In developing nations like the Philippines, MSMEs make up a significant portion of industrial production. One of the factors contributing to economic expansion is the MSME sector, which is thought to offer significant employment opportunities. In fact, in numerous developed and developing nations around the world, the micro small and medium enterprise sector serves as the foundation for economic expansion. It is regarded as the driving force behind the progress of their economy.
If you are an MSME owner and have been running it for a long time, then the new year checklist wouldn’t faze you. But it would also be useful to review a checklist to ensure you don’t forget anything. However, if you just registered your small enterprise, you may be surprised to learn that the beginning of the new year means a slew of new compliance requirements. In this article, we sum up a list of the ten common annual compliance requirements for MSMEs.
Register your MSME
In the Philippines, starting a business regardless of size also has certain requirements they must follow. It is true that your company does not need to be registered as a MSME. The first step is to register with the Department of Trade and Industry (for sole proprietorships) or the Securities and Exchange Commission (for partnerships and larger corporations).
Have your LGU Registration issued/reissued
This includes, but is not limited to, paying for sanitary permits, fire permits, environmental permits, local business tax, barangay clearance, zoning clearance, and other fees. All of these have to be renewed yearly as a prerequisite for the business permit. Requirements vary based on the nature of the business or municipal/ city regulations. Have these renewed before January 20.
Provide an inventory list
This applies to businesses that trade and manufacture goods and have stock-in-trade, raw material, in-process, and other goods in their inventory. Check to see that the amount on the list can be reconciled with the amount on your annual income tax return and financial statements.
Present your books of accounts
Your business’s transactions are recorded in your book of accounts, also known as the “accounting books.” The submission depends on your registration whether loose-leaf books, computerized books, and manual books. Computerized books have until January 31 and others must submit by January 31.
Pay the annual registration fee and submit form 2316 to the BIR
Pay the BIR registration fee (P500) or before January 31. You can pay in the RDO, or use online payment options like banks, paymaya, and others. All enterprises that employ individuals must also submit Form 2316. This is the employee’s withholding statement and should be distributed to them for their information and signature. The employer should then send the signed forms to the BIR.
File all the right documents
File BIR Form 1604C, the annual information return for income taxes withheld from compensation is here. This form should be submitted with the employee AlphaList. Additionally, with Form 1604C is the filing of the BIR Form 1604E, the Creditable Income Taxes Withheld (Expanded) and Income Payments Exempt from Withholding Tax Annual Information Return can be found here. Attach the AlphaList of people who received income payments throughout the year. Notably, the BIR Form 1604C must be filed on or before January 31 and the BIR Form 1604E on or before March 1.
Submit the Annual Financial Statements and Annual Income Tax Return to the BIR
This applies to businesses whose fiscal year ends on December 31. The ITR ought to have the Annual Financial Statement attached to it. To make it easier to prepare your FS, make sure your books of accounts are completed. As an MSME, you don’t need an accounting firm to audit the statements, so you have to be extra vigilant with your accounting and bookkeeping practices.
Submit the AFS to the SEC
Along with the BIR documents, the Annual Financial Statement should also be sent to the SEC for medium scale enterprises who registered with them. Enterprises who are registered with the BIR as sole proprietors are exempt from this.
It could be possible that some of these do not apply to your company. In addition to these, larger or specialized organizations may be required to submit additional requirements. Always confirm with the regulatory bodies with which you are registered.
If any of the requirements are not met or are submitted late, your company will be subject to penalties. Therefore, avoid wasting your limited resources by never skipping any of these items on the checklist. If you need assistance in bookkeeping and organizing your documents, or growing your small enterprise, don’t hesitate to call our accounting firm for advice. Take advantage of our free 30-minute consultation offer.