LGU Certificate of Closure Requirements When Transferring Store Operations (Philippine Legal Context)

1. Why an LGU Certificate of Closure Matters

When a retailer (sole proprietorship, partnership, or corporation) stops operating at its current address in order to transfer the business elsewhere, Philippine local governments treat the old site as a closed establishment for tax-assessment purposes. Obtaining a Certificate of Closure (sometimes called a Certification of Business Closure/Cessation) from the city or municipal treasurer:

Cuts off further local business-tax accruals on the abandoned branch or head office.
Serves as proof to the BIR, SEC/DTI, lessors, suppliers, and banks that the LGU account for that location is fully settled.
Is usually a prerequisite to securing a new Mayor’s/Business Permit for the transferee location (especially if the new address lies in the same LGU).
Avoids surcharges, interest, or delinquency listings under the LGU’s revenue code.

Failure to process the certificate keeps the business “alive” on the LGU’s roll, allowing the treasurer to keep billing annual/quarterly business taxes and regulatory fees—even if sales have already shifted elsewhere.

2. Legal Foundations

Source	Key Provisions Relevant to Closure
Local Government Code of 1991 (RA 7160)	• Sec. 143–147: LGUs may levy business taxes and require permits. • Sec. 165 & Sec. 173: Business taxpayers must file a sworn statement of gross sales and “other information as may be required”; permits may be cancelled for non-compliance.
Ease of Doing Business Act (RA 11032, 2018)	Mandates LGUs to streamline “end-to-end” business-life-cycle transactions, including retirement/closure—ideally within three (3) working days.
Civil Code & Labor Code	Lessors cannot re-let premises without proof of closure; employers invoking “business cessation” as a ground for retrenchment (Art. 298–299 LCP) must show good-faith closure documents.
Local Revenue Code / Closure Ordinance of the LGU	Implements documentary checklist, filing deadlines (commonly 30 days from actual cessation), inspection rules, and penalty rates.

(Always consult the specific revenue code or consolidated ordinance of the city/municipality where the store is registered—e.g., Quezon City Revenue Code of 2015; Cebu City Tax Ordinance 2021; Davao City Ordinance No. 0389-09.)

3. Distinguishing “Closure” vs. “Transfer”

Scenario	Proper LGU Treatment
Store moves to a different LGU (e.g., Pasig → Taguig)	Closure in Pasig; New registration in Taguig.
Store relocates within the same LGU (e.g., another barangay in Pasig)	LGUs vary: most require closure of the old location + application for amended permit showing the new address; a few accept a simple “Change of Address” form, but still issue a “Certificate of Location Transfer” once taxes at the old site are settled.
Spin-off or sale of branch to another entity	Original entity must get a Certificate of Closure; buyer must separately secure a first-time permit.
Temporary shutdown (e.g., renovation)	Not a closure; file a Letter of Temporary Suspension to avoid misclassification.

4. Documentary Requirements (Typical Checklist)

Below is the “worst-case” list—individual LGUs may waive or add certain items, but these are common minimums:

Duly accomplished Application for Business Closure (LGU-supplied form).
Letter-Request/Affidavit of Closure
- Sworn before a notary public.
- States date of last business day and reason for closure/transfer.
Latest Mayor’s/Business Permit and Official Receipt (OR) of payment.
Business Plate/Stickers – surrender for cancellation.
Barangay Clearance for Closure from the barangay where the store operated.
Inventory List of unsold stocks or assets on the last day of operation (sometimes required to check against declared gross sales).
Quarterly/Annual Audited Financial Statements or Sworn Declaration of Gross Receipts up to closure date.
Tax Clearance from the City/Municipal Treasurer or BPLO showing all local taxes, regulatory fees, and penalties up to closure date are paid.
Photocopy of BIR Form 1905 (business cessation) or BIR “Taxpayer Account Information Update” receiving copy.
SEC Certificate of Dissolution or DTI Cancellation (if the entire juridical entity is being closed, not just the branch).
Proof of Employee Separation Benefits (e.g., quitclaim, SSS R-7) if invoking closure to justify redundancy.
If leasehold: Clearance from the building administrator that the premises have been vacated and rentals settled.
Valid IDs & SPA (if representative submits).
Processing Fee – ranges ₱300–₱1,500, plus certification fee (~₱100) and documentary-stamp tax.

Tip: Keep two full sets—one for the treasurer and one for the Business Permits & Licensing Office (BPLO) if these offices are separate.

5. Step-by-Step Procedure

Prepare Documents (as above) and pay any outstanding quarterly business taxes.
Barangay Endorsement – apply for Barangay Closure Clearance (usually same day).
File at BPLO/Business One-Stop Shop (BOSS)
- Submit bundle; clerk computes any deficiency taxes & penalties.
- Pay at Treasurer’s Cashier and get OR.
On-Site Verification/Inspection (sometimes waived under RA 11032 if applicant submits photos showing signage removed).
Issuance of Certificate
- Signed by the City/Municipal Treasurer and noted by the BPLO.
- Processing time: 1–3 working days for streamlined LGUs; up to 10 under older systems.
Receive & Keep Originals – Attach one original to your BIR Form 1905 packet; keep another for the new-location permit file.

6. Deadlines & Penalties

Action	Common Deadline	Typical Penalty for Non-Compliance
File closure application	30 days from actual last sale/operation (some LGUs: 10 days)	Continuing quarterly tax assessment + 25 % surcharge + 2 % interest per month.
Surrender plate/sticker	Together with closure filing	₱500–₱2,000 fine for “Lost” plate if not surrendered.
Update BIR records	Within 30 days under NIRC Sec. 236	Administrative penalties (₱5,000–₱20,000) + criminal liability if wilful.

7. Special Industry/Entity Rules

Ecozone locators – Must secure PEZA/CEZA “Certificate of Registration Cancellation” first; LGU usually respects PEZA’s assessment on whether local taxes are due.
Banks & Financial Institutions – Bangko Sentral requires a separate “Closure Report” before LGU closure can be processed.
Barangay Micro Business Enterprises (BMBE) – Although exempt from local taxes, they must still file closure to end accounting for regulatory fees.
Liquor, amusement, or other specially licensed activities – Surrender respective special permits (e.g., liquor license) along with business plate.

8. Practical Advice When Transferring Operations

Overlap Gracefully – Keep sales receipts at the new site under provisional BIR “Head Office” address until the LGU closure certificate is in hand; then update official receipts.
Escrow Budget for Surprise Assessments – LGU auditors often assess “last-quarter” taxes based on annualized sales; be ready to negotiate or appeal under Sec. 195 (Assessment) and Sec. 196 (Refund) of RA 7160.
Bundle BIR & LGU Filings – Many cities host BIR Revenue District Office liaison desks; simultaneous filing avoids mismatched cessation dates.
Keep Photos and Utility Bills – Useful for proving date of actual cessation if the LGU questions the timeline.
Consult the New LGU Early – Some LGUs (e.g., Makati) refuse to issue the new Mayor’s Permit until they see a receipt that closure has been filed in the old LGU—even if the two cities are unrelated.

9. Sample Outline of a Letter-Affidavit of Closure

Republic of the Philippines ) City of San Juan ) S.S.

AFFIDAVIT OF BUSINESS CLOSURE

I, Juan D. Cruz, Filipino, of legal age, Proprietor of Cruz Retail Mart, with principal place of business at 123 J. Abad Santos St., San Juan City, after having been duly sworn, depose and state:

That the said establishment ceased operations on 31 May 2025 due to relocation of store activities to BGC, Taguig City;

That gross sales from 01 January 2025 to said cessation date amounted to ₱2,150,000.00 as per attached summary;

That all local business taxes and regulatory fees have been paid up to the second quarter of 2025, official receipts attached;

That I am securing a Certificate of Closure from the City Government of San Juan to comply with RA 7160 and other regulations.

IN WITNESS WHEREOF…

(Notary block)

10. Remedies & Appeals

Motion for Reconsideration (MR) – File within 30 days of receiving an LGU assessment you dispute.
Appeal to Local Board of Assessment Appeals – For property-tax matters tied to closure.
Appeal to Secretary of Justice (Sec. 187, RA 7160) – Question the legality of the closure-ordinance provisions; must be filed within 30 days from effectivity of the ordinance.
Judicial Action (RTC / CTA) – For refund of taxes paid under protest (Sec. 196).

11. Frequently Asked Questions

Question	Answer
Do I need a certificate if I transferred just my warehouse but kept the store front?	No—only the warehouse gets closed; file an Amendment for the main store.
Can I retro-date the cessation?	LGUs accept retroactive dates within the same quarter if supported by proof (utility disconnection, inventory logs). Beyond that, expect them to bill taxes up to the quarter when you file.
Is a tax clearance enough?	No. The clearance certifies taxes are paid; the Certificate of Closure memorializes the act of closing and removes the business from the LGU roll.
Do online stores need it?	If you had no physical premises registered with the LGU, there is nothing to close. But if you are surrendering a Mayor’s Permit tied to a pick-up hub or office, you still need the certificate.

12. Checklist for a Trouble-Free Transfer

60 days before move: gather financials, inventory, employee notices.
30 days before move: file Barangay Clearance and prepare Affidavit.
Week of move: stop sales at old POS; take photo of emptied shop.
Within 10 days after move: file closure packet at LGU; pay final taxes.
After receipt of certificate:
- Submit BIR Form 1905 & inventory list.
- Apply for new Mayor’s Permit/location transfer.
- Update SEC/DTI registration (if address change).

Conclusion

A Certificate of Closure is not just a formality—it is the legal endpoint of your tax obligations to the city or municipality where your store previously operated. Treat it as integral to any relocation timeline. Complete, timely documentation protects you from surprise tax bills, eases permit issuance in the new location, and provides the evidence required by national agencies, landlords, and employees.

Always review the exact ordinance and published checklist of your LGU, as procedural fine points and fees vary. When in doubt, seek advice from a local tax lawyer or the BPLO Help Desk well before your target move-out date.