While one would want to continue to sustain their business, there are instances where one must close their business due to a number of factors that lead to the inability to keep the business afloat.
However, before the company may be fully shut down, they must apply for a closure of business with the different government agencies that they have registered with. One of such government agencies is the Bureau of Internal Revenue.
Failure to formally close the business at the Bureau of Internal Revenue shall lead to the business continuously being taxed as if the company is still in operation.
According to the Bureau of Internal Revenue, for the application for closure of business, it shall be filed at the Revenue District Office where the Taxpayer Identification Number is registered. The corresponding form to be submitted is the BIR Form 1905.
The following are the requirements that must be submitted together with the BIR Form 1905:
“1. Notice of closure or cessation of business;
2. Notice of Death and Death Certificate, in case of death of an individual;
3. Estate Tax Return of the decedent, if applicable;
4. List of ending inventory of goods, supplies, including capital goods;
5. Inventory of unused sale invoices/ official receipts (SI/ OR);
6. Unused sales invoices/ official receipts and all other unutilized accounting forms (eg. vouchers, debit/ credit memos, delivery receipts, purchase orders, etc.) shall be physically submitted to the Revenue District Office where the Head Office is registered or where the Authority to Print (ATP) was secured;
7. All business notices and permits as well as the Certificate of Registration shall be surrendered for cancellation;
8. Other documents necessary to support the changes applied for.”
The Bureau of Internal Revenue provides for the procedure that is undergone for the dissolution, merger or consolidation of juridical persons. These are the following:
“1. All taxpayers who filed for cancellation of registration due to closure/ cessation or termination of business, except for branches, shall be subjected to immediate investigation by the BIR office concerned to determine the taxpayer’s tax liabilities.
2. For juridical persons, the Taxpayer Identification Number shall be cancelled at the time of the dissolution, merger or consolidation resulting in termination of their corporate existence through the eventual cancellation of their registration with the BIR.
In case of business merger or consolidation, the Taxpayer Identification Number of the dissolved juridical persons shall be tagged with “Ceased/ Dissolved” status. If one of the parties survives, its Taxpayer Identification Number must be retained, however if a new corporation shall be established, a new Taxpayer Identification Number shall be issued to such new juridical entity.
3. The Bureau of Internal Revenue district office of the Head Office of the dissolved entity shall inform all the other Bureau of Internal Revenue district offices, where the branches are registered, of the closure/ cessation of the business.
4. To avoid generation of stop filer cases, the Bureau of Internal Revenue district office, upon complete submission by the taxpayer of the requirements shall:
a. “End date” the tax types of the taxpayer;
b. Destroy/ shred in the presence of the taxpayer or his authorized representative, the unutilized Sales Invoice/ Official Receipts and other accounting forms by cutting them crosswise and lengthwise at the middle thereof so that the same shall be divided into four (4), ensuring that the same will no longer be sued as originally intended; and
c. Return to the taxpayer the destroyed/ shredded Sales Invoice/ Official Receipts and other accounting forms for burning and/ or proper disposition.
d. The Bureau of Internal Revenue distinct office shall issue a Tax Clearance to the taxpayer applying for cancellation of Taxpayer Identification Number within ten (10) days from termination of its investigations and/or full settlement of the taxpayer’s liabilities, if applicable.”
Criteria of Top Withholding Agents
According to the Bureau of Internal Revenue (BIR) Revenue Regulation (RR) NO. 7-2019, Top Withholding Agents (TWA) shall now refer to agents whose gross sales or receipts, claimed deductible itemized expenses, or gross purchases amounting to twelve million pesos (P12M) during the preceding taxable year.
Existing TWAs deemed before the effectiveness of RR No. 7-2019 will remain a TWA unless they fail to satisfy the P12 million requirement and will be delisted.
The criteria for TWAs are as follows:
The recent expansion and inclusions of TWAs now include large taxpayers, top 20,000 private corporations, top 5,000 individuals and medium taxpayers under the Taxpayer Account management Program (TAMP) –
- whose gross sales are at least ten million pesos (P10M);
- whose gross purchase is at least five million pesos (P5M);
- whose income tax payable is at least two-hundred thousand pesos (P200,000) ;
- whose Value-Added Tax (VAT)/Percentage Tax/ Excise Tax is at least one-hundred thousand pesos (P100,000) during the preceding taxable year;
Need further information and assistance regarding BIR retirement benefits exempt from income tax? Talk to our team at FilePino to know more about the requirements and process. Call us today at 1.806.553.6552 (USA) or +63.917.892.2337 (Philippines) for more information.