One of the most important things, but ohften boring, steps to dissolve a business in the Philippines is getting a tax clearance, or a Certificate of No Outstanding Tax Liability (CNOTL) from the Bureau of Internal Revenue (BIR). This document is a key requirement for the deregistration of other government agencies, and delays in its issuance have historically lengthened the entire bankruptcy process.
For many years, this section has been particularly burdensome due to the requirement of mandatory audits covering previous periods of taxation, which often consumes significant time and contributes to the processing of holdings.
Recognizing these challenges, the BIR recently issued Revenue Memorandum Circular (RMC) No. 47‑2026, which describes simplified and simplified guidelines for closing and/or canceling business registration. This release introduces significant changes in filing areas, documentary requirements, audit rules, and processing times.
ELECTRONIC FILING
Pursuant to Republic Act No. 11976 of the Tax Facilitation Act, and its implementing regulations, the application for cancellation of registration can now be filed manually at the Regional Revenue Office (RDO) having jurisdiction over the taxpayer or by electronic transmission, using the registered e-mail address of the taxpayer through the electronic resources of the BIR.
This shows the BIR’s progress towards digitization and improved accessibility, allowing taxpayers more flexibility in complying with deregistration requirements.
This update, we hope, will help taxpayers to submit their applications in a timely and efficient manner for deregistration without the need to manually send documents before their RDOs. Previously, filing was limited to manual delivery of documents which presented challenges.
MISCELLANEOUS TEXTS
Another notable development is the standardization of documentary requirements. The release specifically identified the requirements to support the tax write-off request; including BIR Form No. 1905 standard, list of unused official receipts/invoices and other accounting forms, inventory of goods and supplies (for VAT registered taxpayers), unused invoices, additional documents or unused accounting forms, and original documents, BIR certificate documents, Notice of Registration of Certificates. Issuance of receipts/Invoices, etc).
Notably, RMC 47-2026 omitted the “all provisions” found in the previous issuance, similar to RR 7-2012 which provides “other documents that may be required” by the BIR. Accordingly, under RMC 47-2026, once these mandatory documents are submitted, the taxpayer will be considered “disenrolled,” effectively stopping the accumulation of penalties and preventing the generation of additional open cases during the processing period. It is worth noting that this is a deviation from the previous practice of RDOs, which refused to recognize the “last date” of taxpayers’ accounts despite the submission of a complete set of documents due to the need to resolve and correct the data of open cases.
FINANCIAL RESEARCH
A key change is the relaxation of mandatory audit requirements. Previously, the rules did not differentiate between taxpayers and usually required a mandatory audit of the last three years of work.
Under the new rules, small taxpayers (those whose net assets at retirement or net sales for the immediately preceding year exceeded P3 million), are no longer subject to mandatory pre-closure audits.
On the other hand, taxpayers with gross sales of more than P3 million, those with an ongoing audit under a Letter of Authority, or those whose total assets at retirement exceed P8 million will still be audited.
In such cases, tax clearance will be issued only upon completion of such audit and payment of outstanding debts.
TIME LINE
According to the timeline, the issuance of tax concessions in favor of small taxpayers is greatly shortened as long as there are no open cases or debts. Tax Clearance may be issued to small taxpayers within three working days from the submission of complete requirements.
If there are open cases or debts, the tax clearance must be issued within three working days from the payment of those outstanding debts.
This is a welcome development for small taxpayers who used to be subject to the same tedious requirements and procedures used in large businesses with a wide range of operations.
NOT A PERFECT PICTURE
Although the changes introduced by RMC 47‑2026 are laudable and consistent with the objectives of ease of doing business, the process can be further improved.
For example, it is not clear whether pre-submission procedures, such as obtaining a Delinquency Verification Slip (DVS) and contacting multiple RDO units, have been fully implemented. The DVS involves the submission of the application to different departments within the RDO such as registration, collection, inspection stages, each of which separately provides for its approval based on its different verifications.
In practice, these steps can be time-consuming, especially when dealing with open historical cases or reconstructing missing records.
In order to achieve the intended planned process, the “deregistration status” must come into effect when a complete set of documents is submitted, only for those listed under RMC 47-2026, and without DVS. In addition, any subsequent posting of “returns” to mention “open cases” should not affect the “de-registration status” of the taxpayer. Currently, the status is reset to “active” when a single return is filed.
In addition, electronic submission of documents may cause delays due to less response or limited comment provision, which may also lengthen the overall process. Therefore, it would be helpful if there were also established rules for electronic submissions and a review process and expected response. In this way taxpayers are also encouraged to use this method of submission instead of choosing to submit manually which, although not possible in most cases, is still quick to address concerns and comments.
In addition, we noted that the standard documents may not fully cover all types of taxpayers. For example, in the case of companies, a board resolution will usually be required to support the authority to submit and process the cancellation of the tax registration.
In cases where the rules are silent and the auditor has the authority to require additional documents, it would be useful if the list of required documents is also added based on the type of business, considering that various documents are still requested by taxpayers such as Resident Foreign Corporations, whose supporting documents may still be required to be used at their head office.
Overall, RMC No. 47‑2026 marks an important step to simplify business closings in the Philippines by standardizing requirements, reducing reliance on mandatory audits, introducing faster processing timelines, and allowing electronic filing.
However, the effectiveness of these changes will ultimately depend on uniform implementation across RDOs and further clarification in practice. Closing a business has long seemed deceptively simple, and some gray area disclosures may still be necessary to make it truly simple.
After all, closing delays are not driven by the complexity of the rules themselves, but by the unwritten requirements and procedural uncertainties taxpayers encounter along the way.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Maxencio Rios, Jr. is a manager in the Tax Services department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers’ global network.
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