The rules surrounding the annual renewal of business permits in the Philippines are complex and with the 20 January deadline looming, now is the time to prepare your business.
The business permits of all registered entities in the Philippines normally expire at the end of each year (31 December). All businesses must process the renewal of their permits within the period of 01 January until 20 January of each year.
All businesses that have been issued a permit last year must renew with the same local government unit in the area where the business operates. All businesses in the Philippines should plan ahead to avoid being inconvenienced by long lines, payment of potential penalties or the prohibition of business operations.
Aside from the renewal of business permits, business establishments are also required to pay the annual registration fee of Php500.00 (ARF) on or before 31 January. Payment of the ARF shall be made at the Revenue District Office of the Bureau of Internal Revenue (BIR) having jurisdiction over the place of business of the establishment.
It is important to note that the renewal of licenses not only affects a business' operation, but can affect its very existence and survival. Failure to secure renewal, or a late filing, not only calls for the payment of its consequent penalties, but also the prohibition of actual business operation which affects employment and the earning of profits during the period where no license has been renewed or applied for.
To ensure business continuity and smooth operations, it is strongly recommended that a business renew the licences and pay the ARF on time. Failure to do so may result to the payment of government fines and penalties.
The law provides for a penalty for directors and officers who allows and tolerates the non-payment of the ARF. According to Section 258 of the National Internal Revenue Code:
"[a]ny person who carries on any business for which an annual registration fee is imposed without paying the tax as required by law shall, upon conviction for each act or omission, be punished by a fine of not less than Five thousand pesos (P5,000) but not more than Twenty thousand pesos (P20,000) and suffer imprisonment of not less than six (6) months but not more than two (2) years."
Local government penalties
Local Government Units (LGUs) also impose surcharges and penalties for failure to renew business permits within the prescribed period. The LGU will impose a twenty-five percent (25%) surcharge on the tax assessed, plus an additional two percent (2%) penalty for every month which the business permit was not renewed. Therefore, it is important to be properly appraised of the penalties to be imposed for late renewals.
In extreme cases of delinquency where a business has pursued its operations without renewing its licence, the local government may issue an apprehension notice and order for the closure of the business. On the other hand, in cases of failure to secure secondary permits, i.e., health, sanitation or a fire safety inspection certificate and still has continuously operated the business despite the order to cease, the local government may also order for the confiscation of property and assets held by the business.
Expert help from TMF Group
Though the method of renewal may be tedious, businesses must be proactive and aware of the period of validity of their permits, as well as the deadlines to renew.
TMF Philippines can help provide the services that your business needs to remain compliant. Our experts can handle your business permit renewal as well as many other services to help your business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.