Business Permit Renewal: January 20 and the 25%
LGU · business
Quick answer
Business permits run for one year. Local taxes and fees are due within the first 20 days of January, or of each quarter. Late payment can carry a surcharge of up to 25% plus interest of up to 2% a month, with total interest capped at 36 months.
Every figure on this page is from official published documents: Official Gazette and Supreme Court E-Library.
Last verified 2 sources, listed below
Official Gazette | Republic Act No. 7160, Local Government Code of 19911 · Supreme Court E-Library | Republic Act No. 110322. PHGuides is independent and not affiliated with any agency.
Renewal has two deadlines that people treat as one. The tax deadline is national and fixed. The permit renewal window is local and optional.
The two deadlines are set by different laws
| Deadline | Set by | Same everywhere? | |
|---|---|---|---|
| Local taxes, fees and charges | First 20 days of January, or of each subsequent quarter | Section 167, RA 7160 | Yes |
| Business permit renewal | First month of the year or the anniversary date of issuance | RA 11032, at the LGU’s option | No |
RA 11032 makes the permit valid for one (1) year and gives the city or municipality the choice of running renewals in January or on each business’s own anniversary. The tax deadline in Section 167 did not move with it.
So confirm which cycle your LGU uses, but assume 20 January for the money.
What late payment costs
Section 168 sets two charges, both as ceilings:
| Charge | Statutory maximum |
|---|---|
| Surcharge on the amount not paid on time | 25% |
| Interest on the unpaid amount, including the surcharge | 2% per month |
| Cap on total interest | 36 months |
The interest compounds onto the surcharge, not just the tax, because Section 168 applies it to the unpaid amount including surcharges.
The 36-month cap is the part worth reading carefully. It does not forgive the debt, it stops the interest clock. At the maximum rate, 2% a month for 36 months is 72% of the unpaid amount, and that sits on top of the 25% surcharge.
On a ₱10,000.00 liability left unpaid for three years, at the statutory maximums:
| Component | Amount |
|---|---|
| Tax due | ₱10,000.00 |
| Surcharge at 25% | ₱2,500.00 |
| Interest at 2% a month for 36 months, on ₱12,500.00 | ₱9,000.00 |
| Total | ₱21,500.00 |
That is this site’s arithmetic on the statutory ceilings, not a bill from any LGU. Your ordinance may set lower rates, and many do. The point of the illustration is the shape: at the maximums, three years roughly doubles the liability and then stops growing by interest.
The same 25% and 2% a month structure governs unpaid real property tax, which is a separate annual charge on the property itself rather than on the business.
The extension exists, but it is a council decision
Section 167 lets the sanggunian extend the time for payment without surcharges or penalties, for a justifiable reason or cause, for a period not exceeding 6 months.
Two things follow. It is granted by ordinance or council action, not by the person at the counter. And when granted, it is genuinely penalty-free, unlike simply paying late.
If the LGU is the one that is slow
RA 11032’s automatic remedies apply to renewals in a different form from new applications:
| Situation | Remedy |
|---|---|
| New application not acted on in time | Deemed approved |
| Renewal not acted on in time | Permit automatically extended |
The prescribed processing times behind both are 3 working days for a simple transaction, 7 for a complex one, and 20 for a highly technical one. The mayor’s permit guide covers the unified form, the one stop shop and the clearances issued alongside the permit.
What you are actually paying
The permit fee under Section 147 is set locally and is meant to be commensurate with the cost of regulation, inspection and licensing. The business tax under Section 143 is computed on your gross sales or receipts for the preceding calendar year, which is why a bad year is taxed the following January rather than immediately.
A registered BMBE is exempt from income tax on its operations, and LGUs are encouraged to reduce or waive local taxes and charges for one. That does not remove the permit itself, only what is charged on it.
Collection is the treasurer’s job under Section 170, whether provincial, city, municipal or barangay, or their duly authorized deputies.
Where this goes wrong
Assuming the permit window and the tax deadline are the same date. The tax is due within the first 20 days of January wherever you are. The renewal window may run on your anniversary instead.
Treating the 36-month cap as a deadline for paying. It caps the interest, not the obligation.
Waiting for the counter to grant an extension. Only the sanggunian can, for justifiable cause, and for no more than 6 months.
Forgetting the interest applies to the surcharge too. Section 168 charges it on the unpaid amount including surcharges.
Computing the business tax on the current year. It runs on the preceding calendar year’s gross sales or receipts.
Related
The Anti-Red Tape Act guide covers the processing clock and the deemed-approved rule behind this renewal.
The fire safety inspection certificate guide covers the BFP clearance the renewal depends on, and the mayor’s permit guide covers the first-time registration.
Frequently asked questions
- When is the deadline?
- Section 167 of the Local Government Code requires all local taxes, fees and charges to be paid within the first 20 days of January, or of each subsequent quarter where you pay quarterly. Separately, RA 11032 lets the LGU run permit renewals either in the first month of the year or on the anniversary date of issuance.
- What does paying late cost?
- The sanggunian may impose a surcharge not exceeding 25% of the unpaid amount, plus interest not exceeding 2% per month on the unpaid amount including the surcharge. Both are ceilings, so the actual figures come from your LGU's ordinance.
- Does the interest run forever?
- No. Section 168 caps it: in no case shall the total interest on the unpaid amount exceed 36 months. At the maximum 2% a month that is 72% of the unpaid amount, on top of the 25% surcharge, and the interest stops accruing there.
- Can the deadline be extended?
- Yes, but only by the sanggunian and only for a justifiable reason or cause. The extension is without surcharges or penalties and may not exceed 6 months. It is a council decision, not something the counter can grant you.
- Can I pay quarterly instead of in one go?
- Section 167 contemplates it, requiring payment within the first 20 days of January or of each subsequent quarter as the case may be. Whether your LGU offers the quarterly option, and on what terms, is set locally.
- What if the LGU does not act on my renewal in time?
- Under RA 11032, if the office fails to act on a renewal application within the prescribed processing time, the permit is automatically extended. That is a different remedy from the automatic approval that applies to a new application.
- Is the renewal deadline the same everywhere?
- The tax deadline is national, at the first 20 days of January. The permit renewal window is not: RA 11032 gives the city or municipality the option of the first month of the year or the anniversary date of the permit, so confirm which your LGU uses.
- Which office collects it?
- Section 170 provides that all local taxes, fees and charges are collected by the provincial, city, municipal or barangay treasurer, or their duly authorized deputies. In practice the Business One Stop Shop co-locates the treasury with the licensing office.