Interested in becoming a BIR-registered freelancer? You can learn more here: Taxes for Pinoy Freelancers: BIR Requirements and Registration | 3 Kinds of Taxes for Pinoy Freelancers | Taxes for Freelancers: How to File Your Taxes at the BIR.
Welcome to the finale of my taxation for Pinoy freelancers series of posts, which tackles the steps and requirements needed to file a closure of business (a.k.a. cessation of registration) with the BIR.
At some point in your career as a self-employed freelancing professional, things have taken a turn that you have decided to close your freelance business.
For example, you’ve decided to transfer locations, or have other plans that demand your attention. You see that you won’t be able to personally visit the RDO for your monthly and quarterly filings, and you’re worried this might leave a bad mark on your records with the BIR.
If you find yourself in a similar situation, you may want to consider filing for a cessation of registration. Let’s take a look at what this means and the requirements to do so.
What is Closure of Business?
Closure of business or a cessation of registration means you want to close your business and stop filing taxes of any kind to the BIR. This means you are not going to operate any longer as a self-employed professional or a freelance business, and so are not obligated to pay taxes further.
Ideally, you would simply file your monthly VAT or quarterly ITR as “No Operation,” which is a lot simpler and easier to do. If you are transferring to a different city or district, you can always file for a transfer of business location and update your BIR 1905.
But, if you feel that you won’t be doing business again in the future, or there are other bigger plans that you will eventually be engaged in, the best move may be to file for a closure.
It is also important to note that you can close your business without removing your status as a BIR-registered tax payer. If you foresee opening or re-registering a new freelance business in the future, do not cancel your TIN number. There are no monthly or yearly fees to have and keep one, plus you may want to update it once you decide to reopen or register a new business.
[mojo_shortcodes_alert style="yellow"] This post is ideally for freelancers who have registered as self-employed professionals and who are operating under their own names. If you have opened under a business name, you may need to visit other agencies other than the BIR for your clearance requirements. This forum thread lists the government agencies you may need to visit. Finally, if you have an accountant filing your taxes, consult his or her advice before doing so. [/mojo_shortcodes_alert]
While searching for information about this topic, I came across the BIR 1905 form available at the BIR website, wherein the requirements for specific updates to your registration are listed.
For cessation of business, make sure to have the following:
- Latest annual ITR filed before the deadline – make sure to file the latest annual ITR before closing your business. This is to ensure that you have paid all of your dues for the past year. File for closure 10 days after deciding to close your business.
- Letter of closure addressed to the BIR – indicate that you are closing your business and the effective date.
- Inventory of unused receipts - a list of the unused invoice stubs, can be printed on ordinary bond paper.
- Unused receipts - surrendered to the BIR for destruction
- Books of accounts - your ledger, columnar books, etc.
- Certificate of registration - to be surrendered to the BIR
- BIR form 1905 - the form used to update your status as a tax payer.
- Accomplished routing sheet – a form wherein several BIR signatories check your records and sign to indicate that you are cleared of any cases, suspensions, or bad marks with the bureau.
- Filed income tax returns, monthly VAT (if you’re VAT-registered), etc. – basically all of the papers you have submitted and that the BIR stamped during filing.
A Hunting We Will Go
Once you have all of the requirements, you can now begin the procedure of filing for closure.
Take note that what follows may not exactly be as how it will turn out at your respective Revenue District Office. Always ask the BIR officer-of-the-day for information on how to file for a closure if you are not sure.
- With your requirements on hand, secure a routing sheet, which will be used for your clearance as a tax payer.
- Ask the BIR officer to which department to acquire the first signature. Once you have the signature, always ask to who you will proceed to next. You would be going through collections, the head officer of the RDO, documentations, etc. Follow in sequence to avoid any problems.
- Once your routing sheet is complete, proceed to the BIR officer-of-the-day to have them evaluate your annual ITR, books of accounts, and receipts.
- The unused receipts must be destroyed with the BIR officer-of-the-day present. Make sure that you are a witness to this to avoid any suspicion.
- If you are cleared, s/he will sign the evaluation form and ask you to submit the rest of the requirements.
And you’re done. It’s a very stressful process (in my opinion), but as long as you have paid for all of your taxes and have submitted all of the requirements, you shouldn’t have anything to worry about further.
Here are some things to remember to lessen the problems and hassles when filing for a closure at the BIR:
- Make sure your ITR computations are “readable” and understandable to the BIR. Even if you have paid for your annual ITR at the bank, any number that isn’t written or printed properly will be questioned.
- Avoid filing for a closure during rush hours to avoid waiting too long in line.
- Bring both copies and originals of all of your files, including the very first forms you have submitted to the BIR.
- Always ask for help if you find yourself lost in the middle of the procedure. While they are strict, the BIR officers are willing to help.
- If you’d like information on how to file a closure for a traditional brick and mortar business, Business Tips offers information and advice in “How to Close a Business in the Philippines.”
- And finally, if you have specific questions about this procedure that the post doesn’t cover, you can always call your respective RDO or seek advice from the BIR officer-of-the-day, as they are the best people to turn to for clarification.
I hope this post helps you in case you see and need to file a closure of your freelance business. Please spend as much time as you can thinking about your decision to close before visiting the BIR.