What is 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.

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.

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.

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 and acquiring 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.

The officers in our municipal hall (Sta. Maria, Bulacan) have been very courteous during the whole process. I thank them; Mam Annie, Mam Baby and Mam Carmen.

 

Credit: businesstips.ph

V.A.T. Vs. Non-V.A.T.

Value Added Tax (VAT) and Percentage Tax are both business taxes collected from the sale of goods and services. The similarity ends there because these taxes are different in nature. Business owners, especially the new ones, need to know which one applies to their business to avoid future disputes with the Bureau of Internal Revenue (BIR).

Value Added Tax (VAT)

Value Added Tax (VAT) is a form of sales tax. As such, it is based on gross receipts from sale, barter, exchange, or lease of goods or properties and services within the Philippines. It is also imposed on goods imported into the country. VAT is an indirect tax which means the end consumer is being charged for the tax. In the Philippines, the rate of VAT is at 12% except for export sales and other zero-rated sales which is at 0%.

Who needs to register as a VAT taxpayer?

  1. Any person or entity engaged in the business of selling goods or services that are subject to VAT and whose annual gross sales or receipts exceed or are expected to exceed One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (Php1,919,500.00).
  2. Any person or entity that is not VAT exempt but failed to register.
  3. Any person or entity engaged in importation of goods.

How to register as a VAT taxpayer?

  1. Use BIR Form 0605 and pay the registration fee of Php500.00.
  2. Register books of accounts like ledgers and columnar books.
  3. Secure Authority to Print then register invoice and official receipt booklets.

What are your responsibilities as a VAT taxpayer?

  1. Display Certificate of Registration at the place of business.
  2. Issue invoices and/or official receipts. A sales invoice is issued for every sale, barter, or exchange of goods or property. An official receipt is issued for lease of property and sale, barter or exchange of services.
  3. Keep your books. Make sure that your books are updated and always ready in case an audit is made.
  4. File monthly. Use BIR Form 2550M. If there is payment, go to an Authorized Agent Bank (AAB) in the Revenue District Office where registered. If there is no payment, submit to the RDO where registered, with required attachments. Deadline is not later than the 20th day of the next month.
  5. File quarterly. Use BIR Form 2550Q. If there is payment, go to an AAB in the RDO where registered. If there is no payment, submit to the RDO where registered, with required attachments. Deadline is every 25th day of the following month from the last day of covered quarter.
  6. Pay annual registration fee equivalent to Php500.00 not later than January 31.

Percentage Tax (Non-VAT)

For small businesses with gross annual sales and receipts that do not exceed Php750,000.00, and are not VAT-registered, percentage tax is imposed for sold or leased goods, properties or services. The tax rate varies depending on the nature of business. The usual rate is 3% but it could go as high as 30%, for gross receipts of Jai-Alai and racetrack operators for instance.

Who are required to file percentage tax?

  1. Any person exempted from VAT under Sec. 109z of the Tax Code.
  2. Domestic carriers and keepers of garages.
  3. International air and shipping carriers based in the country.
  4. Franchise grantees of utilities.
  5. Franchise grantees in broadcasting business the annual gross receipts of which do not exceed Php10M and opted not to register as VAT taxpayers.
  6. Operators of communications equipment sending dispatch, messages, or conversations overseas.
  7. Life insurance premiums and agents of foreign insurance companies.
  8. Proprietor, lessee, or operator of betting businesses such as cockpits, race tracks, cabarets, etc.
  9. Stock brokers trading through Local Stock Exchange other than sake of dealer in securities, as well as corporate issuers or stock brokers of domestic or foreign markets.

When to file percentage tax returns?

  1. Monthly. Use BIR Form 2551M. If there is payment, go to an Authorized Agent Bank (AAB) in the Revenue District Office where registered. If there is no payment, submit to the RDO where registered, with required attachments. Deadline is not later than the 20th day of the next month.
  2. Quarterly. Use BIR Form 2551Q. If there is payment, go to an AAB in the RDO where you are registered. If there is no payment, submit to the RDO where registered, with required attachments. Deadline is every 20th day of the following month from the last day of covered quarter.

Note that for both tax types, even if there are no payments to be made, it is important that you file your returns to the RDO that covers your business location. Failure to do so may mean penalties and you must pay even if there are no tax dues.

Credit: full-suite.com

BIR Taxation and Receipts 101

I recently attended a seminar for business tax payers. It was conducted in Sta. Maria, Bulacan (my RDO) since my business address is within its jurisdiction. That was after I transferred my RDO address from East Pasig as an employee (from previous employer) to Sta. Maria as an entrepreneur. Ms. Soc (a BIR Officer) was very detailed of the information which I need to know as an entrepreneur. I should have taken some pics during the briefing. I was so busy taking down notes like a kid’s first day in school. I listened carefully but still mixed up some details in mind. I am confident I was able to jot down the important things to remember.

Before we proceed, let us define first taxation.

Taxation is the act of levying the tax, i.e., the process or means by which the sovereign, through its law-making body, raises income to defray the necessary expenses of the government. It is merely a way of apportioning the cost if the government among those who in some measures are privileged to enjoy its benefits and, therefore, must bear its burdens. (71 Am Jur. 2nd 342; 1 Cooley 72-73). (Credit: philtaxation.blogspot.com)

Tax law in the Philippines covers national and local taxes. National taxes refer to national internal revenue taxes imposed and collected by the national government through the Bureau of Internal Revenue (BIR) and local taxes refer to those imposed and collected by the local government. The Tax Code of 1997, Revenue Issuances and BIR Rulings pertaining to national taxes are posted at the BIR website. (Credit: bir.gov.ph)

I learned that when you have a business entity rendering services such as ours; printing, also transportation (ex. Grab Taxi),  and others you need to issue an Official Receipt. While if you are engage in trading such as selling shirts and other stuff, you need to issue a Sales Invoice. Those 2 receipts should have the taxpayer’s info such as Trade name, Tax Identification Number (TIN), Name of Proprietor, Business Address, Contact number, Printer’s info at the bottom and of course the amount of transaction involved. So, when you hear someone needs an O.R. or Official Receipt, that person is pertaining to a receipt with TIN issued by the business establishment/proprietor. It could be a Sales Invoice or the Official receipt. Again, depends if the nature of business is service or trade. Another one is Collection receipt, issued when full payment of items are given after the down payment as agreed upon the seller and the buyer . Got it?

As a business owner, you and your business will start to pay taxes in the Philippines according to law. There are VAT (12% of the gross income) and Non-VAT, Percentage tax (3% of the gross income), Withholding tax, Income tax (Gross less the disbursement) and others. The business owners shall pay their taxes on a monthly, quarterly and annual basis; depends which they are classified. There are also digferent deadline dates each month, quarter and the annual deadline every 15th of April.

There are BIR forms for every tax type which the business owners shall pay. It can be found here.

I have a lot to learn in taxation. I will share with you every step of the way. I actually need help to illuminate me on some matters. Anyone?

“Pay your taxes on time to avoid penalties” 😊