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
|Securities and Exchange Commission (SEC)||Department of Trade and Industry (DTI)||Barangay||City Hall||Bureau of Internal Revenue (BIR)|
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.
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.
Thanks for this article! It’s very helpful. Also timely for me since I’m in charge of closing down our business (that’s a general partnership). I’m wondering, from your experience at processing BIR closure, aside from checking tax returns submitted and requirements like permits, used and unused receipts and invoices, and the other things you mentioned, do they check or question anything else?
Hi, already got my form 2320 (certificate of business cessation) but i still received a letter for my failed compliace for sls and slp. What should i do? Should i show them the certificate of business cessation? Or should i show them both the certificate and sls and slp indicated in the letter?
Thank you for getting in touch!
May we know if the notice of failure for sls and slp is for periods after the business retirement or if it were for the period before retirement?
Hi Kitkat how many months did you receive the 2320 from the time you submitted the docs, what is SLS and SLP
What if I already completed the steps(barangay, municipality, DTI) except for the BIR then I decided to not complete the business registration process because I have discontinued the business.
Will I still need to close it in barangay, municipality, DTI?
Will I still pay even if I decided to discontinue the business registration?
What will be the consequences regarding my situation?
It would be best to close it in the barangay and municipality level, otherwise, the city hall may come after you for non-renewal of business permit.
where closing our computer shop at manila..all requirments are ok except city hall is asking to 41k for municipality payment as per the gross income even if we renew regularly every year.. is this legal? Any one can help..
Did you confirm with the city hall their basis and how it was computed?
The annual renewal is based on declared gross receipts.
If these did not match the documents you submitted for the closure, there is a possibility that your income for the past years is under-declared.
Is it legal? In all probability, yes.
We’re closing an RHQ and we are now going to submit requirements for TIN cancellation. May we know the difference between the notice of dissolution and letter of request for cancellation of TIN? To whom are we going to address the notice of dissolution?
The notice of dissolution should be submitted to SEC, and the letter of request for cancellation of TIN should be submitted to BIR.