A Look Inside Philippine Business Processes: What Happens for Not Renewing Business Permits
Depending on the respective local government units (LGUs), it can be quite the hassle to register and renew business permits in the Philippines. It’s always tempting to continue operating without a business permit renewal because of the long queue lines and the many processes an entrepreneur has to accomplish. However, if you’re not renewing business permits, you may face grave consequences that are costlier than the price of temporary comfort you experience.
The Philippine government has adopted various strategies to ease transactions relating to registration and renewal of business permits. From automating and online solutions, various LGUs have designated a one-stop office for business owners to streamline their applications.
However, a business owner must understand that tax purposes are different. Once you’re finished securing the most-coveted business permit or “permit to operate,” you can focus on your operations. Yes, it entails charges, but it’s more reasonable to pay for this instead of paying for the damages of not renewing business permits.
What are the consequences you’ll face if you do not renew business permits, and what will happen to your business? Let’s understand more below.
The first thing you can expect from operating without a business permit is to pay money for damages. According to the Bureau of Internal Revenue regulations, the penalty for running a business without permits (otherwise known as “failure to register”) is “fine of not less than PHP 5,000 but not more than PHP 20,000. There can also be imprisonment of not less than six months but not more than two years.”
Furthermore, the compromising amount depends on the municipality of your business address. Establishments on cities can be fined for about PHP 20,000. For 1st class municipalities, the monetary damages are determined at around PHP 10,000. 2nd class municipalities fine around PHP 5,000. For 3rd class municipalities, you need to pay around PHP 2,000.
A business owner should also bear in mind that these penalties are based on the “revised schedule of compromise penalty.” Other LGUs may impose corresponding penalties depending on the violations of your business.
GU Mandated Penalties
Aside from your obligations to the tax authorities of the Philippines, LGUs may impose penalties for your failure of business permit registration. It is helpful to know how a particular LGU computes its liabilities. This applies in case you forget to file for application, registration, or renewal. Be mindful of the due dates as well, as penalties can rack up without your knowledge.
Let’s discuss an example of how an LGU computes its penalties. In Makati City, the penalties for non-renewed business permits is 25% of the surcharge of the total amount due. Plus, there’s an additional 2% of penalties for every month of delay.
For extreme cases or a business that operates for an extended time without a permit, the government may opt to close the operations until it has settled its deficiencies. The government can also seize its assets and property, especially if the operations are deemed unhealthy, unsanitary, unsafe, or illegal.
If one chooses to close down their business in an attempt to run away from their deficiencies, other LGUs will be alerted of your actions for future references. Further, continuing to operate your business should be legally allowed by securing a renewal. The disadvantages of operating without one outweigh the discomfort you can experience from the processes and transactions you need to accomplish.
How 3E Accounting Helps Your Business
Thinking of acquiring or renewing business permits in the Philippines? We can help.
You can also contact us if you need help with company formation in the Philippines. Experts from our company, 3E Accounting, provide you with every professional corporate services. We can help you with every aspect of business-building! All you have to do is message us for more details.