Local and foreign investors and entrepreneurs that intend to establish companies in the Philippines are required to register their businesses with various government agencies before they are allowed to commence business operations. Registration with the Securities and Exchange Commission (SEC) is the first step in the registration process wherein a Certificate of Registration is issued and the legal existence of the corporation is approved, specified, and recognized.

After registering with the SEC, corporations are required to secure a Mayor’s Permit from the Local Government Unit (LGU) where the business is to be located. The next step to this is the accomplishment of a Certificate of Registration from the Bureau of Internal Revenue (BIR).

The BIR is the national government regulatory agency that regulates finance, taxation, and monetary policy in the Philippines. It collects internal revenue taxes, fees and charges, and enforces all forfeitures, penalties, and fines connected with tax matters for the Philippine government.

The Certificate of Registration issued by BIR (BIR Form 2303) contains an enumeration of the types of taxes that are required to be paid to the government, which includes the following:

       Corporate Income Tax, Percentage Tax, Value-Added Tax, and Withholding Taxes (Compensation, Expanded, Fringe Benefits, etc.)

Registering your business with the BIR gives you the authority to print your official receipts and invoices, formally register the Tax Identification Number (TIN) provided for your company in the Certificate of Registration issued by SEC, and register the books of accounts you are required to annually register with BIR to serve as official record of your business transactions for the fiscal year.

Steps in Registering Your Business with the BIR

1. Accomplish BIR Form 1903 (Application for Registration for Corporations/Partnerships (Taxable/Non-Taxable)) and submit the same together with the required supporting documents to the Revenue District Office (RDO) that has jurisdiction over the registered address of your business establishment. The supporting documents to be attached to the Form 1903 are as follows:

• SEC Certificate of Registration (Certificate of Incorporation for domestic corporations/License to Do Business in the Philippines for resident foreign corporations)
• Mayor’s Permit or application for Mayor’s Permit (must be submitted prior to the issuance of the BIR Certificate of Registration)
• Contract of Lease
• Other documents to be submitted if applicable:
  
  • Certificate of Authority (if Barangay Micro Business Enterprises (BMBE) registered entity)
  • Franchise Agreement
  • Proof of Registration/Permit to Operate with BOI, PEZA, SBMA or BCDA

2. Pay the Annual Registration Fee (PHP500.00) at the Authorized Agent Banks (AABs) of the concerned RDO

3. Pay the Documentary Stamp Tax (DST) on Subscription and Lease (BIR Form 2000). The DST on Subscription depends on the amount of your capital while the DST on Lease depends on your monthly rental.

After receipt of the aforementioned requirements, BIR officials will get back to you to inform you when the BIR Certificate of Registration (Form 2303) is going to be available.

After securing a BIR Certificate of Registration, you will be required to do the following:

• Apply for Sales Invoices/Official Receipts through BIR Form 1906 – Authority to Print Receipts and Invoices. The documentary requirements for obtaining such are as follows:
  
  • BIR Form 1906 (Authority to Print)
  • BIR Certificate of Registration (Form 2303)
  • Final and clear sample of Principal and Supplementary Commercial Receipts and Invoices
  • BIR Certificate of Registration of Accredited Printer
  • BIR Annual Registration Fee (Form 0605) of Accredited Printer
  • Job order
  • Quarterly report of Accredited Printer
• Register books of accounts and have them stamped by the RDO where your business is registered. Note that the BIR examiner will usually advise you the types of books and taxes applicable to your business upon the initial taxpayer’s briefing. The documentary requirements you have to submit upon registering your books of accounts are the following:
  
  • BIR Certificate of Registration (Form 2303)
  • New sets of books of accounts, such as but not limited to: 
    
    • General Journal
    • General Ledger
    • Cash Receipt  
    • Cash Disbursement
    • Subsidiary Sales Journal
    • Subsidiary Purchase Journal
• Attend the taxpayer’s initial briefing to be conducted by the RDO for new registrants to inform them of their rights and duties/responsibilities.

Before you can start operating your business in the Philippines, you need to secure a Mayor’s Permit or Business Permit from the Local Government Unit (LGU) where your company office is located. LGUs can be cities or municipalities, and the procedures for obtaining a permit may vary depending on the local regulations and ordinances the city or municipality seeks to implement.

Business permits are renewed every year. Renewal period is usually on the first month of the calendar year. Penalties are imposed on businesses that fail to renew their business permits on or before the prescribed period.

List of Requirements for Obtaining a Mayor’s Permit in the Philippines

• Application Form
• Certificate of Registration from Securities and Exchange Commission (SEC) for Corporations/Partnerships; Department of Trade and Industry (DTI) for Sole Proprietorships; or Cooperative Development Authority (CDA) for Cooperatives
• Barangay Business Clearance*
• Community Tax Certificate (CTC or Cedula)
• Contract of Lease (if leased)/Transfer Certificate of Title (if owned)
• Sketch/Pictures of the business location (3 copies)
• Public Liability Insurance (for Restaurants, Cinemas, Malls, etc./exempted: Sari-sari Stores, Carinderias)
• Locational/Zoning Clearance*
• Certificate of Occupancy (Building and Unit)*
• Building Permit and Electrical Inspection Certificate*
• Sanitary Permit*
• Fire Safety Inspection Permit*

*You can view the list of requirements for securing each permit/clearance here.

Steps in Securing a Mayor’s Permit

The step-by-step process for procuring a Mayor’s Permit depends on the local regulations and ordinances of the city/municipality where your business is located. But the general process usually involves the following steps:

1. Secure the initial requirements:

• Accomplished Application Form
• SEC/DTI/CDA Certificate of Registration
• Contract of Lease or Transfer Certificate of Title
• Sketch/Picture of the business location

2. Secure permits and clearances – each permit can only be obtained when the aforementioned requirements in step 1 are fulfilled. Each permit/clearance is usually obtained from designated offices inside the City/Municipal Hall. The specific permits/clearances are as follows:

• Barangay Business Clearance
• Certificate of Occupancy
• Building Permit and Electrical Inspection Certificate
• Locational/Zoning Clearance

3. File your Application Form along with the other requirements to the Bureau of Permits (BP)/Business Permit and Licensing Office (BPLO) at the City/Municipal Hall.

4. Procure a Community Tax Certificate/Cedula from the City Treasurer’s Office.

5. An assessor will assess your application fees and you are required to have the assessment (Official Billing Assessment) validated by a BP/BPLO officer.

6. Submit your application requirements, along with the Official Billing Assessment, to the designated office.

7. Pay the necessary payment fees for the permits and licenses to the Cashier’s Office.

8. Obtain a Fire Safety Inspection Permit from the designated Fire Department by presenting your paid application requirements.

9. Obtain a Temporary Sanitary Permit from the designated Sanitary Department by presenting your paid application requirements. Depending on the local health regulations or ordinances of the city/municipality, the actual permit may only be issued after completion of mandatory company office inspections and/or health tests for employees.

10. Submit all requirements, along with the Fire Safety Inspection Permit and Temporary Sanitary Permit, to the designated BP/BPLO office.

11. Release of Mayor’s Permit

Business closure or retirement is an activity that any business owner do not want to happen. It can happen for various reasons. Most of the time, it’s financial like loss or low profits. But whatever the reason is, closing a business in the Philippines formally is a must if you want to ensure you have clean records.

Closing a business in the Philippines is a long and tedious process. The requirements and processes are different per type of company, per city, and per government agency.

Here is a table for your reference. Please note that these are aggregated among all cities. Some may add other items, but what we listed here are definitely required.

Requirements For Business Closure

Again, it’s worth noting that this only lists the basic requirements. Depending on the circumstances, like foreign-owned corporations, or if you have a PEZA registration, or those less than 3 years of operations, have different requirements.

Setting Expectations and Some Reminders

Before we go through the actual process, I just want to set expectations and list a few reminders. This is important. I cannot stress this enough.

Reminder 1: Behave as if Operational

If you are registered, you can’t simply stop operating. No matter the circumstance — bankruptcy, death, etc. If you stop complying with the government’s requirements (monthly tax returns, SEC annual filing, etc), you will just incur penalties.

I repeat.

In the eyes of the law (government), you are still operating. If you don’t complete the process of business closure and retirement, that means you are still operational. And if you are still operational, and not complying with these things, once the government finds out, you will incur penalties.

Ignorance of the law does not excuse oneself from the law.

Reminder 2: Timeline

The entire process can take more than a year. Yup. Depends on the circumstance of your retirement, i.e. did you miss any BIR filings or not? The more “open cases” you have, the longer this will take.

The timeline also differs per business type. A corporation is harder to close than a sole proprietorship. A company with 5 years of operations usually also takes longer than one with less than a year.

Now that we went through the list of requirements and setting some expectations, the next step is the actual processing of the closure of the business.

Process of Business Closure

The actual process of closing a business is often called retiring a business.

The normal process starts out with the LGU, then the BIR, then the SEC or DTI.

Closing a Business at the Barangay Level

Closing your business at the barangay is the first thing you do. It’s also the easiest.

Just complete the requirements listed above, go to the barangay hall where your business is registered, and submit the requirements.

Based on our experience, there is no form to be filled-up. And if they do, you can readily do that since it should be available at the barangay. Once you’re there, they’ll receive the files.

In some cases, you can get the Certificate of Closure the same day. Otherwise, you come back the next day.

When the certificate is ready, you have to pay the fees first prior to it being released.

Closing a Business at City Hall

Once you get the certificate of closure at the barangay, you can head straight to the city hall, if you have all the requirements.

Here, you will definitely need a form signed by the owner. It’s readily available at the city hall of your registered business. Once the form is submitted, you need to have this notarized.

You submit the notarized form with the other requirements. They’ll assess this and let you know if you need to submit something else.

You’ll then be given a stub with some contact information. They’ll often put a date on when to follow-up again. Normally, that’s at least a month’s time from now.

So, once the assessment is complete, you followed-up and the city hall said the certificate of closure is ready, you head back to the city hall and pay the corresponding fees. They’ll release your certificate of closure.

Again, it’s worth noting the first reminder I gave above: to behave as if operational. If your documents were “stuck” longer than expected and carried over the new year, that means you will still need to renew your permits. That also means that all this time, even if you are no longer operational, you continue to file zero tax returns.

Closing a Business at BIR

Now that the Local Government Unit (LGU) is complete, i.e. you already have the certificate of closure at the barangay and the city hall, it’s now time to tackle the retirement at the BIR level.

The process is mostly the same: gather the requirements, fill out a BIR form 1905, and submit them to your RDO.

You’ll be asked to head over to the TIN Issuance group. That’s where they’ll receive the receipts, etc. If they don’t have any other questions, they’ll give you a stamped copy of the BIR form 1905 that will serve as proof that you already cancelled your TIN. That means only at that point do you stop filing tax returns.

Afterwards, you submit the rest of the requirements with the examiner of the RDO. Again, from our experience, they’ll simply glance over to see if you’re missing something. If not, they will tell you to followup with them after 1-2 weeks.

What happens here is that they check within the RDO if you have open cases (or missed returns, etc.) Usually they find something even if you complied with everything.

They’ll tell you, for example, that you missed the 2551M of February. All you need to do is print out the form you filed, together with the confirmation email from the eBIR Forms. If you paid something in the bank, include a copy of the bank payment slip as well.

Once you have all those, just submit everything then wait again.

Afterwards, they’ll turn this over to the National level. Here, they check if you have other open cases in other RDOs. The same thing applies. If they find something, just submit then comply and wait.

If in the event that you did miss filing some returns, file the form online, print the confirmation slip, then pay the penalties at the bank. Photocopy the proof of payment, then submit these to the BIR.

Once the national office give their go signal, they’ll return the documents to the RDO. From there, they’ll release a Certificate of No Liability.

Closing a Business at SEC / DTI

Finally, we’re at the last step. Take all requirements and submit everything to the SEC and DTI.

Since most requirements were already given during the previous steps, most likely, the SEC and the DTI won’t ask for something new. So this will be faster.

Again, this will be a waiting game. It can take 2-4 weeks before you receive the certificate.