The new year symbolizes a new start and an opportunity to move on from the mistakes made in the previous year. Surely, a lot of people are looking forward to kickstarting 2024 with a bang.
But the other side of the coin is the dread felt by many businesses. Not only does 2024 symbolize a new year, but it also represents the start of one of the busiest months in their working lives. It’s business permit renewal season at local government units (LGUs), which means unending paperwork, bargaining, and phone calls from various people.
LGU permit renewal is one of the most essential processes businesses go through each year. Obtaining a valid business permit allows them to continue to operate in their city. Without such a permit, businesses risk their whole operation getting shut down and being charged a penalty. Although the process may sound tedious, it isn’t always the case, especially for long-standing businesses that have perfected the art of LGU business permit renewal.
Whether you’re new to business permit renewal or consider yourself experienced in the process, here are some of the basics that you should never forget.
BUSINESS PERMITS: WHY AND WHAT FOR?
Consider your business permit as one of the A-B-Cs of your business. It gives Authority to your Business and is issued only if the business is Compliant with the rules and regulations in a particular city. A business permit isn’t just a piece of paper handed to you by your LGU representative. If at all, it is THE piece of paper that every business needs to signify the validity of their existence for the year.
One can’t simply do away with this requirement, regardless of how big or small your business is. The absence of a valid permit can lead to the closure of a business, penalties, and fines. All the hard work and effort you put into building your business could be for nothing if you fail to apply for this coveted piece of paper.
THE NITTY GRITTY OF LGU PERMIT RENEWAL
The requirements for LGU permit renewal usually vary per city or municipality. Notwithstanding, the procedure is similar in almost all cities.
The first step usually begins at the barangay level, where a permit to operate and a clearance must first be obtained. The whole procedure could take no more than a day to accomplish, so be sure to come prepared with the necessary documents.
After the barangay, you can now proceed with the LGU permit renewal. You can start as early as Jan. 1, but no later than Jan. 20. In previous years, some cities extended the period for LGU renewal due to the volume of applications.
Businesses must also prepare for the local business tax they have to pay during renewal. This is perhaps one of the biggest difficulties some businesses face, especially if they’re assessed a large amount. Unfortunately, companies have no other option but to pay the local business tax, as it is mandated by the Local Government Code (LGC). Sections 166 and 167 of the LGC provide that all local taxes, fees, and charges accrue on the first of January each year and must be paid within the first 20 days of January. Failure to make such a payment will subject a business to a surcharge and penalty of no more than 25% of the amount of taxes, fees, or charges not paid on time. In addition, a rate not exceeding 2% will be imposed as interest for every month of unpaid taxes, fees, or charges.
DIGITALIZING LGU PERMIT RENEWAL
In an effort to make renewal accessible and convenient for everyone, some LGUs have adopted a system of online submission. There’s hardly any difference between in-person and online submission, except for the fact that you’re skipping lines and experiencing a much more convenient way of doing business. Businesses can also expect feedback immediately from their LGU assessors so that they’ll be able to work on additional requests, if any. Now that this option has been made available in some cities, it begs the question of when other cities will apply it, especially in cities that are densely populated by corporations.
Mark your calendars because the season for LGU permit renewal has officially begun. It’s a busy start for many companies, which can make the month of January pass by fast. Make sure to take note of the basic requirements and have them ready for submission. More importantly, make sure to get the full set of requirements from your respective LGUs. Now that you know the basics of LGU renewal, you have at least a few bullets in your arsenal as you welcome 2024 by dealing with this tedious task.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Joselle Mariano is an associate from the Tax Advisory & Compliance division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audits, tax, advisory, and outsourcing firms in the Philippines, with 29 Partners and more than 1000 staff members.
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