It’s not easy, I’m telling you that.
I had to close down my sole prop business registration in Pasig because I moved to Antipolo and wishes to register there and pay business tax to where my roots are and where we are based at (makes sense?).
Anyway, it was all good until the BIR decided to find holes and faults and tied both my hands and forced me to pay taxes I never owed and because I didn’t want to pay grease money or coffee money.
Here are the steps I did to close down my sole prop business in Pasig City
1. Cancel business name and registration with the DTI
Provide the DTI a letter saying you want to close down the business name and registration.
Fill up a form from the DTI and wait for a few minutes for the approval and the printing of your certification stating your business name cancellation. You can do this on any DTI office, I applied at Antipolo eventhough my initial registration was in the main DTI branch located in Makati. I’m not sure if it’s the same as other DTI branches, but in Antipolo, I was served well and fast.
2. Cancel Barangay permit/s
Bring the DTI cancellation certificate, your old permits and then an affidavit requesting for the closure of the business. The barangay issued a certificate stating the cancellation of my business as well- Certificate of No business operation. I got it within an hour as well.
3. Cancel the Municipal Business permit
This is the start of a tedious and expensive phase.
DTI cancellation certificate
Brgy certificate of no operation
Affidavit stating the intent to close the business
Old official receipts – they will need to compute how much taxes you still need to pay (if any)
Books of Accounts
To be honest, I didn’t bother going back and forth with this process because I was already having problems with BIR. You can simultaneously apply for the closure with the City Hall and the BIR- that’s what I did.
4. Closure of business with BIR
Now, this is where it all gets dirty.
Because my business is a micro-mom and pop- business, I never expected to experience stress and anxiety over the closure of a legit business.
Mind you, I have an accountant who does all my taxes every month and we file EVERYTHING. We do not hide anything because I want to pay what is due. So it broke me when the BIR personnel did what he did. My business was registered as VAT. I did all the registration myself and no one told me to register as percentage tax…. the BIR RDO decided I should be VAT, fyi.
Here’s the official published steps from the BIR when you want to close down your business:
2. Submission of docs. Itr, forms, used and unused or’s
3. Inventory of materials and equipment
4. Review of unpaid and late filling (pay what was assessed)
5. Release of certificate of closure
And this was what actually happened to me:
Day 1 January 9, 2017 – Filed and applied for closure
Affidavit of closure
Old Certificate of Registration
Old receipts and left over official receipts
Books of Accounts
Inventory list of materials and equipment (indicate status for each i.e. sold, etc)
All copies of the BIR forms you have filed for the last 2 years (or if you can, since the start of the operation)
Authorization letter if someone is doing this for you (i.e. accountant)
Fill up appropriate forms for the application and attach all the requirements.
You will be asked to go to the assessor’s office to have all your documents checked and to determine if you owe something. I was asked to submit the left over receipts and destroy them in front of a BIR officer. I took photos of this.
You will also need to photocopy all the forms you have and every document you have for submission. AT THIS POINT, LET ME TELL YOU…. HAVE A RECEIVING COPY, HAVE IT SIGNED BY THE PERSON RECEIVING YOUR DOCUMENT.
I was asked to come back on January 23, 2017 for the result of the evaluation and release of the clearance from the finance department after paying the demanded amount if any.
Day 2 January 23, 2017 – I was informed that the results were not ready because THEY do not have the documents with them.
They could not find it. WOW. JUST WOW. But what can you do? So I had to photocopy EVERY SINGLE DOCUMENT AGAIN and submit it. Then it’s another 2-3 weeks wait for the clearance and evaluation result. I was assigned to Revenue Office- Mr. Danny Rodrigo. I got his secretary’s number so I can follow up my papers and see if they’re ready and so that I won’t have to waste time and transportation fees going to and fro. (I was residing in Antipolo by then).
Day 3- 3rd week of March – Settle your penalties and fees
As for me, I was asked to pay P14,000 for late payment fees and interests on a late filing of my forms 1601-E and 1601-C. Please note that I don’t pay for these, we simply filed to comply and say I have nothing to file but unfortunately, my accountant failed to submit some of them on time, hence the payment. The next day, I settled it just so I can move forward with the closure.
BUT… OF COURSE there’s a BUT….
I was again not given the clearance after paying it. I was asked to come back another week because the clearance will have to be printed. I was asked to pay P500 FOR THE PRINTING OF THE CLOSURE CERTIFICATE.
Day 4 – March 29, 2017 – NO CLEARANCE, MORE FEES TO PAY- BIGGER FEES TO PAY
I was told this was the end of the process but NO. When I went to the counter where they release the clearance and certificate of closure, I was told to wait while she gets the paper. THEN the lady came out with another assessment certificate (no signature of anyone like the first one for the 14k) that I had to pay P145,000 for penalty because Danny Rodrigo found a discrepancy in my 2015 Financial Statement.
To my dismay, I asked to speak to Danny Rodrigo for an explanation. Because my papers were SUPPOSED TO BE CLEARED and EVALUATED weeks ago- I even paid the assessed P14,000 penalties and the P500 for the certificate print out.
Unfortunately that day, he was out on field- I was told.
Day 5- March 30, 2017 – MEETING WITH DANNY RODRIGO
I went very early to make sure I can set a meeting with Mr. Danny Rodrigo because surely he’ll be in the office before going out on the “field”. 8AM, I was there waiting. He arrived 10AMish.
He explained that he saw a discrepancy in the financial statement – he pointed out a P100,000 asset that was not declared in the overall statement. When I looked at it, I can see clearly that it was BOUGHT, meaning an expense (because we bought 2 floor polishers) and it was duly noted, filed with Official receipts!
He insisted the statement clearly said it was an asset or an income because it was put in the line of the income. At this point I wanted to cry because I am not an accountant but it was clear to me that it was an expense and also because I knew we bought it and didn’t earn P100,000. So I told him, the accountant who prepared the financial statement will speak to him the following day.
I called my accountant and told him about the discrepancy and he agreed to settle it with the BIR Officer, Danny Rodrigo.
Day 6 – March 31, 2017 – NO DANNY RODRIGO
No Danny Rodrigo showed up for work. As per his secretary, he was out on a field work. A day wasted.
Day 7 – April 3, 2017 – FAILED EXPLANATION BY ACCOUNTANT
At this point, my accountant told me Danny Rodrigo didn’t want to budge unless I pay for the assessed penalty fee of P145,000 eventhough he showed our books, our OR from the purchase, etc.
I asked the accountant if it’s possible to speak with the RDO’s commissioner himself and appeal my case. My accountant agreed to speak with him in behalf of me because he felt really bad that it was all because of the Financial Statement “error” or misunderstanding or whatever you may want to call it.
End result- the commissioner said if the Revenue officer found it that way, he cannot do anything about it.
So our rally lasted for a month- speaking with Danny Rodrigo several times just because I didn’t want to pay something THAT BIG which I didn’t owe! I am closing a business for pete’s sake!
I even asked him to pay my registered business address a visit so he can evaluate it properly and see for himself that I am indeed closed for business and already transferred in Antipolo.
He hinted on wanting some of the equipment listed but I already told him these were sold.
My accountant, sadly, gave up. So another lesson here — get an accountant you can trust and who will represent you on times like this. Your BIR obligations are yours alone. Not your accountant’s. You pay for your fees and your penalties. Your accountant cannot be held liable at any cost. PAINFUL BUT TRUE.
So yeah, my accountant who filed late and made an error in the financial statement, left.
So what did I do?
Seek help from an experienced accounting firm.
The firm helped me straighten out the BIR issue. I did not pay the P145,000 to the BIR because it was deemed false. I however paid P40,000 to the accounting firm.
And after 7 months, I got my clearance and business closure certificate.
That, ladies and gentlemen, is the sad sad state of business owners in the Philippines.