A tax-exempt business?
Very few people know that there is a law that allows businesses to be exempt from tax on income arising from their operations.
Republic Act 9178, otherwise known as the Barangay Micro Business Enterprise (BMBE) Law, encourages the setting up and growth of barangay micro business enterprises by providing them with incentives. Such incentives are:
– tax exemption from income arising from the operations of the micro business enterprise;
– exemption from the coverage of the Minimum Wage Law, but with a provision that employees hired under BMBE-registered businesses shall receive the same social security and health care benefits as other employees hired outside of BMBE;
– priority with a special credit window set up specifically for the financing requirements of BMBE-registered businesses;
– technology transfer, production and management training and marketing assistance programs for BMBE beneficiaries, particularly from the Department of Science and Technology; and
– a maximum registration and two-year renewal fee of only P1,000.
The purpose of the law is to encourage underground businesses to register with the government in exchange for the above incentives. Only when such businesses grow to be small businesses will they lose the foregoing incentives. So, in a sense, the economy, as a whole stands to gain more revenues by first nurturing such micro business enterprises.
Who are eligible to register under BMBE?
By the very name of the law, those who are eligible are micro businesses. By definition, a micro business must have assets not greater than P3 million. However, if land is used for the business, the value of the land is not counted in the P3 million maximum level.
The other requirements for eligibility under BMBE are:
– The micro business enterprise cannot be providing services rendered by anyone who is duly licensed by the government after having passed a government licensure examination, in connection with the exercise of his profession;
– The principal activity is for livelihood;
– The micro business enterprise is not a branch, subsidiary, division or office of large-scale enterprise;
– The micro business enterprise has its own policies and business modus operandi, meaning it can only register as franchiser and not as franchisee; and
– The micro business enterprise is barangay-based.
Now, to be barangay-based, the micro business enterprise needs to comply with only one of the three following criteria:
– The employees are residents of the barangay where operations will be based;
– The skill or raw materials needed for the business are peculiar to the said barangay; or,
– The operations of the business are confined to the said barangay.
What are examples of businesses eligible for BMBE perks?
These are sari-sari stores, sidewalk vendors, weekend sellers, barber shops and salons, just to name of few.
Here is the thing though, micro business enterprises looking to register under BMBE need to register with the local government unit that covers the barangay where they will be based. Such registration is on top the usual Department of Trade and Industry (DTI) or Securities and Exchange Commission registration, Bureau of Internal Revenue registration, application for business permit, as well as the registration with Home Development Mutual Fund, PhilHealth and Social Security System (SSS) for businesses with employees. And to ensure smooth sailing, it would be best to first check with the DTI or one of its satellite offices if the planned business will be accepted under BMBE in the intended barangay.
BMBE has facilitated the growth of many micro business enterprises so much that such enterprises have undertaking creative reporting just so to continue to qualify under the law. Please note that any person who shall willfully violate any provision of BMBE shall be fined not less than P25,000 but not more than P50,000 and suffer imprisonment of not less than six months but not more than two years.
For more on the BMBE law, simply visit the DTI website and look for laws applying to micro small and medium enterprises.
If you are entrepreneurial-minded, take advantage of the BMBE law. You have nothing to lose and everything to gain.
