Business Permit Closure (Retirement) Procedure in the Philippines (A practitioner-oriented legal guide; last updated 16 July 2025)

1. Why “closing” a business permit matters

A city or municipality issues a Mayor’s/Business Permit annually under the Local Government Code (Republic Act 7160). As long as that permit remains on the LGU’s books, local taxes, regulatory fees, and even some national-level obligations (e.g., BIR open-case assessments) continue to accrue—even if operations have stopped. Properly retiring the permit therefore:

Cuts off local tax accruals from the date of cessation.
Serves as prerequisite evidence when cancelling BIR registration, dissolving at the SEC, or terminating a DTI business name.
Protects owners and officers from personal liability for unpaid community taxes, business taxes, and surcharges.

2. Governing legal framework

Source of authority	Key provisions relevant to closure/retirement
Local Government Code (RA 7160)	Secs. 147–150 (local business taxes); Sec. 455(b)(3)(iv) (Mayor’s regulatory power); Sec. 521 (tax delinquencies)
BIR Regulations	Sec. 236(N) of the Tax Code; Rev. Regs. 7-2022 (cancellation of registration via BIR Form 1905)
Corporation Code (RA 11232)	Title XIV (dissolution and liquidation)
DTI Business Name Registration Act (Act 3883)	Sec. 6 (voluntary cancellation)
Labor Code & DOLE Dept. Order 147-15	Art. 298–299 (closure/retrenchment); employer reportorial duty
SSS Law, PhilHealth Law, Pag-IBIG Act	Employer deregistration and final contribution filing
Ease of Doing Business Act (RA 11032)	3-step/3-signatory target for LGU processing of retirement

3. Overview of agencies to notify

Barangay – issues Barangay Certificate of Closure.
City/Municipal Treasurer’s Office (CTO) – processes Business Permit Retirement.
Bureau of Internal Revenue (BIR) – cancels Certificate of Registration (COR) & TIN branch code.
DTI (sole proprietors) or Securities & Exchange Commission (SEC) (corporations/partnerships) – cancels business name or approves dissolution.
SSS, PhilHealth, Pag-IBIG – employer status termination.
DOLE – report on employee displacement (if any).
Regulatory agencies (FDA, BOI, PEZA, BSP, etc.) – as applicable.

4. Step-by-step procedure

4.1 Barangay level

Draft a Letter of Closure stating effective date and reason.
Secure Barangay Clearance/Certification of Business Retirement (fees: ₱50–₱300 typical).

4.2 City / Municipality

File “Application for Retirement/Closure of Business” at CTO’s Business Permits & Licensing Office (BPLO).
Submit:
- Barangay Certificate of Closure
- Latest Mayor’s Permit & official receipts
- Audited FS or sworn Statement of Gross Sales up to closure date
- Inventory list of unused invoices/ORs
- Board Resolution (corporation) or Affidavit of Closure (sole prop.)
Assessment & payment of:
- Pro-rated Business Tax for the last quarter/month
- Franchise/Regulatory fees, clearances, surcharges (if filed late)
Inspection (optional, for high-risk establishments).
Release of Certificate of Business Retirement (turn-around target under RA 11032: 3 working days).

4.3 BIR cancellation

Step	Form / Action	Deadline (from cessation)
File BIR Form 1905 – Application for Registration Information Update/Cancellation	Attach LGU Retirement Cert., COR, unused OR/Invoices, inventory list, books	30 days
File “Short-period” returns – VAT/Percentage, Income Tax, Excise, Withholding	Pay any deficiency	Per normal due dates OR within 30 days of closure, whichever is earlier
Audit/exit conference (optional)	BIR may issue Letter of Authority	None specified
Receive “Certificate of Registration Cancellation”	indicates TIN branch deactivated	2–6 months typical

4.4 DTI or SEC

Sole proprietor: Submit notarized Affidavit of Business Retirement + original DTI Certificate → get Certificate of Cancellation (1 day).
Corporation/Partnership:
1. Board resolution approving dissolution.
2. Publish notice of dissolution for 3 consecutive weeks (if creditors exist).
3. File SEC Form D-1 (voluntary dissolution with creditors) or SEC Form D-2 (no creditors); pay filing fee (₱2,030 + ₱100/page).
4. SEC issues Certificate of Dissolution once liabilities settled and tax clearance from BIR is presented.

4.5 Social agencies & DOLE

Agency	Action	Form
SSS	Employer Termination	R-7 (Employer Registration Plate)
PhilHealth	Employer Data Amendment	ER2
Pag-IBIG	Employer Deregistration	HQP-PF-263
DOLE	Report of Establishment Closure / Retrenchment	RKS Form 5

5. Documentary requirements checklist

Letter / Board Resolution on closure
Barangay Certificate of Closure
Latest Mayor’s Permit & ORs
LGU Application to Retire Business
Audited FS or sworn sales up to closure
Inventory & surrender of unused BIR ORs/invoices
BIR Form 1905 + COR (Form 2303)
Final/short-period BIR tax returns & proof of payment
DTI Affidavit or SEC Dissolution forms
SSS R-7, PhilHealth ER2, Pag-IBIG HQP-PF-263
DOLE RKS Form 5 (if employees affected)

6. Timelines & fees snapshot

Stage	Statutory or usual deadline	Typical government fee*
Barangay closure cert.	Same day	₱50–₱300
BPLO filing	Within current business tax year; surcharges after Jan 20	Retirement fee ₱500–₱1,000 + unpaid taxes
BIR Form 1905	30 days from cessation	₱500 annual reg. fee forfeited; penalties if late
DTI cancellation	Anytime after LGU retirement	₱230
SEC dissolution	Within 60 days of board approval	~₱3,000–₱5,000 incl. publication
*Excludes surcharges/deficiencies. LGUs differ—check local ordinance.

7. Tax and accounting close-out focus

Short-period corporate income tax return covers start of taxable year up to date of dissolution.
Inventory write-off/disposal must follow Sec. 34(G) of the Tax Code.
Input VAT on remaining goods may need to be paid as output VAT upon cessation (Sec. 106(C)).
Liquidating dividends to owners are subject to regular withholding tax rules.
Retention of books: 10 years from the last BIR entry (Sec. 235).

8. Penalties for non-compliance

Omission	Potential consequence
Failing to retire permit	Continuing local business tax assessments + 25 % surcharge + 2 % monthly interest
No BIR cancellation	Open cases → ₱1,000 per unfiled return + compromise penalties + audit
SEC non-dissolution	Annual report and penalty fees keep running; directors/officers solidarily liable (Sec. 181, RA 11232)

9. Practical tips & common pitfalls

Synchronize dates across Barangay, LGU, and BIR documents to avoid queries.
Close payroll first; issue final pay and COE to employees before filing DOLE report.
Surrender POS machines & permits (e.g., FDA LTO, mayor’s auxiliary clearances) to avoid lingering inspection findings.
Keep clear copies of all certificates—future lenders, new ventures, or immigration applications often request proof that past businesses were properly wound up.
If only transferring address/ownership, use transfer or change of ownership procedures; full retirement cancels the tax profile permanently.

10. Frequently asked questions

Q 1: I stopped operating two years ago. Can I still retire now? Yes, but surcharges and interests will be computed retroactively. File the closure application promptly to stop further accruals.

Q 2: Is a tax clearance from BIR required before LGU retirement? LGUs rarely require it up front, but SEC dissolution does. Obtain BIR clearance after LGU retirement certificate is issued.

Q 3: Can I cancel my BIR registration first? In practice the BIR asks for the LGU retirement certificate, so retire locally first.

11. Conclusion

Properly retiring a business permit in the Philippines is a multi-agency, multi-step legal process. Start at the smallest political unit (Barangay), work upward to the LGU, and finish with national agencies (BIR, DTI/SEC, SSS, PhilHealth, Pag-IBIG, DOLE). Missing any step can leave lingering tax exposure or compliance liabilities. When in doubt—especially for SEC dissolution—consult a Philippine lawyer or accredited tax practitioner to ensure all statutory timelines and documentary formalities are met.

This article provides general information only and does not constitute legal advice. For case-specific guidance, consult qualified counsel or the relevant government offices.