This guide teaches you 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.
NOTE: 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.
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.
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.
>> GUIDE #6: TAXES FOR FREELANCERS: FREQUENTLY ASKED QUESTIONS <<
Hi Stef. Do you have a sample letter for cessation of business registration for self-employed? I hope you can send me a copy. Thank you.
Stef G. says
Unfortunately I don’t have my copy anymore, but it’s really easy to draft. The letter for cessation of business registration simply lets the BIR know that you would like to close your business. Mine was pretty loose and somewhat informal even. You just have to state that you would like to close your business, the effective date, and the reasons behind your decision if you’d like to disclose it in the letter.
Address it to the BIR RDO of your area and sign the letter at the end. 🙂
elizabeth manlutac says
do you have a sample of an affidavit stating that I have no sales yet for this month (just started). They (BIR) asked me to submit an affidavit to present plus form 2225 as a requirement for my quarterly tax payment for Oct-Dec.
thanks so much.
My husband’s business didn’t go well and we ceased our operations after 2 months. This was like 3 years ago. we want to formally close it but we are afraid that BIR might levy penalties that would put us to so much trouble. What is the best thing to do? Baka makacahrge kami ng sobra sobra at wala naman talaga kami pambayad ng penalties.
Stef Gonzaga says
I’m sorry to hear that your husband’s business didn’t succeed. I’m afraid you will have to consult with the BIR regarding your unfiled case and will have to pay the penalties that have been incurred since you didn’t file for a closure right after deciding to close your business. Just explain your situation, provide the books and the leftover receipts you’ve registered, and comply with their closure requirements.
It’s better to have it settled now than to prolong the problem. Baka tataas at tataas ang penalties niyo and the BIR will pay a visit to settle your accounts.
Let me know how it goes if you decide to proceed!
Is the 10 days deadline for filing from the date of closure really strict?
I completed first the Brgy and municipal closure certifications. It’s been 25 days since the date of cessation in my affidavit. Will the RDO still accept it? I’m kinda worried to go to BIR.
Stef Gonzaga says
Hi Kat, if memory serves me right, you should complete the process 10 days from the date of closure. Of course, the best way to get the right information is to contact your RDO. It will mean explaining your situation, but it’s better than having to suffer from the delays later on.
Hi, i have a small sari-sari store business that i want to close, I’ve been paying my taxes since I’ve registered the business with BIR, now I’ve decided to close the business. I still have another business that will still operate and which the tax is being withheld every month. What is the best option to take? Should i file for closure for my small sari-sari store or just file a no operation (filing for no operation means, i’ll be filling it every month for a long time?)? I’ve also read that closing a business means also cancelling your TIN, so i guess that will just cause me more problem that solution, right?. Please advice. Thank you very much.
Closing or cancelling your business registration with the BIR is not the same as cancelling your TIN. You may close your business without cancelling your TIN. You can have the same TIN for the rest of your life.
hello po. may tanong lang po ako.
nag open po ako ng business last january 2014, nakapag register na po ako sa DTI at sa City Hall. pero hindi ko po na register sa BIR kasi due to some circumstances hindi nag operate yung business ko. kaya wala akong COR at mga receipts. gumawa na rin po ako ng affidavite na hindi ko po na register yung business sa BIR.
tapos nagdecide nlng ako na e close yung business. na close ko na po sa DTI at City Hall. sa BIR on the process na po. nasa Assessment na po yung papers ko.
ang tanong ko po, kng may babayaran ba ako? at kng meron around how much?
2-years ago, I’m in your website to read how to start the freelance registration with BIR. Today, I’m back to read how to close and terminate my business registration. I just realized that with all the requirements the BIR is asking recently -its time to move-on and unload all the stress. I guess doing business in this country is no longer an option unless you have money to burn.
BIR should consider making things simple with all the aspiring business people but I guess they prepare to complicate this and discourage our citizens.
Thank you Stef for this website, you are indeed helpful. God bless!
I filed for closure on my BIR years ago but when I re check few months its still not closed so I tried again and submitted another one, I just checked two weeks ago and its still not closed any suggestion?
Hi mike, just curious, how did your closure process go? how many days did it take you?