Applying for or renewing a Business Permit in the Philippines is just one of the many tax and compliance activities that businesses must consider each year in order to ensure that they remain fully compliant!
A Business Permit must be obtained when a business is first registered as a business and prior to commencing operations.
Importantly, the Business Permit must then be renewed every year, in January, going forward.
In this article, we explain everything you need to know about the Business Permit in the Philippines and what is required by Philippine businesses when applying for or renewing the Business Permit each year.
- 1 What is the Business Permit?
- 2 What is the Purpose of the Business Permit?
- 3 Business Permit v BIR Certificate of Registration
- 4 Who Needs a Business Permit?
- 5 Business Permit Applications and Business Permit Renewals
- 6 What is the Deadline for Filing the Business Permit?
- 7 How to File for the Business Permit?
- 8 Information Required for the Business Permit Renewal in the Philippines
- 9 Plan Ahead – Confirm All Business Permit Requirements in Advance!
- 10 CloudCfo – Tax and Compliance Services in the Philippines
What is the Business Permit?
First, it is important to note that all registered businesses in the Philippines, unless they are availing of an applicable exemption, are required to apply for and obtain a Business Permit for their business. The Business Permit is often also referred to as the Mayor’s Permit in the Philippines.
The Business Permit is a key compliance document which entitles and enables a business to legally operate and do business in the area in which the business is registered. In short, the Business Permit can be considered as a “licence to operate” within that specific area.
The Business Permit is an important compliance document for businesses in the Philippines. Registered businesses should not be operating without having an up-to-date Business Permit or else they will face potential sanctions including fines, penalties and business closure.
What is the Purpose of the Business Permit?
The Business Permit is a way for Local Government Units (LGUs) – barangays and Municipalities – in the Philippines to monitor and keep track of all businesses that are operating within their region or jurisdiction. The Business Permit process also helps ensures that businesses are paying their taxes and dues to the local government office in the area in which the business is registered and operating.
As outlined below, there are a number of documentary requirements and certifications required in order to complete the Business Permit application or renewal process. Certain of these requirements relate to sanitation certificates, fire safety certificates and environmental safety certificates. As such, the Business Permit process also serves to help the LGUs ensure that businesses have standard, secure and safe business practices in place and are adhering to the various regulations and safety standards required when running a business.
From the perspective of the business, the obtaining of a Business Permit will illustrate that the business is properly registered and entitled to operate within the LGU. This can be a source of legitimacy and reputability for customers seeking to engage that business. It can also be a common request when setting up commercial relationships, partnerships or accounts with various third parties such as banks, payment gateways, online subscriptions or supplier/vendor engagements.
Any of these agencies may request a copy of the Business Permit as part of their due diligence or KYC process (Know Your Client).
Business Permit v BIR Certificate of Registration
There can sometimes be confusion around two key compliance documents that business must take account of when operating in the Philippines – the Business Permit and the Certificate of Registration (BIR Form2303).
In short and as mentioned above, the Business Permit is a form of licence that businesses must apply for and obtain through their local Barangay Office and through the local City Hall of the area in which the business is operating. It is effectively a licence from the Local Government Unit (LGU) that enables a business to operate within that LGU area.
The Certificate of Registration, also known as BIR Form2303, on the other hand, is a BIR Certificate evidencing the registration of a business as an official taxpayer in the Philippines. This document is applied for and obtained through the Regional District Office (RDO) of the BIR in the “district” in which the business is registered. For more information, you can check out our article on BIR Form 2303 in the Philippines.
While both documents are essential documents that a business in the Philippines must process and obtain as part of the initial business registration and prior to commencing operations under that business, it is important for founders, owners and managers to understand the difference between both of the above documents – so they can ensure both documents are processed on a timely basis!
Who Needs a Business Permit?
As mentioned above, all businesses in the Philippines, unless exempt, will require a Business Permit in order to be able to legally operate within their local area or LGU.
Importantly, this is applicable irrespective of the type of entity under which the business is operating. So, whether it is a Sole Proprietorship, Standard Domestic Corporation, One Person Corporation (OPC) or Partnership, it will be necessary to secure a Business Permit for the business.
Also, the Business Permit requirement will apply irrespective of the type of business model. For example, whether the business is a traditional bricks and mortar business or an online business in the Philippines, a Business Permit will usually still be required!
If you are operating or intending to operate any form of business here in the Philippines, it is important to ensure that you have considered your obligations to obtain a Business Permit during the initial registration and then maintain and renew the Business Permit each year!
So make sure to speak to your law firm, accountant, bookkeeper or business consultant to confirm the Business Permit obligations for your PH business!
Business Permit Applications and Business Permit Renewals
As mentioned above, the Business Permit application process is not a once-off activity for businesses!
When a business is being registered for the first time in the Philippines, a Business Permit must be applied for and secured as part of the initial business registration process.
Importantly, the Business Permit in the Philippines must be renewed every year at the start of each year! In order to secure the Business Permit Renewal, there are a number of documents required to be submitted.
Remember, a business without an up-to-date Business Permit is technically not entitled to operate the business within the LGU! If the LGU identifies that a business is operating within their area and without a Business Permit, the business may be prevented from operating until such time that it has obtained the Business Permit, complied with the various requirements and paid any fines or penalties that might arise as a result of operating without the Business Permit.
The above would also apply in the case of a non-renewed Business Permit – i.e. if a business does not renew their Business Permit by the deadline each January, until such time as it is renewed, the business will effectively be operating without an up-to-date Business Permit.
What is the Deadline for Filing the Business Permit?
As mentioned above, the Business Permit application process can fall across two primary categories – a) a new application for a Business Permit, and b) the renewal of an existing Business Permit.
For a first time application of a Business Permit, this needs to happen at the time that the business is being registered as an official business in the Philippines. This will be required after the DTI or SEC registration has already been completed and the business is moving forward to register with the BIR as a taxpayer in the Philippines.
So, for new Business Permit applications, there is really no deadline. Simply, the Business Permit should be obtained during the business registration process and prior to the business commencing operations.
Businesses in the Philippines must renew their Business Permit every year!
The deadline for filing the Business Permit is on or before 20 January each year. In effect, that means that once the calendar year has ended, a company has between 1 January and 20 January to get the Business Permit renewal application prepared, submitted and filed.
There is work required to collate and generate the various documents and information required for the Business Permit renewal. So, our recommendation is not to leave this until the last minute on 20 January – or you might miss the filing deadline!
Businesses should note that there are administrative and financial penalties if the Business Permit is not renewed on time! So start your preparations early and contact your usual provider to support with the renewal process for the Business Permit in 2022!
How to File for the Business Permit?
Whether you are applying for a new Business Permit or renewing an existing Business Permit, there are a number of steps required which can involve various Government agencies and Government units.
It is important for businesses to understand that renewing the Business Permit in the Philippines is traditionally a manual process that requires physical attendance at the various Government offices. The filing and obtaining of the Business Permit, whether for a new application or a renewal, must be conducted physically and in person. While some LGUs are starting to move towards an online system, it is usually a hybrid system that involves both online and physical activities. For example, some LGUs have an online system for booking a physical appointment date/time to attend and renew the Business Permit.
One step will be attending at the local Barangay Hall within the Barangay in which the Business is officially registered and submitting the required documents (see below). Once this process has been completed and paid for, a Barangay Clearance will be issued.
Another step is to attend at City Hall with the Barangay Clearance and the rest of the required documents for application or renewal (see below).
Note: In recent years, certain LGUs have created a “one-stop shop” whereby the Barangay Clearance can be obtained while attending at City Hall. This means that all of the documentary requirements can be obtained and submitted through City Hall. However, in some LGUs, there may still be a requirement to attend the Barangay Hall after attending City Hall. So, as always – make sure to check in advance with your local LGU on the process that applies to your business for the Business Permit application and renewal.
Expert Tip! As the deadline for Business Permit renewal moves closer and closer to 20 January, the queues and waiting times at the Barangay Hall and City Hall will get longer and longer! Another good reason not to leave the Business Permit renewal to the very last minute!
Information Required for the Business Permit Renewal in the Philippines
There are various types of information and documentation that need to be submitted as part of the Business Permit renewal process. These requirements can change from year to year. The requirements can also change from Barangay to Barangay and from Municipality to Municipality. As such, before proceeding with the Business Permit renewal process, it will be important to review and confirm which requirements apply to your business!
While the requirements can vary, the following list includes the common documents and information that would usually be required as part of the Business Permit renewal process.
First of all, it will be a requirement to submit the Business Permit Document Suite from the previous year which would generally include all or most of the following documents (some documents might depend on the circumstances or location of the business):
- The previous year’s Business Permit (including the OR or Official Receipt evidencing payment for last year’s Permit).
- Barangay Clearance Certificate
- Community Tax Receipt
- Sanitary Permit
- Community Tax Certificate/Receipt
- CENRO Certificate (if available). CENRO is also known as the Community Environment and Natural Resources Office.
- Fire Safety Inspection Certificate
- Comprehensive General Liability Insurance (also known as the CGL)
- Occupation and Zoning Clearance Certificate (if applicable)
- Depending on the specific Municipality, a Notarized Lease Agreement for the business might be necessary
In addition to the previous year’s Business Permit Document Suite, additional and updated information will be required to process the renewal of the Business Permit, including:
- Quarterly VAT returns from the previous calendar year
- The Audited Financial Statement from the previous year
- Letter of Explanation (if Gross Sales/Receipts is lower than previous year’s declaration)
- Confirmation of number of employees employed at the time of Business Permit Renewal
- As mentioned above, certain Municipalities may require the business to submit a full list of their employees at the time of the Business Permit Renewal. This would include such information as individual addresses, registration numbers for TIN, SSS, PHIC, PAG-IBIG, etc.
- If the business has had no operations or financial transactions during the previous year, it may be necessary to submit an Affidavit of No Operations.
Regarding fees throughout the renewal process, businesses will be required to pay a business permit fee (based on a % of gross sales/revenue in the previous year), all local business taxes and any additional charges or fees that might be imposed by the particular Municipality.
Again, Business Permit processing fees and charges can vary depending on the Barangay or Municipality in which the business is registered – so make sure to confirm all applicable fees and charges when first attending for renewal!
Plan Ahead – Confirm All Business Permit Requirements in Advance!
A final reminder and recommendation!
If you are planning on renewing the Business Permit yourself, remember to clarify all of the requirements well in advance with your LGU so there are no surprises when you finally attend at City Hall or Barangay offices for filing!
Each LGU may have their own variations on the specific requirements – so plan ahead!
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