Every time we enter a new year, many of us reflect on the past and make resolutions for the future.
When the first working day arrives, however, we face reality.
One of those realities is the dreaded city business permit renewal.
Town and city governments in the Philippines require enterprises to register before they can conduct business in their areas of jurisdiction. Renewing a business permit is mandatory by every third week of January of every calendar year. It doesn’t matter if the business is big or small, profit or non-profit, every enterprise is required to register and renew their permits annually; there are very few exceptions.
The responsibility to register falls mainly on the enterprise. It’s one more task in an enterprise’s list of things-to-do to comply with the myriad of laws and regulations inherent in doing business in the Philippines.
The city/town business permit is also known as the mayor’s permit. To get one, whether new or renewed, the enterprise has to fulfil several prerequisites. These include:
- Clearance from a barangay or village;
- Securing a sanitary permit;
- Getting an environmental permit;
- Showing a fire department permit;
- Clearance from the city’s zoning office;
- Paying & getting a community tax certificate.
Each prerequisite in turn has its own requirements to meet. These include:
- Proof of comprehensive general liability insurance coverage which is insurance to cover for anyone getting injured in an enterprise’s premises;
- Physical medical examinations of the enterprise’ s employees including x-rays, blood tests, and doctors poking your people’s bodies;
- A certificate from a licensed pest control exterminator certifying that there are no pests (insects not humans) in the enterprise’s premises;
- A certificate from a national government agency that you’re complying with environmental laws. If the enterprise is exempted, it would need to get a certificate that the enterprise is exempted or a certificate that one that does not need a certificate (yes, it’s red tape at its worst);
The enterprise would need to pay fees for each clearance and permit it secures. The expenses can be hefty. A community tax certificate can cost up to PhP 10,000 ($USD 200) which is significant for many small businesses.
When an enterprise presents all the clearances and permits to the city/town business permit & licensing office, it will then have to pay the local tax which is based on the enterprise’s sales and spend for fees such as:
- Garbage fee;
- Signboard fee (even if you don’t have a signboard);
- Electrical & mechanical inspection fees;
- Personnel inspection fees (fees to pay for the medical, police, occupational tax, and seminars of the enterprise’s employees no matter what topics they cover);
- EPO accreditation fee (EPO is the environmental protection officer of the enterprise and the fee pays for the city’s accreditation or certification of that person);
- Environmental inspection fee;
- Sanitary inspection fee;
- Fire inspection fee – local;
- Fire inspection fee – national (enterprises pay for the local and national fire departments);
- Engineering inspection fees.
These fees seem to cover all the costs of city hall and then some so one wonders where the taxes enterprises pay go to.
Cities earn a lot of revenue from these business taxes and fees. Yet, they don’t make it easy for enterprises to renew their permits and pay for them.
It would take enterprises up to six (6) months if they are getting a business permit for the first time. And it would come at great cost and time. Cities and towns would require new businesses to undergo inspections (getting signatures from local agencies, engineers, and other authorities) and submit a lot of paperwork such as tax documents, business registration papers, as-built construction plans, and corporate licenses. Note that these are requirements for new businesses. The enterprise is applying for a permit to do business but has to first submit paperwork as if it has already been in operation for years.
Renewing the business permit every January of every subsequent calendar year isn’t as lengthy but it is a hassle. Renewing a permit is similar to getting a new one altogether. One has to submit documents, fill out application forms, and go to one local agency after another to get a city officer to sign the forms saying the enterprise fulfilled its requirements but still is subject to inspection.
Even if the city puts up what they call a “one-stop-shop” where all the agencies are located in one place, the enterprise’s representative still has to walk and stand in line at each agency’s desk. The total distance of walking within a “one-stop-shop” can run up to several kilometres, not including the walking after the desk officer tells you that you need to photocopy more of the documents you submitted and you’d have to run outside to the nearest photocopier several hundreds of metres away which also has a line of people waiting.
There is no value-added benefit in getting a business permit. At least to the enterprise. All the value goes to the city. The enterprise does most of the work preparing & submitting documents and paying for all the taxes and fees for services which mostly one will never really see.
It’s all part of compliance to laws and regulations that govern enterprises in the Republic of the Philippines. One has to follow the processes and pay for them for the sake of building the nation and uplifting the lives of citizens (as to which citizens we don’t seem to have any business to know). As the saying goes, “you can’t fight city hall.”
Enterprise executives delegate much of government compliance work to their employees, such as their bookkeepers, their in-house paralegals, and their administrative staff. More often than not, compliance is not on an executive’s strategy list. It is not a competitive priority.
If at all, executives rather not spend time thinking about compliance, even so for bothersome local business permits at the start of a new year. Executives would rather be busy on more so-called important things such as sales, operations, and investments.
But whether they like it or not, compliance is a priority that executives should not outright ignore. Because if and when they do, they can pay a high price.
- A city mayor shut down several businesses after inspection showed they were operating without permits;
- A factory paid a heavy fine after it failed to prove it was complying with local environmental laws (it didn’t have a required bicycle rack and poster that showed the picture of the mayor saying there’s no smoking allowed in the premises);
- A town billed a trucking company thousands of pesos for delivery vehicles that the latter did not disclose when it renewed its mayor’s permit;
- A city zoning office refused to give clearance to an enterprise that was operating in a residential area where zoning laws didn’t allow business to be conducted.
We can avoid the unnecessary costs from business permit renewals not only by following procedures but also by looking out for some savings.
For instance, some cities and towns offer discounts if an enterprise pays one full year’s worth of tax instead of remitting every three (3) months. An enterprise saves not only from the discount but also from having to send staff to pay every quarter. (Some cities negate this benefit when their agencies require the enterprises to renew certifications such as environmental & sanitary permits every quarter).
It’s sometimes worth it for an enterprise to examine what it pays for in a business permit. For example, a commercial building for years has been paying a private company a monthly fee to take away the trash. The building’s board of trustees realised later that it was paying thousands of pesos in garbage fees to the city. When the board brought it up to the city sanitation office, the latter instructed the city’s trash hauler to pick up the trash. The board then cancelled the contract with the private company and stopped spending for something already paid for with the city.
Enterprise executives always like to enter any new year with confidence and initiative to grow their businesses. Growth, however, entails meeting obligations such as renewing city permits at the start of every year. It’s a hassle and it costs a lot but enterprises need to do it else they will pay more in fines or risk being closed down.
Compliance is a must when it comes to laws and regulations but enterprises can avoid spending too much by examining what they’re charged for and availing of discounts when offered.
Compliance comes with a cost but we don’t have to spend more than we should.