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14
May

BMBE Law eyed for amendments

The Barangay Micro Business Enterprise (BMBE) Law or Republic Act No. 9178 was enacted sometime in 2002 to encourage the growth and formation of barangay based micro-enterprises. This has long been effective, but based on our observations, only few enterprises registered and availed of the same. Under the Department Order No. 17-04 of the Department of Finance (DOF) providing guidelines, hereunder are the basic qualifications of the BMBE to qualify for income tax exemptions, exemption for minimum wage application, and other benefits:

a. Barangay based which means (a) majority of its employees are residents of the municipality of principal office location, (b) principal activity consist in the application of a skill peculiar to the locality, or business operations confined to the LGU of principal office location.

b. Micro-enterprise in nature and scope which requires that (a) its principal activity be primarily for livelihood, or determined by SMED or DTI as priority are for development or government assistance, (b) not a branch, subsidiary or division of a large-scale enterprise, and (c) its policies and business modus operandi are not determined by a large enterprise.

c. Its total assets (real or personal) not more than P3M, excluding the land of business location.

d. Engaged in manufacturing, trading, or services other than practice of profession.

e. Issued a Certificate of Authority (COA) by the LGU’s City Treasurer of principal office location within 15 days from filing complete application requirements/papers, and valid for 2 years and renewable for not more than 2 years in any instance. Details of the COA is annotated in the BIR Certificate of Registration and hereunder are the basic application requirements:

1. Entity registration papers – SEC/DTI/CDA;
2. BIR Certificate of Registration;
3. Business Permit
4. Sworn Affidavit of Owner or President on being brgy. based and micro-business;
5. Sworn statement of assets & liabilities in business or those to be used with acquisition details and support such as invoices, receipts or contracts;
6. Pictures of the place of business and its assets, except cash;
7. Copy of loan contracts and notarized certification of amortization payments, if any;
8. For existing business, BIR-filed income tax return, and
9. Duly filled out Application form with application fee of not more than P1,000.

Taxwise, BMBE is exempt from income tax with respect to its income from operations and as such, income payments to it is not subject to withholding taxes. It is however subject to business tax (3% percentage tax or 12% value added tax, whichever is applicable), and to other internal revenue taxes (e.g. documentary stamp tax, registration fees, etc.). While it is exempt from paying the minimum wage (e.g. P426/day in Metro Manila), employees salary should be reasonable enough. LGU of jurisdiction is likewise encouraged to provide reduced rates on local taxes.

Income tax exemption is quite a good factor to consider and we suggest to consider becoming a BMBE.  For the purpose, we further suggest to closely coordinate with your LGU of business location.

Presently, the BMBE law is at stake for legislative amendments tending to improve and enhance its provisions, but the details of such is not yet clearly determinable. They are now conducting public hearing on strategic places for the purpose. We hope and pray for the success of the team proposing the amendments.(Post viewed 3373 times)

Comments

  1. Leone Siciliani says:

    I’m creating a collaborative blog and I need to know if I can transform a blogspot blog into one where anyone can add content and edit or change the text. Maybe there is another type of blog whee you can do this.. Thanks for this post, anyway..

    1. Hi Leone! Apologies I have to edit some part of your comment and links. Approved it, anyway.

  2. Clarinda says:

    I hope you keep posting those wonderful articles, thanks a lot.

  3. TaxAcctgCenter says:

    Yes, we will. Just please visit our website from time to time and you will see more updates and learning.

  4. Eloísa says:

    i am following your blog regularly and got great information. i really like the tips you have given. thanks a lot for sharing. will be referring a lot of friends about this.

    1. TaxAcctgCenter says:

      Hi Eloisa. Thank you for dropping by and we appreciate.

  5. Nancy says:

    Hello,I would just like to ask if the BMBE law also covers home based businesses? I am contemplating of selling food stuff to help my husband.

    1. TaxAcctgCenter says:

      Hi Nancy. Yes, we believe it is covered. Please coordinate with the City Treasurer of the City where you intend to do business for the details and specific requirements. Thanks.

      1. Nancy says:

        Ok, I’ll do that, thanks. Was so relieved to have come across your site, very informative and helpful. Keep it up! :-)

  6. Our pleasure Nancy. Hope you secure the approval soonest.

  7. Do you have a sample Sworn Statement of Assets and Liabilities for our BMBE Application? Thank you in advance!

  8. TaxAcctgCenter says:

    I think the City Treasurer of your place has a customized one already. I suggest you proceed to that office.

  9. Cossie says:

    I’ve been registered as a BMBE since 2005 for the Market Research company that I have. For some reason the BIR RDO has refused to issue an amended 2303 to reflect the income tax exemption (they claim they are not aware of it). Anyhow, since 2005, we’ve been filing the 1702 ITR with the BIR by just indicating the BMBE tax exempt, hence, no income tax payments have been made since then.

    I’m just worried that in time the BIR runs after me since I do not have a formal Tax Exempt Authority from them – all I have are the 1702 Forms with the BIR receiving stamp. For the past 7 years the BIR hasn’t informed us if we had lapses with the our Tax obligations.

    In short, my question is… should I be worried of not having a BIR Tax Exempt Authority?

  10. Cossie says:

    Upon searching the web on this matter, it appears there are alot of BMBE members who have been turned down by the BIR with regard to their tax exempt application. Obviously, there are lapses in the various LGU’s specially the BIR with regard to processing.
    Having said this, will I be held liable if I’ve not been paying the annual income tax even if I don’t have a BIR Authority BUT I have the BMBE Certificate issued by the City Treasurer which has been consistently renewed since 2005?

  11. Melvin says:

    I am currently putting up a small time packaging business in the province. Your post made me do more research about BMBEs on which I will be applying for one after the incorporatioon of my small business is done.

    I want to share some additional information on BMBEs that I fould from the DtI and BIR websites:

    http://www.dti.gov.ph/uploads/DownloadableFiles/2010_RA_9178_BMBE_Act.pdf
    ftp://ftp.bir.gov.ph/webadmin1/pdf/1161RMC%2040-2004.pdf

    I hope these materials would help your blog readers understand the BMBE Act better. More power to your blog.

  12. TaxAcctgCenter says:

    Thanks for sharing Melvin. Wish you luck in your application.

  13. Blessie says:

    Hello. I am a newly certified BMBE, and I have just received my amended COR reflecting cancellation of income tax from my tax activities. However, after I sent this new COR to my clients, they insist that I am still subject to withholding tax! How can I convince them otherwise? And if I fail to convince them, is there anyway I can get the tax back from the BIR?

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