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17 steps to starting a business in Davao City

And why it\\\'s easy to start a business there
By |

The gateway to the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area, Davao City is the financial and trade hub of Southern Philippines. Starting a business in Davao City is a mere 17 steps and 27 days away, according to the International Finance Corporation (IFC).

Rising from an embarrassing 19th spot in the 2009 Doing Business in the Philippines study of the IFC, the southern city emerged on the second spot this year.

If you are thinking of doing business in Davao City, here are the 17 steps to take so you can start your business:

Step 1. Verify and reserve

The company can verify the availability of the company name online. Verification is free but reservation of the name, once approved by the Securities and Exchange Commission (SEC), costs PHP 40 for the first 30 days. The company name can be reserved for a maximum of 120 days for a fee of PHP 120, which is renewable upon expiration of the period. To know more, visit the Business Bureau section of Davao City\\\'s website.

Step 2. Deposit paid-up capital in the authorized agent bank (AAB)

The company is required by law to deposit paid-up capital amounting to at least 6.25 percent of the authorized capital stock of the corporation. This paid-up capital must not be less than P5,000. Some banks charge a fee for issuance of the certificate of deposit.

Step 3. Notarize articles of incorporation and treasurer\\\'s affidavit

According to Sections 14 and 15 of the Corporation Code, articles of incorporation should be notarized before filing with the SEC.

Step 4. Register the company with the SEC

The company can register online through SEC i-Register but must pay on site at the SEC. The following documents are required for SEC registration:

a. Company name verification slip;
b. Articles of incorporation (notarized) and by-laws;
c. Treasurer\\\'s affidavit (notarized);
d. Statement of assets and liabilities;
e. Bank certificate of deposit of the paid-in capital;
f. Authority to verify the bank account;
g. Registration data sheet with particulars on directors, officers, stockholders, and so forth;
h. Written undertaking to comply with SEC reporting requirements (notarized); and
i. Written undertaking to change corporate name (notarized).

The SEC Extension Office charges a handling fee of P30 to cover the cost of transmitting the documents to the SEC Head Office in Metro Manila.

Step 5. Pay the annual community tax and obtain the community tax certificate (CTC)

Step 6. Obtain barangay clearance

This clearance is obtained from the barangay where the business is located and is required to obtain the business permit from the city or municipality. Barangay fees vary for each barangay since they have the discretion to impose their own fees and charges for as long as these fees are reasonable and within the limits set by the Local Government Code and city ordinances.

Step 7. Obtain print-out of the encoded business permit application form from the Business Bureau–Permits and License Division (BBPLD)

The application form can be downloaded from the city\\\'s website. The applicant submits the filled out application form to the BBPLD for encoding, evaluation and verification. The BBPLD releases a printout of the encoded application form, which the applicant must have notarized.

Step 8. Notarize the encoded business permit application form at the City Legal Office

Step 9. Obtain the Temporary Authority to Operate (TAO) and Compliance Form from the BBPLD

The city introduced the TAO in November 2008. To obtain the business permit, the company must file the following documents at the BBPLD:

a. SEC registration;
b. Articles of incorporation;
c. Community tax certificate of the corporation (but only if corporation is established before June 30)
d. Barangay clearance;
e. Board resolution authorizing person to transact, and clear photocopy of ID of authorized person;
f. Duly notarized lease contract (if office is rented); and
g. Sketch of location on the back of the application form.

There is one-time assessment of all fees at the City Treasurer’s Office. Upon payment, the applicant will go to BBPLD to present official receipt and supporting documents. Once approved, the TAO and Compliance Form are released and the applicant can commence business operations.

The applicant has to submit the original TAO, Compliance Form and other requirements within 30 working days from issuance of the TAO. Non-compliance within said period will result in automatic revocation and cancellation of the TAO and closure of the business. The requirements include occupational permits for employees, verification of building permit at the Office of the Building Official, zoning verification at the City Planning and Development Office and temporary approval from the Bureau of Fire Protection.

Step 10. Buy special books of account at bookstore

Special books of accounts are required for registering with the BIR. The books of accounts are sold at bookstores nationwide. One set of journals consisting of four books (cash receipts account, disbursements account, ledger, general journal) costs about PHP 400.

If the company has a computerized accounting system (CAS), it may opt to register its CAS under the procedures laid out in BIR Revenue Memorandum Order Nos. 21-2000 and 29-2002. The BIR Computerized System Evaluation Team is required to inspect and evaluate the company’s CAS within 30 days from receipt of the application form (BIR Form No. 1900) and complete documentary requirements.

Step 11. Apply for Certificate of Registration (COR) and Taxpayer Identification Number (TIN) at the Bureau of Internal Revenue (BIR)

The company must register each type of internal revenue tax for which it is obligated by filing BIR Form No. 0605 and paying the annual registration fee of PHP 500. Upon registration, the BIR will issue to the company the certificate of registration—BIR Form No. 2303.

To obtain the TIN, the company has to file:
a. Barangay clearance;
b. Mayor\\\'s permit; and
c. Copy of its SEC registration.

For company registrations filed with the SEC Head Office in Metro Manila, the BIR confirms the pre-registered TIN issued by the SEC.

Step 12. Pay the registration fee and documentary stamp taxes (DST) at the AAB

The company must pay DST on the original issuance of shares of stock. The rate is PHP 1 on each PHP 200 or a fractional part thereof, of the par value of such shares of stock. This payment with the BIR should be made on the 5th of the month following registration with the SEC. The COR will be released only after all the DSTs are paid.

The company must also pay DST on its lease contract at the rate of PHP 3 for the first PHP 2,000 or fractional part thereof, and an additional PHP 1 for every PHP 1,000 or fractional part thereof in excess of the first PHP 2,000 for each year of the lease as stated in the contract.

Step 13. Obtain the authority to print receipts and invoices from the BIR

The authority to print receipts and invoices must be secured before the sales receipts and invoices may be printed. The company can ask any authorized printing company to print its official forms, or it can print its own forms (i.e., it uses its computers to print loose-leaf invoice forms) after obtaining a permit from BIR for this purpose. To obtain the authority to print receipts and invoices from the BIR, the company must submit the following documents to the Revenue District Office (RDO):

a. Duly completed application for authority to print receipts and invoices (BIR Form No. 1906);
b. Job order;
c. Final and clear sample of receipts and invoices (machine-printed);
d. Application for registration (BIR Form No. 1903); and
e. Proof of payment of annual registration fee (BIR Form No. 0605).

Step 14. Print receipts and invoices at the print shops

The cost is based on the following specifications of the official receipt: 1/2 bond paper (8 ½ x 5 ½ cm) in duplicate, black print, carbonless for 10 booklets.

Step 15. Have books of accounts and Printer’s Certificate of Delivery (PCD) stamped by the BIR

After the printing of receipts and invoices, the printer issues a Printer’s Certificate of Delivery of Receipts and Invoices (PCD) to the company, which must submit this to the appropriate BIR RDO (i.e., the RDO which has jurisdiction over the company’s principal place of business) for registration and stamping within thirty (30) days from issuance. The company must also submit the following documents:

a. All required books of accounts;
b. VAT registration certificate;
c. SEC registration;
d. BIR Form W-5;
e. Certified photocopy of the ATP; and
f. Notarized taxpayer-user’s sworn statement enumerating the responsibilities and commitments of the taxpayer-user.

The company must also submit a copy of the PCD to the BIR RDO having jurisdiction over the printer’s principal place of business.

Step 16. Register with the Social Security System (SSS)

To register with the SSS, the company must submit the following documents:
a. Employer registration form (Form R-1);
b. Employment report (Form R-1A);
c. List of employees, specifying their birth dates, positions, monthly salary and date of employment; and
d. Articles of incorporation, by-laws and SEC registration.

Upon submission of the required documents, the SSS employer and employee numbers will be released. The employees may attend an SSS training seminar after registration. SSS prefers that all members go through such training so that each member is aware of their rights and obligations.

Step 17. Register with the Philippine Health Insurance Company (PhilHealth)

To register with PhilHealth, the company must submit the following documents:
a. Employer data record (Form ER1);
b. Report of employee-members (Form ER2);
c. SEC registration;
d. BIR registration; and
e. Copy of business permit.

Upon submission of the required documents, the company shall get the receiving copy of all the forms as proof of membership until PhilHealth releases the employer and employee numbers within three months.

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