Here’s What Will Happen If You Don’t Fix Your Taxes
Registering your business and doing your taxes can seem like a hassle, but neglecting to do so leads to troublesome, and even severe consequences
Starting up involves, among many things, registering your business with the BIR. In the same vein, managing your business year after year involves routinely paying and filing your taxes. This should be common knowledge, but unfortunately, many businesses still avoid doing either.
Thus, as a reminder to all business owners out there, we’ve put together a list of consequences you’ll face if you don’t handle your business registration and taxation properly—and at the same time, a number of reasons why you absolutely need to do them right.
The Consequences of Not Having a Business Permit
It’s tempting to operate without a permit, especially with how long it takes to register a business in some parts of the Philippines. But there are a number of consequences you’ll have to deal with if you don't:
Government penalties—The first and most obvious consequence would be fines from the BIR and maybe even from your local government. The penalty for Failure to Register according to the BIR is, “not less than P5,000 but not more than P20,000 and imprisonment of not less than 6 months but not more than 2 years.” That’s right; you can get arrested.
Inability to expand—You might think your business is going fine while it’s operating under the radar. But once you try to expand by getting bigger clients, forming partnerships or collaborations, you’ll come to realize that many of these people want a receipt or some proof of registration.
Tarnished reputation—Remember that failure to register is a criminal offense punishable by law. Like all offenses once committed, will leave a stain on your record for life—which will make it harder for you to start another business later on or even repair your name with the BIR.
Closur, and even seizure of property and assets—In extreme cases, like operating for several years without a permit, your local government can actually move to close down your business until you’ve settled the deficiencies. Worse, if you’ve violated other secondary permits like health, sanitation, or fire safety, they can even seize your property and assets.
Why You Need to Do Your Taxes
Remember that filing and paying are two different things, but they should be done simultaneously so as not to incur the following:
- Penalty fees—Again, this is the most obvious one. There are various penalties for late filing of tax returns, whether there is or isn’t any tax due, detailed in the BIR’s website, as well as for late filing of other required statements or reports. These penalties include fines and even imprisonment.
- Interest—For unpaid overall tax amount, the government imposes a 20% interest rate per year from the date of the deadline until the same amount is fully paid. Failing to pay in five years will double the payable (20% x 5 years = 100%).
- Display registration documents—Make sure to display your registration documents (BIR Form 2303, BIR Form 0605, signage that says, “Ask For Receipt”) inside your establishment or could cost you P1,000.
- Register receipts—Refusing to register your company’s receipts or invoices to the BIR will cost you up to P50,000.
- Issue receipts—Remember to issue receipts and/or invoices or else it’ll add up as another payable. For the first offense of failing to register your company receipts, you’ll have to pay P10,000, while refusal to pay will cost you P25,000. For the second offense, it’s double the price.
Our advise? Just do it and save yourself the headache of dealing with all these consequences if you don't do your taxes. Good luck!
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