Tax Exemption and More: Take Advantage of the Incentives Provided by the Barangay Micro Business Enterprises Act

  Tax Exemption and More: Take Advantage of the Incentives Provided by the Barangay Micro Business Enterprises Act

MSMEs (Micro Small and Medium Enterprises) are undoubtedly vital to the country’s economy. Based on 2014 figures by the Philippine Statistics Authority (PSA), it is estimated that around 99.6% of business establishments in the Philippines are MSMEs with 90.3% being micro enterprises and 9.3% being small enterprises. Hence, the government has taken steps to encourage the proliferation of MSMEs in the country by supporting their growth through notable legislations such as R.A. No. 6977 as amended or the Magna Carta for MSMEs.

But being a startup founder or small business owner is not easy. From finding the necessary capital to dealing with risks and losses along the way, the startup journey is truly filled with uncertainties. Because of this, many aspiring entrepreneurs are deterred or discouraged from entering the startup life.

Just like earlier laws, R.A. No. 9178 or the Barangay Micro Business Enterprises Act of 2012 was passed to help MSMEs flourish in the country. The said law provides for incentives to BMBEs (Barangay Micro Business Enterprises) which includes tax exemptions and easier access to certain loans. With these incentives, the government hopes to support and assist micro businessmen with their development and growth.

Qualifying as a BMBE

If you are running a startup businesses, chances are you’ll easily qualify as a BMBE. Under the law, a BMBE is any entity or enterprise engaged in the production of goods and services with total assets of not more than P3 million. Total assets includes loans and the value of all other personal and real properties (except land). With its liberal definition of what a BMBE is, almost all micro and small businesses in the country are covered.

Registering your micro business

To register, you must first accomplish BMBE Form 01 in three copies and submit it to the Office of Treasurer in your city or municipality. The application will then be processed within 15 working days upon submission of the documents required. If your business is found to be eligible, the Office of the Treasurer will register it as a BMBE and issue a corresponding Certificate of Authority that will enable your business to avail of the benefits under the law. The said certificate is renewable every 2 years. Depending on the city or municipality, the application may be completely free or it may charge a little fee. In any case, should the city or municipality decide to charge, the fee should not exceed P1000.

Tax Exemption

BMBEs are exempt from paying tax for income derived purely from its operations. To avail of this exemption under the law, you will need to register your business with the BIR. If you are already registered, the BIR will note the status of your business as a BMBE and amend your registration certificate. Afterwards, you are no longer required to pay income taxes for profits from your business. However, since the exemption is only for income tax, you may still be required to pay other internal revenue taxes such as withholding taxes.

  Tax Exemption and More: Take Advantage of the Incentives Provided by the Barangay Micro Business Enterprises Act

Minimum Wage Exemption

BMBE owners who employ workers for their business do not need to follow the prescribed daily minimum wage. This means that they can pay their workers less than the statutory minimum wage which is generally deemed illegal under our country’s labor laws. However, BMBE employers are still required to provide other benefits such as healthcare and social security benefits to their employees.

Credit Delivery

The law also encourages several financial institutions including the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LBP), and the Small Business Guarantee and Finance Corporation (SBGFC), to loan to BMBEs and incentivizes them for doing so. Loans provided to BMBEs are treated as an alternative form of compliance to Presidential Decree No. 717 (Agri-Agra Law) and R.A. No. 6977 (Magna Carta for Small and Medium Enterprises) which mandates these financial institutions to set aside loanable funds for their respective purposes under the said laws. Moreover, loans granted to BMBEs are computed two times their value in determining their compliance with the two laws.

Other Benefits

A BMBE Development Fund was also set up by the law and allocated to agencies such as the Department of Science and Technology (DOST), the Department of Trade and Industry (DTI), and the University of the Philippines Institute for Small Scale Industries (UP ISSI), to fund programs that will help the growth of BMBEs. The fund is P300,000,0000 and sourced out from the Philippine Amusement and Gaming Corporation (PAGCOR). Programs include technology transfers, production and management trainings, and marketing assistance to BMBEs.

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A political science graduate and a struggling law student with a relentless passion for writing. He keeps himself updated on the latest developments in science, technology, business, law and politics. John also loves to play the guitar, read books, play chess, and occasionally write poetry.