Do you own a business? Did you know that your business can be exempted from paying income tax or no tax at all? Businesses are usually subject to two types of taxes, which are business tax and income tax in the Philippines. There are tax benefits given to the SME or having a small business in the Philippines. These are Marginal Income Earner (MIE) and Barangay Micro-Business Enterprises (BMBEs).
In this article, I will discuss the benefits and how to register your business as BMBE in the Philippines. If you just started your business and you’ve recently registered your business as subject to the income tax rate and business tax, don’t worry, it’s not yet the end of the world. Let me tell you first what is BMBE!
What is Barangay Micro Business Enterprise?
It is defined as any business enterprise engaged in processing, manufacturing of products, including agro-processing, as trading and services and production, which the total asset is less than 3 million, including assets from loans but not including the value of land which the business or equipment are located.
Services that are rendered who is duly licensed by the government or to exercise professions like Accounts, Lawyer, Doctors, and Engineers, etc.
Also, the Department of Finance also provides information that is qualified to avail of these benefits. It includes a branch, subsidiary, division, or office of a large-scale enterprise and its policies and franchise.
BMBE Law Objectives
The primary objective of this is to create more employment and livelihood to the Filipinos. It helps many entrepreneurs to be creative and successful. Finally, to have a better quality of life for many Filipinos.
Any person who registered business will be exempted from income tax and exempted from paying a minimum wage but will be receiving the same social security and health care benefits. Other benefits are also given to BMBE beneficiaries like technology transfer, production and management training, and marketing assistance programs. Above all, there’s a priority window for financing purposes.
What do you think about these benefits? Are you not yet satisfied with these benefits? There’s more! The local government unit is also encouraged to minimize the amount of local taxes, charges impose, or they may grant exemptions from taxes, fees, or costs. What are waiting for, apply now!
BMBE Processing and Requirements
Once you qualify as BMBE beneficiary, you may apply or renew your registration in the Office of the Treasurer of the city or municipality where the business is located.
Here are the basic requirements in processing your registrations.
- BMBE application form (BMBE Form 01)
- Passport size ID pictures
- DTI, SEC, CDA registrations and Mayor’s Permit for those assets of 300, 000 or less
However, if your business has a total asset beyond 300 000 but not more than 3 million, you must submit these requirements.
- Taxpayer Identification Number (TIN).
- Certificate of Registration from the BIR.
- Certificate of Registration from the DTI, SEC or CDA
- Mayor’s Permit of Municipal Business Permit
- An affidavit by the owner that the business qualifies as BMBE, including the Sworn statements of Assets and Liabilities with supporting documents attached.
- Photos of the building and its assets (equipment and plants), not including cash, receivables, and other intangible assets.
- Loan Contract, if any
- Lastly, the Income tax Return (ITR)
BMBE Procedures to Process
Once the requirements are completed, proceed to the Office of the Municipal or City Treasurer.
- Get three copies of the BMBE Form 01 that is signed by you or any authorized person to process your registration.
- Submit Form 01, together with all the requirements listed above, to the Office of the Treasure and wait for further notice. The application is usually processed within fifteen days (15 working days) from the date of submission. If no rejection received within those days, your application is considered as approved.
- Get your Certificate of Authority as proof of registration. The validity of this registration is only up to two years.
How much is to Pay to Register?
Generally, registration and issuance of the Certificate of Authority of the Local Government Unit are free of charges. However, they are allowed to a charge fee not exceeding one thousand (1,000) for the cost of administrative costs of registrations and monitoring.
Those amounts are only for the processing in the Office of Treasurer, but it doesn’t include the processing fee in the DTI or the BIR. For more information regarding the cost of registration in the BIR and DTI, click here.
How to Register BMBE in BIR
Register your business in the Bureau of Internal Revenue (BIR) and secure the Certificate of Registration. Apply as a Sole Proprietorship that is subject to Income tax and business tax either percentage tax of 3% or value-added tax rate of 12%.
Do I need to pay Income Tax?
Even though exemption from Income tax is one of the benefits of BMBE, but you’re still required to file the annual income tax return with a zero amount to be paid.
BMBE is required to submit an Annual Information Return in exchange for income tax return. Submit on or before the 15th day of the fourth month after the close of the taxable year. It also includes data from financial statements and Sworn Statement of Assets owned and used.
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How to Avail Income Tax Exemption in the BIR?
In filing the annual income tax return, you must bring these documents:
- Copy of the BMBE’s Certificate of Authority
- Sworn Statement of Assets of the BMBE and other documents needed.
- Latest Audited Financial Statements
- Certified list of branches, sales outlets, places of production, warehouse, and storage facilities.
Is BMBE business will always be Income Tax Exempt?
Once your business is registered as BMBE, you will be exempted from paying income tax, but does it mean that you will always be exempted from income tax? The answer is NO! Being BMBE doesn’t mean you will be permanently exempted from income tax.
Here are the situations where BMBE will no longer be exempted from income tax:
- Change of total assets. Once your business exceeded the threshold amount of 3 million, you’ll lose your BMBE benefits.
- Change of place of business
- Death of the registered individual owner of the BMBE
- Combination of business which is not qualified as BMBE
- False documents submitted or falsified documents.
- Not operating the business within one year.
- Selling or transferring the BMBE business to an individual without the legal process.
To register as BMBE, you need to know first the total assets of your business. Make an inventory to compute the total amount of assets, excluding the value of the land. BMBE benefits include income tax exempted and no required minimum wage and received training from respective agencies.
Once you’ve registered your business as BMBE, you are still required to file your annual income tax and pay the quarterly business taxes. There are other ways to reduce your taxes on your business, read this to know more.
If you have any questions about processing your BMBE, we’ll be happy to assist you.