Building a business is certainly a good step into wealth creation. After all, you can’t rely on your job forever. But with the hassles of getting the permits in the Philippines plus the hefty taxes, you might get discouraged before taking the leap of faith.
But not known to many, there is a law that helps fledgling start-ups to get income tax and minimum wage exemptions! You heard it right! The two most onerous expenses exempted!
What is this God-sent law, you ask? It’s the Republic Act No. 9178 entitled the Barangay Micro Business Enterprise (BMBE) Law. This law is enacted in 2002 to help grow small businesses by giving them several benefits.
Benefits like income tax exemption, exemption from paying minimum wages and market assistance such as credit priority from financial institutions and growth assistance from DTI Negosyo Centers and DOST, among others are enjoyed by the registered BMBE.
(But you still need to pay for percentage taxes and give out SSS, Philhealth, and Pag-ibig contributions for your employees. Don’t forget that.)
This law will certainly ease the financial burden on your company.
What is Considered as BMBE?
Before you get really excited, determine first if you qualify as a BMBE. Under this law, a BMBE is any business enterprise that: produces, processes or manufactures goods, including processing of agricultural. They can also be engaged in selling or trading goods and services. It can either be a sole proprietorship, partnership, corporation or cooperative.
The business should also have total assets of not more than 3 Million excluding the land on which the enterprise is located.
Take note, services provided by professional practitioners, such as medical clinics, accounting services, consulting services, and the like are not included.
Furthermore, it should be the main business. Meaning it can’t be a branch or a franchise. In essence, no bigger corporation or business entity should be setting the standard as to how the business should be operated. This might be done to prevent big corporations from circumventing the tax laws.
How to Apply
Now that you qualify, you just need to go to the Office of the Treasurer of the city or municipality where your business is located. These are the requirements.
If your business has less than P300,000 worth of assets:
BMBE application form accomplished in triplicate.
Three passport size pictures.
Municipal business permit.
DTI business name registration (Sole Proprietor) or SEC Registration (Partnership or Corporation) or CDA registration (Cooperative).
There are additional requirements if you have more than P 300,000 worth of assets. They are as follows:
Certificate of Registration (COR) with the BIR.
A sworn affidavit executed by the sole proprietor or the President of the enterprise that the enterprise is barangay-based and micro-business in nature and scope.
A sworn Statement of Assets and Liabilities supported by pertinent documents.
Pictures of the place of business and its assets, other than cash, receivables, and intangibles.
A copy of Loan Contract/s, if any, and duly-notarized Certification of Amortization Payments on the Loan.
Your Personal Income Tax Return (ITR).
Also, you also need to pay a P1,000 application fee.
After lodging, the treasurer will evaluate the application. It shall be processed within 15 working days upon submission of complete documents. If the decision hasn’t come out after 15 days, the BMBE shall be deemed registered.
Afterward, you will receive a Certificate of Authority effective for two years. You can just renew it for another two-year period after it expires.
After Successful Application, Claim Your Tax Exemption Privilege
After getting your Certificate of Authority, you still have one step. You need to claim your tax exemption privilege in your respective BIR Revenue District Office. Just bring the following:
A Copy of the BMBE Certificate of Authority.
Your Current Certificate of Registration in BIR.
Sworn statement of assets of the BMBE and/or its affiliates (either a person or ?business) supported by relevant documents .?
Certified list of the branches, sales outlets, factories, warehouses, and storage ?facilities, if any.
Certified list of affiliates (either persons or businesses), if any.
Latest audited financial statements or account information form or its equivalent.
After passing the requirements, you will receive an updated COR (usually at the day itself) indicating that you are exempted from income tax. You can show your COR to your customers also to avoid withholding your income from their payments.
With that, you are ready to operate with the benefits that can certainly grow your business. I hope you find your way to financial freedom! Good luck!