How to officially close your business with the BIR
Closing a business isn't always as simple as putting up a "Closed" sign and calling it a day.
For business owners, freelancers, consultants, and professionals who have decided to call it quits, shutting down operations is only part of the process. There are still registrations to cancel, documents to prepare, and tax obligations to settle.
Leaving them unattended could mean dealing with outstanding liabilities or penalties down the line. So before you walk away from your venture for good, here's a guide to closing your business properly in the Philippines.
What are the requirements?
The process of closing your business is primarily handled by the Bureau of Internal Revenue. As stipulated under Revenue Memorandum Circular No. 47-2026, the application must be submitted to the Revenue District Office where your head or branch office was registered.
You can also submit your application together with the required documents electronically by sending them to the RDO's official email address, or through the BIR's electronic registration facilities.
The documents you will need include:
- Two copies of application for cancellation (BIR Form No. 1905)
- List of ending inventory of goods and supplies, including capital goods, for VAT-registered taxpayers
- Inventory of unused invoices/supplementary invoices, together with Unused invoices/supplementary invoices and all other unutilized accounting forms (e.g. vouchers, debit/credit memos, delivery receipts, purchase orders, etc.)
- Original copy of BIR Notices and Permits issued to taxpayer as well as original copy of the BIR Certificate of Registration
If you are planning to send a representative, you must prepare a notarized Special Power of Attorney specifically authorizing them to process the application for the closure of your business along with a photocopy of any government-issued ID of the you and your representative.
What happens after you submit your application?
Once you've submitted your application, the processing time depends on your taxpayer classification and whether you have outstanding tax liabilities or are subject to an audit.
If you qualify as a micro taxpayer—meaning your gross sales from the previous year didn’t exceed P3 million, or your gross assets upon retirement didn’t exceed P8 million—the BIR aims to issue your tax clearance within just three working days after you turn in all complete requirements. Those with open cases can be cleared three days after submission of requirements and payment of outstanding liabilities and penalties, if any.
However, if your business has a pending audit under a Letter of Authority, or if your gross sales or assets exceeded the micro taxpayer thresholds, the process takes a bit longer. In those cases, you will need to wait for the audit to fully finish before the BIR can issue your tax clearance and officially finalize your closure.
The most important thing to remember is never to walk away or stop operating without filing your paperwork. If you ghost the BIR, your business remains registered with "Open Cases," which means that you will still be liable for their tax obligations, including filing returns and paying applicable taxes and penalties. This is even if you have had zero transactions.
Under the law, failure to do so carries steep consequences, including penalty equivalent to 25% of the amount due, a fine of at least ₱10,000, and potential imprisonment for 1 to 10 years for deliberate non-compliance. Rest assured, however, that penalties will not accrue after submitting your application. Your business will be placed under "deregistered" to ensure that no open cases will be generated.