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.

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Seminar Schedules

January 2018

January 25, 2018 ThursdayBasic Income Taxation for Sole Proprietors under New ITR

January 26, 2018 FridayHow to Analyze Financial Statements for Managers and Entrepreneurs Seminar

January 27, 2018 SaturdayBasic Income Taxation for Corporation under New ITR

February 2018

February 01, 2018 Thursday – Input VAT Refund Seminar

February 02, 2018 FridayReturns and Reports Preparation under eBIR and Online Submission Seminar

February 03, 2018 SaturdayWithholding Taxes, Subjects and Applications

February 08, 2018 ThursdayHow to Register Business Entity in the Philippines Seminar

February 09, 2018 FridayBIR Examination: Their Procedures and Other Related Defenses

February 13, 2018 Tuesday – Tax Reforms for Acceleration and Inclusion (TRAIN) Seminar

February 15-16, 2018 Thursday & FridayBasic Business Taxation Simplified

February 17, 2018 SaturdayValue Added Tax: In and Out

February 22-23, 2018 Thursday & Friday – Basic Business Accounting and BIR Compliance for VAT Entities