How to Register as a Barangay Micro Business Enterprise (BMBE) in the Philippines

A micro business or enterprise is defined as any business activity or enterprise engaged in industry, agribusiness and or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, must have value of not more than 3 million Pesos (Sec. 3. of R.A. 9501 otherwise known as the Magna Carta for Micro, Small and Medium Enterprises (MSMEs).

If your business or activity falls under the micro enterprise category, you might also be eligible to be registered as a BMBE (Barangay Micro Business Enterprise) which may avail of the following incentives provided by the government through R.A. 9178, otherwise known as the “Barangay Micro Business Enterprises Act of 2002:

1. Income tax exemption from income arising from the operations of the enterprise
2. Exemption from the coverage of the Minimum Wage Law (BMBE employees will still receive the same social security and health care benefits as other employees)
3. Priority to a special credit window set up specifically for the financing requirements of BMBEs
4. Technology transfer, production and management training, and marketing assistance programs for BMBE beneficiaries.

Sounds interesting, especially the income tax exemption? Let’s continue.

 

The “BMBEs Act of 2002”

The government, in its objective to strengthen Barangay Micro Business Enterprises in the country and provide more jobs, livelihood and a better quality of life for Filipinos, has enacted Republic Act 9178, otherwise known as the “Barangay Micro Business Enterprises Act of 2002”.

R.A. 9178 is “An Act to Promote the Establishment of Barangay Micro Business Enterprises (BMBEs), Providing Incentives and Benefits therefore, and for Other Purposes”

The “BMBEs Act of 2002” encourages the formation and growth of barangay micro business enterprises by granting them incentives and other benefits. The Act was signed into law by President Gloria Macapagal-Arroyo on November 13, 2002.

What is BMBE and who are eligible to register as BMBEs?

A BMBE is defined as any business enterprise engaged in production, processing, or manufacturing of products, including agro-processing, as well as trading and services, with total assets of not more than P3 million. These assets include those arising from loans but not the land on which the plant and equipment are located. However, services rendered by any one, who is duly licensed by the government after having passed a government licensure examination, in connection with the exercise of one’s profession (e.g., Accountant, Lawyer, Doctor, Architects, Civil Engineers, etc.) shall not be included.

Is the government discouraging the professionals to start a micro business and want them to just get a job as an employee instead? I’m just asking. I think professionals also need aid from the government when it comes to entrepreneurship especially that they have the skills, knowledge, and potential to succeed in business. Besides, professionals, having incurred a lot of money to review and pass the licensure exams, may not have any money left to start an enterprise. So why exclude them? 

Anyway, the DOF Department Order No. 17-04 also provides that, an enterprise can only qualify for registration if it is not a branch, subsidiary, division or office of a large scale enterprise and its policies and business modus operandi are not determined by a large scale enterprise or by persons who are not owners or employees of the enterprise (i.e., franchises). So if you are a franchisee, you are not eligible to register as a BMBE.

In other words, a business or activity may be eligible to register as BMBE if they meet the following criteria:

1. The business enterprise is engaged in production, processing, or manufacturing of products, including agro-processing, as well as trading and services.

2. The business enterprise has total assets of P3 million or less including those arising from loans but excluding the land on which the plant and equipment are located.

3. The business enterprise or service provider, in connection with his or her exercise of profession, is not a professional who is duly licensed by the government after having passed a government licensure examination (e.g. accountant, lawyer, doctor, etc.).

4. The business enterprise is not a branch, subsidiary, division or office of a large scale enterprise or it is not a franchisee.

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How to register as a Barangay Micro Business Enterprise (BMBE)?

The registration of BMBE in the Philippines is processed and done in the Office of the Treasurer of the city or municipality where the business is located. Thus you may want to visit your City or Municipality office to inquire more about this.

The requirements for BMBE registration are different for those micro business enterprises with assets of P300,000 and less and those with assets of P300,001 to P3,000,000, in which the former have fewer requirements to be submitted than the latter.

Basic requirements for new applicants and for BMBEs applying for renewal of registration:
a. Duly filled out application form (BMBE Form 01) in triplicate, signed by the owner or manager of the entity applying for registration (you may download BMBE Form 01 here which I got from Paranaque.gov.ph website).

b. Three passport size ID pictures

Additional requirements for new applicants:

A. For those with assets worth three hundred thousand pesos (P300,000) and less –
1. Registration as a business entity or enterprise from the appropriate government agency (e.g., Securities and Exchange Commission (SEC) registration in the case of corporation, partnership or association; Cooperative Development Authority (CDA) registration in the case of cooperative; Department of Trade and Industry (DTI) business name registration in the case of sole proprietorship)
2. Mayor’s Permit or City/ Municipal Business Permit

B. For those with assets worth more than three hundred thousand pesos (P300, 000) up to three million pesos (P3,000,000.00)
1. Registration as a business entity as explained above in item A.1
2. Taxpayer Identification Number (TIN)
3. Certificate of Registration from the Bureau of Internal Revenue (BIR)
4. Mayor’s Permit or City/Municipal Business Permit
5. Sworn affidavit executed by the sole proprietor or the President of the enterprise, as the case may be, that the enterprise is barangay-based and micro-business in nature and scope
6. Sworn Statement of Assets and Liabilities supported by pertinent documents
7. Pictures of the place of business and its assets, other than cash, receivables and intangibles
8. Copy of Loan Contract/s, if any, and duly-notarized Certification of Amortization Payments on the Loan
9. Income Tax Return (ITR).

Additional requirements for the renewal of BMBE registration:
C. For those with assets worth three hundred thousand pesos (P300,000) and less –
1. Documents previously listed in item A.1 for new applicants with assets worth three hundred thousand pesos and less
2. Annual Information Return (for the year immediately preceding the renewal of registration) duly filed with the BIR, together with its attachments

D. For those with assets worth more than three hundred thousand pesos (P300,000) up to three million pesos (P3,000,000.00) –
1. Documents previously mentioned in item B.1-8
2. Annual Information Return (for the year immediately preceding the renewal of registration) duly filed with the BIR, together with its attachments

Steps and procedures for registering as a BMBE

The following are the procedures for BMBE registration and getting the Certificate of Authority as a BMBE:

a. Accomplish BMBE Form 01 in triplicate and submit to the Office of the Municipal or City Treasurer.
b. The Municipal or City Treasurer evaluates the application. The application shall be processed within 15 working days upon submission; otherwise, the BMBE shall be deemed registered.
c. A registered BMBE shall be issued a Certificate of Authority as proof of registration, effective for a period of two years. The application is renewable every two years.

 

How much will it cost to register?

According to Section 4 of the Act, registration and issuance of the Certificate of Authority of the LGU is free of charge and shall be done promptly. However, to cover the administrative costs of registering and monitoring the BMBEs, the LGUs are allowed to charge a fee not exceeding P1,000.00.

 

How to avail for the Income Tax Exemption?

To avail with the income tax exemption, the BMBE must register with the BIR Revenue District Office (RDO) where the principal office or place of business is located and submit the following documents:

a. Copy of the BMBE’s Certificate of Authority
b. Sworn Statement of Assets of the BMBE and/or its affiliates, supported by pertinent documents
c. Certified list of branches, sales outlets, places of production, warehouses and storage facilities
d. Certified list of affiliates
e. Latest audited Financial Statement or Account Information Form or its equivalent

What document should be filed with BIR by an income tax exempt BMBE?

Instead of an income tax return, an income tax exempt BMBE is required to submit an Annual Information Return. This is filed on or before the 15th day of the 4th month after the close of the taxable year with an Account Information Form, which contains data from its financial statement and Sworn Statement of Assets Owned and/or Used.

However, while a registered BMBE could be exempt from income tax, its Income Tax Exemption privilege may be revoked for any of the following reasons:

1. Transfer of place of business
2. Value of its total assets exceeds P3M
3. Voluntary surrender of the Certificate of Authority
4. Death of the registered individual owner of the BMBE; violation or noncompliance with the provisions of R.A. 9178
5. Merger or consolidation with an entity which is not eligible to be a BMBE
6. Sale or transfer of the BMBE, if it is a sole proprietorship without prejudice to the transferee applying for registration
7. Submission of fake or falsified documents;
8. Retirement from business, or cessation/suspension of operations for one year; and
9. Making false or omitting required declarations or statements.

For more information, please read DTI’s Handbook Guide to Republic Act (RA) 9178: BMBEs Act of 2002 which also includes the full text of RA 9178 and its implementing rules and regulations (IRR) including the supplementary guidelines or clarifications issued by concerned agencies.

For questions and discussions, we can discuss this topic in our online business forums.

This is a reposted article created by :

Victorino Abrugar is a retired CPA practitioner, a blogger, speaker, and an entrepreneur. He’s the President of Optixor, Inc., a digital marketing company based in the Philippines. Follow him on Twitter at @viclogic.

Reference: RA 9178, R.A. 9501, DTI Department Administrative Order (DAO) No. 1, Series of 2003, Department of Finance Department Order No. 17-04, Revenue Memorandum Circular No. 40-2004, Revenue Memorandum Circular No. 52-2004

Other important references added by Team Think Philippines :

1) Copy of the Law, Click HERE!

2) Downloadable “Guide Book” in PDF file of the Law, Click HERE!

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