professionals with gross sales or receipts not exceeding ₱3,000,000 for the year may elect an optional 8% tax on gross sales or receipts in excess of ₱250,000, in lieu of both the graduated income tax rates and the 3% percentage tax. This election is made at registration (Form 1901) or at the start of a taxable year, and it significantly simplifies compliance since it removes the need to track deductible expenses.
Consider a freelance graphic designer earning ₱1,200,000 in gross receipts for the year, registered as non-VAT.
Under the 8% option: (₱1,200,000 − ₱250,000) × 8% = ₱76,000 in total tax due, covering both income tax and percentage tax.
Under the graduated rates (assuming ₱900,000 in net taxable income after allowable deductions): using the TRAIN law table, tax due on income between ₱800,000 and ₱2,000,000 is ₱102,500 plus 25% of the excess over ₱800,000, i.e., ₱102,500 + (₱100,000 × 25%) = ₱127,500 in income tax, plus 3% percentage tax on gross receipts (₱1,200,000 × 3% = ₱36,000), for a combined total of roughly ₱163,500.
In this example, the 8% option results in substantially lower tax due, which is why many freelancers and small professionals choose it — though the better option always depends on your actual deductible expenses, and should be reviewed each year.
Missing a filing or payment deadline triggers a 25% surcharge on the tax due (or 50% in cases of willful neglect or fraud), plus 12% annual interest on the unpaid amount, on top of any compromise penalty the BIR assesses. Filing on time, even with an estimated or amended figure, is almost always cheaper than filing late.
New registrants should also note their ongoing obligations: quarterly income tax returns (Form 1701Q for individuals, 1702Q for corporations), an annual income tax return, and — if VAT-registered — quarterly VAT returns (Form 2550Q, since the EOPT Act discontinued the old monthly VAT declaration). Staying current on these filings, alongside accurate books and properly issued invoices, is what keeps a newly registered business in good standing with the BIR long after the Certificate of Registration is issued.
Frequently asked questions
Do I still need to pay the ₱500 Annual Registration Fee to the BIR?
No. Under the Ease of Paying Taxes Act (RA 11976), the ₱500 Annual Registration Fee and its corresponding BIR Form 0605 filing were removed starting 2024, so businesses no longer pay this fee every January.
Which BIR form should a sole proprietor use to register?
Sole proprietors, freelancers, and other self-employed individuals use BIR Form 1901. Corporations, partnerships, and other juridical entities registered with the SEC use BIR Form 1903 instead.
When should I register with the BIR relative to starting my business?
You should file your registration form (1901 or 1903) with the RDO covering your business address before you start operations or before you receive your first taxable income, whichever comes first.
Can I choose the 8% tax rate instead of the graduated income tax table?
Yes, if your gross sales or receipts for the year do not exceed ₱3,000,000, you may elect the 8% flat rate on gross sales or receipts in excess of ₱250,000, in lieu of the graduated income tax and the 3% percentage tax.
