The new year symbolizes a new lease in life and an opportunity to start fresh from the mistakes we’ve learned in the previous year. Surely, a lot of people are looking forward to kickstarting 2024 with a bang.

But at the other end of the spectrum of anticipation is the dread felt by many businesses. Not only does 2024 symbolize a new year, but it also represents the onslaught of what is about to be one of the busiest months in their work lives. It’s business renewal season in their respective LGUs, and it could only mean unending paperwork, bargaining, and phone calls from different people.

LGU renewal is one of the most essential processes businesses go through each year. Through this process, they get a valid business permit, which allows them to continue to operate in the city they’re in. Without such a permit, businesses risk their whole operation getting shut down for being illegal and suffering 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 Renewal.

Whether you’re new to the world of LGU Business Renewal or consider yourself one who is seasoned for the job, here are some of the basics that you should never forget.

Business Permits: Why is it important, and what is it for?

Consider your Business Permit as the A-B-Cs of your business. It gives Authority to your Business and is issued only if the business is Compliant with relevant 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 for their valid 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 Renewal

The requirements for LGU 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 and ready for the necessary documents.

Right after the Barangay Level, you can now proceed with the LGU renewal. You can start as early as January 1, but no later than January 20. In previous years, some cities extended the period for LGU renewal due to the number of applications.

Besides the amount of paperwork, 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 timely 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.

A Step Towards the Digitalization of LGU Renewal

In an effort to make LGU renewal accessible and convenient for everyone, some LGUs have adopted a system where businesses can submit their requirements online. 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.

Final Words

Mark your calendars because the season for LGU 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 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.


As published in BusinessWorld, dated 09 January 2024