You better watch out: LGU renewal deadline is coming to town

The holiday season is here! Parties, gift shopping, and year-end deadlines are piling up. Thus, the Christmas lyric, “You better watch out, you better not cry…” rings true. Because after the holiday cheer, LGU deadlines are waiting for business owners and taxpayers.

While you have been busy decking the halls and enjoying the festivities, January brings important compliance tasks — renewal of business registration, payment of local business tax (LBT), and settling real property tax (RPT).

If you do not renew your business permits or pay your real property tax on time, you might start the new year with penalties instead of fireworks. For business owners and taxpayers, one of the key dates to remember is Jan. 20, the deadline for business permit renewal. Failure to renew the business registration would entail the imposition of penalties — 25% surcharges, 2% monthly interest, and even closure orders.

WHY EARLY RENEWAL IS YOUR BEST GIFT TO YOURSELF
The Local Government Code of 1991 (RA No. 7160) requires businesses to renew permits and local business taxes annually. Real property tax is also due at the start of the year, with early payment discounts of up to 20%, meaning more funds for your business and less stress for you.

Think of it this way: early renewal is not just about being compliant but also a strategy. By starting now, you avoid the rush, skip long lines, and steer clear of penalties that can eat into your profits. You’ll enter the new year with peace of mind, ready to focus on growth instead of paperwork.

CHECKLIST BEFORE YOU DECK THE HALLS
Getting ahead means gathering all the necessary documents now, so you’re not scrambling when the clock strikes January. Here’s what you’ll need to keep your business merry and bright:

• Previous year’s Mayor’s Permit and receipts;

• Barangay clearance;

• Lease contract or title to the property;

• Audited financial statements;

• Income tax returns/ VAT returns;

• Certificate of gross sales/no sales for the year 2025;

• Duly filled-up renewal application form;

• Comprehensive General Liability (CGL) Insurance policy with official receipt;

• SEC registration documents including the latest General Information Sheet (GIS);

• Community Tax Certificate/Cedula, updated permits for Sanitary, Environmental, Fire Safety Insurance Certificate, and such other related permits

‘WHY IS MY TAX HIGHER?’
Have you ever seen your local business tax suddenly spike compared to last year? The common reasons are as follows:

• Wrong business classification — your business might have been tagged under a category with higher tax rates.

• Overstated gross sales — errors in reported income can inflate your tax base.

• System or encoding errors — yes, even LGUs can make mistakes.

Before you panic, here’s your post-holiday rescue plan:

• Request the full computation and legal basis. Ask for a breakdown and the specific LGU ordinance citation. Transparency is your right.

• File a protest within 60 days under Section 195 of RA No. 7160. Timing matters. If you miss this window, your options shrink.

• If the LGU still refuses, consider paying under protest (optional but strategic), mark your receipt clearly as such, and then file for a refund or credit within two years.

• If all else fails, escalate to the court of competent jurisdiction or judicial relief.

KNOW YOUR RIGHTS
When it comes to local business tax disputes, jurisprudence is clear — taxpayers have remedies, and LGUs have limits.

In Rock Steel Resources, Inc. vs. City of Davao, CTA Case No. 139, Aug. 11, 2016, the Court of Tax Appeals invalidated an ordinance that required taxpayers to pay first before filing a protest against a business tax assessment. The ruling emphasized that the “pay under protest” rule applies only to real property tax, not to business tax under Section 195 of the Local Government Code. This means that you can challenge an LBT assessment without repayment.

In Mactel Corp. vs. The City Government of Makati, G.R. No. 244602, July 14, 2021, the Court went further by ordering Makati City to issue a temporary business permit while a tax dispute was pending. This case underscores that LGUs cannot hold your permit hostage to force payment of a contested assessment.

Meanwhile, in Hon. Lourdes R. Jose, in her capacity as  City Treasurer of Caloocan vs. Tigerway Facilities and Resources, Inc. G.R. No. 247331, Feb. 26, 2024, the Court clarified that if you paid under protest to avoid business disruption, you can still claim a refund or tax credit, provided you file within two years from payment and comply with procedural requirements. On the flip side, the Supreme Court in another case serves as a cautionary tale. It denied refund claims when taxpayers missed the 60-day protest period and the two-year refund window, underscoring strict compliance with Sections 195 and 196 of the Local Government Code. The moral? Deadlines matter — don’t snooze on them.

YOUR HOLIDAY COMPLIANCE GAME PLAN
• December: Gather and collate all documents, check the LGU schedules as some LGUs provide extended deadlines, and pay RPT early for discounts

• Jan. 1 to 20: Renew permits and settle local business tax

• Jan. 31: Ensure proper settlement of real property taxes

• Within 60 days of any assessment: File a protest

• Within two years of payment under protest: File refund claim

HOLIDAY WRAP-UP
After the holiday cheer, watch out for LGU deadlines as they are coming fast! Start early, stay compliant, and know your rights. The holiday should bring joy and not tax headaches. So, while you’re wrapping gifts, wrap up your permits and taxes too, and your future self will thank you!

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.

Ma. Jessica A. Guevarra is a senior manager from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com