Barangay Micro Business Enterprises (BMBEs) Act of 2002

Purpose of BMBEs

The "Barangay Micro Business Enterprises (BMBEs) Act of 2002" or Republic Act No. 9178, aims to stimulate the Philippine economy by fostering the growth of micro-businesses at the local level. This law provides incentives and benefits to encourage the formation and growth of BMBEs, which are seen as essential to economic development and as seedbeds for Filipino entrepreneurial talent.

BMBE Defined

Section 3 of RA 9178 or BMBE Act defined BMBE as any business entity or enterprise engaged in the production, processing or manufacturing of products or commodities, including agro-processing, trading and services, whose total assets including those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00). Service shall exclude those rendered by anyone, who is duly licensed by government after having passed a government licensure examination, in connection with the exercise of one's profession and juridical persons such as partnerships or corporations engaged in consultancy, advisory and similar services where the performance of such services are essentially carried out through licensed professionals (Department of Finance Order No. 17-04 dated April 20, 2004)

Registration of BMBE

Section 4 of RA 9178 or BMBE Act provides that the Office of the Treasurer of each city or municipality shall register the BMBE's and issue a Certificate of Authority to enable the BMBE to avail of the benefits. Any such applications shall be processed within fifteen (15) working days upon submission of complete documents. Otherwise, the BMBEs shall be deemed registered. The Certificate of Authority shall be effective for a period of two (2) years, renewable for a period of two (2) years for every renewal. Section 5 of RA 9178 or BMBE Act provides that any person, natural or juridical, or cooperative, or association, having the qualifications may apply for registration as BMBE.

Exemption from Taxes and Fees

Section 7 of RA 9178 or BMBE Act provides that all BMBEs shall be exempt from tax for income arising from the operations of the enterprise. The LGUs are encouraged either to reduce the amount of local taxes, fees and charges imposed or to exempt BMBEs from local taxes, fees and charges.

Exemption from the Coverage of the Minimum Wage Law

Section 8 of RA 9178 or BMBE Act provides that the BMBEs shall be exempt from the coverage of the Minimum Wage Law: Provided, that all employees shall be entitled to the same benefits given to any regular employee such as social security and healthcare benefits.

Barangay-based Explained

A business enterprise shall be considered “barangay-based” if (i) the majority of its employees are residents of the municipality where its principal place of business is located; or (ii) its principal activity consists in the application/use of a particular skill peculiar to the locality or of raw materials predominantly sourced from the area; or (iii) its business operations are confined within the territorial jurisdiction of the municipality or LGU in which its principal place of business is located: Provided, however, That the enterprise may establish warehouses, buying stations, sales outlets, and booking or administrative offices anywhere in the Philippines, subject to pertinent rules and registration requirements of the concerned LGUs and other government agencies where such warehouses, outlets, stations or offices are established. (Department of Finance Order No. 17-04 dated April 20, 2004)

Micro-business Explained

It shall be considered “micro-business in nature and scope” if: (i) its principal activity is primarily for livelihood, or determined by the SMED Council or DTI as a priority area for development or government assistance; (ii) the enterprise is not a branch, subsidiary, division or office of a large scale enterprise; and (iii) 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. (Department of Finance Order No. 17-04 dated April 20, 2004)

Documents to be Submitted by the Applicant-Business Entity to the City or Municipality Treasurer

1. Registration as a business entity or enterprise from the appropriate government agency;

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 showing the values of assets owned and to be used in the conduct of business;

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; and

9. Income Tax Return (ITR) with proof that it has been duly filed with the BIR, including attachments, if any, (for an existing business only). (Department of Finance Order No. 17-04 dated April 20, 2004)

Documents to be Submitted by the Applicant-Business Entity to the City or Municipality Treasurer for those with Assets less than P300,000

1. Registration as a business entity or enterprise from the appropriate government agency;

2. Mayor’s Permit or City/Municipal Business Permit;

Filing of Annual Information Return

Every BMBE entitled to full income tax exemption is required to file an Annual Information Return, together with an Account Information Form, or its equivalent, containing data lifted from audited financial statements and a sworn statement of assets owned and/or used in business. The return shall be filed with the Revenue District Officer or the Revenue Collection Officer or the duly authorized Treasurer of the city or municipality in which the BMBE has its principal place of

business. The Return specified above shall be filed on or before the fifteenth (15th) day of the fourth month following the close of the taxable year. (Department of Finance Order No. 17-04 dated April 20, 2004)