Let’s Talk Tax

How RMC 47-2026 transforms the old rules under RMC 57-2020

The closure of business and cancellation of tax registration with the Bureau of Internal Revenue (BIR) has historically been one of the most complex and compliance-heavy aspects of doing business in the Philippines. Over time, the BIR has undertaken several reforms to streamline these procedures. Among the most significant issuances are Revenue Memorandum Circular (RMC) No. 57-2020 and the more recent RMC No. 47-2026. While RMC 57-2020 laid the groundwork for standardizing documentary requirements, RMC 47-2026 represents a major shift toward simplification, digitalization, and taxpayer relief.

Back when I was an associate, one of the most tedious engagements I handled was the cancellation of BIR registrations for corporate clients. On paper, it looked straightforward — file a BIR Form 1905, submit supporting documents, and wait for tax clearance. In reality, however, it was one of the most painstaking and unpredictable processes governed by RMC 57-2020. It felt like reopening the taxpayer’s entire history. The moment a client decided to cease operations, the real work began, not in closing the books but in preparing for what was essentially a mini audit.

Clients often approached us months or even years after they had stopped operating, assuming that inactivity was equivalent to closure. By then, records were incomplete, personnel had changed, and physical documents such as unused invoices, books of account, and even the Certificate of Registration were sometimes lost. And under RMC 57-2020, incomplete submissions were simply not entertained by the BIR, so the burden was on us to ensure that everything was complete before filing.

Then came the review of tax compliance. One of the most challenging aspects was dealing with “open cases.” Even if the business had zero activity, the BIR system would continue to expect regular filings. If returns were not filed, each missed submission translated into penalties. In some cases, clients who had been dormant for years suddenly had dozens of open cases, each carrying compromise penalties. Before we could even talk about closure, all of these had to be identified, filed, and settled. This phase alone could take weeks, sometimes months. Clients are surprised, some even frustrated, that they had to pay penalties for a business that no longer existed. As an associate, you had to manage expectations while also navigating the technical requirements, which was never easy.

Another layer of complexity came from the lack of uniformity among Revenue District Offices. Even with RMC 57-2020 prescribing standardized checklists, each RDO had its own interpretation of what was “complete.” Some would require additional documents, while others would impose their own procedural requirements. As an associate, you had to learn the preferences of each RDO, almost like an unwritten rulebook to keep the process moving.

The issuance of RMC 47-2026 is a breath of fresh air.  It was promulgated to align with the requirements of the Ease of Paying Taxes Act (RA 11976) and related regulations. Its primary objective is to simplify, standardize and accelerate the closure and cancellation of business registration. This effectively creates an “ease of closing business” framework analogous to earlier ease-of-doing-business reforms of the BIR.

SCOPE AND COVERAGE
Unlike the previous circular, in which requirements were outlined through annexes covering various taxpayer types, including closure scenarios, the new RMC explicitly applies to all business taxpayers registered with the BIR that have permanently ceased operations, regardless of size or legal structure. This includes individuals, corporations, partnerships, joint ventures, cooperatives, and even government entities, therefore providing clearer and more universal coverage, eliminating ambiguity as to applicability.

DOCUMENTARY REQUIREMENTS
A major area of divergence is the treatment of documentary requirements. Previously, the requirements for closure were relatively extensive and procedural, often requiring multiple supporting documents depending on the taxpayer’s classification. Now, the requirements are limited, standardized, and clearly enumerated:

• BIR Form No. 1905 (Application for Cancellation);

• List of ending inventory (only for VAT taxpayers);

• Unused invoices and accounting forms, with inventory;

• Original BIR permits and certificates;

• Authorization documents (if applicable)

It is worth noting that the submission of inventory of goods is now limited to VAT-registered taxpayers, unlike the broader application under the old RMC.

AUDIT REQUIREMENTS AND TAX CLEARANCE
One of the most burdensome aspects of closure under the old framework was the mandatory tax audit prior to the issuance of tax clearance. Closure typically involved a full audit, identification and settlement of deficiencies and the delayed issuance of a tax clearance. With the new RMC, the approach is clearer. Micro taxpayers are not subject to mandatory audits. A tax clearance may be issued within three working days for compliant taxpayers. The BIR may still conduct audits, but these are no longer a prerequisite to initiate closure. This represents a significant paradigm shift from audit-first to process-first, with audits becoming discretionary rather than mandatory.

EFFECT ON TAX FILING OBLIGATIONS AND PENALTIES
A key pain point under RMC 57-2020 was the continued obligation to file tax returns while closure was pending. Failure to file often resulted in accumulating penalties. RMC 47-2026 introduces a major reform. Once complete documentary requirements are submitted, the taxpayer’s status becomes “deregistered.” Penalties for non-filing cease to accrue from that point onwards.  This eliminates the compliance limbo where taxpayers incur penalties despite ongoing closure proceedings.

FILING MODES AND DIGITALIZATION
The old RMC largely assumed manual submission of documents at the RDO, consistent with pre-pandemic administrative processes. RMC 47-2026 embraces digital transformation by allowing electronic filing via e-mail or use of BIR platforms such as the Taxpayer Registration-Related Application (TRRA) Portal and the Online Registration and Update System (ORUS). However, certain documents such as the unused invoices and original permits must still be physically submitted. This hybrid approach modernizes the process while still ensuring that the authenticity of documents is reviewed.

PROCESSING TIME AND EFFICIENCY
Under the old RMC, closure timelines were uncertain and often prolonged due to audit requirements, documentary deficiencies and RDO-level inconsistencies. RMC 47-2026 introduces defined and expedited timelines, particularly three working days for micro taxpayers without open cases and faster issuance even with liabilities, subject to payment. This reduces uncertainty and enhances predictability for taxpayers.

In essence, RMC 47-2026 addresses long-standing inefficiencies, particularly excessive documentation, audit delays, and penalty accumulation, making business closure more aligned with global best practices. RMC 47-2026 marks a significant regulatory leap.

Indeed, the BIR is making tangible progress in realizing its campaign to ease tax compliance and reduce burdens on taxpayers. If effectively implemented and sustained, these reforms have the potential to strengthen taxpayer trust, encourage voluntary compliance, and enhance the integrity and efficiency of the tax system.

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.

Ira Jennena J. Bero-Abutan is a manager from the Tax Advisory & Compliance practice area of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com