Business Permit Requirement for Dormant Businesses in the Philippines
(Comprehensive legal article, updated to 23 April 2025)

1. Definition and Threshold Question

Philippine law does not formally define “dormant business.” In practice, the term refers to any registered sole proprietorship, partnership, or corporation that has ceased commercial operations but has not completed formal retirement, closure, or dissolution before the relevant government agencies. Until those formal steps are done, the entity remains a “taxpayer” and a “person engaged in business” for regulatory purposes, regardless of zero sales or inactive offices. citeturn0search0turn3search0

2. Primary Legal Framework

Level	Statute / Issuance	Key rule affecting dormancy
Local	Local Government Code (LGC) RA 7160 – Secs. 143, 147, 151	Mayor’s/Business permit is an annual license; fees accrue until the business is officially retired with the city/municipality. citeturn2search2
National – SEC	Revised Corporation Code (RCC) RA 11232; SEC MC No. 23-2019 (revival of expired corp.), MC No. 23-2023 & MC No. 6-2024 (beneficial-ownership & reportorial integration)	Failure to file GIS/AFS for 5 consecutive years or non-compliance with MC 28 may place a corporation in delinquent status and trigger revocation, even if dormant. citeturn5search0turn5search2turn5search4
National – BIR	National Internal Revenue Code, as amended by RA 11976 “Ease of Paying Taxes Act” (effective 22 Jan 2024); BIR Advisory 8 Jan 2024; RMC 91-2024	Annual Registration Fee (₱500) abolished; dormant taxpayers must still file nil returns and books unless closure is approved. citeturn4search0turn4search1turn4search3
Process	RA 11032 “Ease of Doing Business & Anti-Red Tape Act”; DILG-DTI-DICT Joint MCs on Business-One-Stop Shops	LGUs must process permit renewals/retirements within fixed periods, but penalties can still accrue if deadlines are missed. citeturn2search0

3. LGU–Level Obligations While Dormant

Mayor’s/Business Permit Renewal
- Validity ends 31 December yearly; renewal window 1 – 20 January (some LGUs extend to 31 January). citeturn2search0turn2search1
- Even with zero gross receipts, the dormant entity must:
  - file Sworn Statement of No Operation or Zero Sales Declaration (form varies by LGU);
  - pay regulatory fees (sanitary, fire, mayor’s permit fee) and community tax certificate (CTC).
- LGU may assess ₱0 local business tax but will still collect the regulatory charges. Failure to renew triggers 25 % surcharge plus 2 % interest per month on outstanding taxes/fees. citeturn2search0
Barangay Clearance
- Renewed annually before the city permit is released; some barangays waive the business tax portion if an affidavit of dormancy is filed. citeturn3search1
Fire Safety & Sanitary Permits
- Required even for unused premises unless the establishment is formally closed and inspected for clearance.

4. National-Level Obligations While Dormant

Agency	Dormant-year filings & fees	Risk of inaction
BIR	Quarterly & Annual ITRs, VAT/Percentage returns, withholding, books of accounts registration (online via ORUS). The ARF is now repealed. Nil returns still mandatory until BIR Form 1905 (closure) is approved and Tax Clearance issued. citeturn4search0turn1search0turn0search5	Compromise penalties (₱1 000–25 000 per late return), plus interest and possible criminal action.
SEC	GIS filed within 30 days of AGM each year; AFS due 120 days after FYE (if no operations, file audited Nil AFS). citeturn5search4	Administrative fines (up to ₱20 000 /day under RCC §177); revocation after prolonged non-filing.
DTI (sole props.)	Business-name renewal every 5 years or earlier cancellation.	Name lapses; others may use it.
SSS/PhilHealth/Pag-IBIG/DOLE	File Employer Interruption Notice to suspend mandatory contributions; otherwise monthly penalties accrue.	Penalties & prosecution for failure to remit.

5. Lawful Routes for a Dormant Business

Remain Dormant but Compliant
- Continue zero-sales declarations, renew permits, and file nil tax returns yearly.
- Advantage: keeps entity alive for future reactivation or sale.
Apply for “Temporary Suspension/No Operation” Status
- Some LGUs allow reduced fees for up to one fiscal year; BIR allows temporary cessation (RMO 46-2018) but still expects year-end returns.
Retire the Business Permit (LGU) Without Dissolving the Entity
- File Application for Retirement/Closure with BPLO → secure tax clearance → receive Certificate of Retirement; then update BIR Form 1905 to stop local permit penalties while the corporation remains at SEC. citeturn0search0turn3search3
Full Deregistration / Dissolution
- Multi-agency process: Barangay ➜ City Treasurer ➜ BIR (Form 1905 & audit) ➜ SEC (for corporations, via dissolution under RCC §135 ff.) or DTI cancellation (for sole props.). citeturn3search0turn3search2
- Upon completion, all annual compliance obligations cease.
Revival of an Expired/Revoked Corporation
- Under SEC MC 23-2019, an expired or revoked company may be revived by paying back-fees, filing updated reports, and proving no intra-corporate disputes. citeturn5search0

6. Penalties & Enforcement Snapshot

Violation	Governing rule	Typical sanction
Unrenewed Mayor’s Permit	LGC §§143, 147 and city ordinance	25 % surcharge + 2 %/month; closure & padlocking of premises. citeturn2search0
Late / non-filing of BIR returns	NIRC §250 & BIR schedules	₱1 000 – 25 000 compromise + 25 % surcharge + 12 % interest p.a.; criminal fines ₱10 000 – ₱100 000 & 1–10 yrs jail. citeturn0search5
Non-filing of SEC GIS/AFS	RCC §177; SEC MC 23-2023	₱10 000 base + ₱1 000/day; possible revocation after 5 yrs. citeturn5search4

7. Frequently Asked Questions

Question	Answer (short)
Can I skip renewing the Mayor’s Permit if sales are zero?	No. LGU fees run until you formally retire the permit or dissolve the entity.
Is the ₱500 BIR Annual Registration Fee still payable for 2025?	No, the ARF was abolished effective 22 Jan 2024 under RA 11976. citeturn4search0
Will SEC let me “pause” filings while dormant?	No. GIS and AFS remain mandatory until dissolution; file nil reports to avoid fines.
Can I revive my company after years of dormancy and unpaid permits?	Yes, via SEC MC 23-2019 revival plus settlement of LGU/BIR arrears; but late-filing penalties will be computed. citeturn5search0

8. Practical Compliance Checklist (2025 edition)

January 1–20 – Renew Barangay & Mayor’s Permit; submit Sworn No-Operation Statement if applicable.
31 May – File AFS (calendar-year corp.) even if nil.
30 June – File SEC GIS (within 30 days of AGM).
Quarterly – File BIR 1702Q / 1701Q, 2550Q or 2551Q with “0” entries.
Throughout year – Decide whether to continue dormancy, retire permit, or start dissolution before penalties snowball.

9. Conclusion

Being “dormant” does not exempt a Philippine business from securing or renewing a Mayor’s Permit and complying with BIR and SEC reportorial requirements. The cheapest route is usually either (a) renew on a zero-sales basis or (b) officially retire/close the business. Failure to pick one path exposes the owners, directors, or partners to steadily compounding local surcharges, national tax penalties, and eventual SEC revocation.

This article is for informational purposes only and is not a substitute for individualized legal advice. Always verify requirements with your LGU, BIR Revenue District Office, and the SEC, as rules and fees can vary and are updated regularly.