Closing a business or managing lost tax documentation requires strict adherence to the regulations set by the Bureau of Internal Revenue (BIR). In the Philippines, business cessation is not merely a physical act but a formal legal process. Similarly, the Certificate of Registration (COR) is a foundational document; its loss necessitates a specific administrative procedure to ensure continued compliance.
Part I: Procedures for Closing a Registered Business
The dissolution of a business in the eyes of the BIR is the final step in a multi-agency process (which usually begins with the Local Government Unit and the DTI or SEC). Under Revenue Memorandum Order (RMO) No. 20-2019, the process has been streamlined, but it remains rigorous.
1. Mandatory Requirements
To initiate the closure, the taxpayer must submit the following to the Revenue District Office (RDO) where the business is registered:
- BIR Form 1905: Application for Registration Information Update (for Closure of Business/Cancellation of TIN).
- List of Unused Sales Invoices/Official Receipts: Including the physical inventory of these booklets for destruction.
- Inventory List of Unused Tickets/Stickers: (If applicable).
- Board Resolution or Secretary’s Certificate: For corporations and partnerships, stating the intent to dissolve.
- Original Certificate of Registration (BIR Form 2303).
- Notice of Dissolution: Proof that the business has filed for closure with the DTI (for sole proprietorships) or the SEC (for corporations).
2. The Step-by-Step Process
- Submission of Notice: The taxpayer must file the application for closure within ten (10) days from the cessation of operations.
- Settlement of "Open Cases": The BIR will conduct a verification to see if there are unfiled returns or unpaid taxes (stop-filer cases). You cannot close a business until all previous tax liabilities are cleared.
- Surrender of Documents: All unused receipts and invoices must be surrendered to the RDO. They are usually "short-cornered" or punched to prevent future use.
- Audit and Investigation: For corporations or large taxpayers, a Letter of Authority (LOA) or a Tax Verification Notice (TVN) may be issued. The BIR will audit the books of accounts for the current and preceding years to ensure all terminal taxes (like final income tax) are paid.
- Issuance of Tax Clearance: Once all liabilities are settled and the audit is complete, the RDO will issue a Tax Clearance.
- Deactivation of TIN: For individuals, the TIN remains but is updated to "inactive" or "one-time taxpayer" status. For corporations, the TIN is permanently cancelled upon dissolution.
Important Note: Failure to formally close a business with the BIR leads to the continuous accumulation of "stop-filer" cases and penalties, even if the business is no longer physically operating.
Part II: Replacing a Lost BIR Certificate of Registration (COR)
The Certificate of Registration (Form 2303) is the document that proves a business is a registered taxpayer. It is required for opening bank accounts, applying for permits, and proving tax status to clients. If lost, it must be replaced immediately to avoid "Failure to Display" penalties during BIR mapping.
1. Required Documents
The taxpayer must visit their registered RDO and present:
- Affidavit of Loss: A notarized document explaining the circumstances of how the original COR was lost or destroyed.
- BIR Form 1905: Filled out specifically for "Replacement of Certificate."
- Proof of Payment: A copy of the current year’s Annual Registration Fee (ARF) payment (BIR Form 0605).
- Valid ID: Of the taxpayer or the authorized representative.
2. Fees and Timeline
- Certification Fee: Generally PHP 100.00.
- Documentary Stamp Tax (DST): PHP 30.00 (to be clinical to the replacement document).
- Processing Time: Replacement can often be done within the same day or a few working days, provided there are no outstanding "open cases" on the taxpayer's record.
Summary Table: Key Differences in Documentation
| Requirement | Business Closure | COR Replacement |
|---|---|---|
| Primary Form | BIR Form 1905 | BIR Form 1905 |
| Supporting Document | Notice of Dissolution / SEC Dissolution | Notarized Affidavit of Loss |
| Tax Clearance | Required after audit | Not required |
| Status of TIN | Deactivated or Cancelled | Remains Active |
| Inventory | Must surrender all unused receipts | No inventory required |
Legal Implications of Non-Compliance
Under the National Internal Revenue Code (NIRC), businesses that stop operating without notifying the BIR are still considered "active" in the system. This results in:
- Automatic Penalties: PHP 1,000 per unfiled return per month.
- Legal Obstructions: The owners or board members may face difficulties registering new businesses in the future due to "hit" records in the BIR database.
- Compromise Penalties: Total accumulated fines for non-closure can often exceed the actual taxes owed during the business's active years.