Better late than later! Finally, my much-delayed post about my BMBE certification.
I received my BMBE Certificate of Authority for my two registered small businesses back in October. But due to my full schedule, I didn’t get to have my BIR (Bureau of Internal Revenue) status updated until December. That, and because I’m really not fond of going to government offices.
So what is BMBE?
It stands for Barangay Micro Business Enterprise. According to Section 3(b) of RA No. 9178, otherwise known as the Barangay Micro Business Enterprise Act of 2002, a BMBE is “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 be not more than three million pesos.”
This Act aims to encourage formalization of informal or underground businesses by giving incentives and benefits to certified BMBEs.
Based on a 2014 data from Philippine Statistics Authority, 99.5% of all businesses in the Philippines are MSMEs or Micro, Small and Medium Enterprises. And from that 99.5%, 89.4% are Micro.
The same data shows that MSMEs provide employment to 65% of the labor force. They are clearly the primary source of livelihood and jobs in the country. Hence, the government’s drive to encourage micro businesses to register and become legal tax paying entities.
Back when I first heard of BMBE, the registration was under the local government units, and businesses were required to pay registration fee. While the amount was minimal (I believe it was set to not exceed Php 1,000.00), it was enough to make really small businesses less enthusiastic about registering. Including myself.
In recent years, the responsibility to issue Certificate of Authority was transferred from the Municipal Treasurer to the Department of Trade and Industry (DTI) through its Negosyo Center. They removed the required registration fee, and the process can be completed in three (3) easy steps:
- Step 1 : Accomplish BMBE Form and submit to the Negosyo Center / DTI Office where business is located with any of the following:
- Certificate of Business Name Registration from the DTI (for sole proprietors)
- Certificate of Registration from the SEC (for corporations)
- Certificate of Registration from the CDA (for cooperative)
- Step 2 : DTI will evaluate the eligibility of the application
- Step 3 : If qualified, within 15 working days, DTI issues Certificate of Authority valid for 2 years
I was fortunate enough to be among those invited by our local Negosyo Center to attend a BMBE orientation.
Who are qualified to register?
- Single Proprietorship, Partnership, Corporation, Cooperative or Association
- Total assets not more than P 3,000,000.00
- Enterprise engaged in:
- Production / Processing / Manufacturing
- Services – except government licensed services
Who are not qualified?
- Medical/Dental/Veterinary Clinic
- Notary Public/Law Firm
- Real Estate
- Construction Firm
- Accounting Firm
In short, if you are small business practicing a profession, then you cannot register as BMBE.
What are the benefits of becoming BMBE-certified?
Accredited businesses are exempted from paying income taxes arising from their operating expenses. This, however, does not include the exemption in transaction taxes such as value-added tax (VAT) and other percentage taxes, among others. Furthermore, BMBE-accredited enterprises are still required to regularly file their regular income tax returns.
Minimum Wage Exemption
BMBE-registered enterprises are also allowed to pay below the statutory minimum wage which is otherwise not permitted by law. However, they are still required to pay for their employees’ benefits such as PhilHeath, SSS, and HMDF.
Financial institutions are given incentives in providing loans to BMBE-registered business enterprises. They are also required to provide a special credit window for BMBEs.
To provide technical support, the government has allotted funds to agencies supporting BMBEs such as DTI Negosyo Centers, UP Institute for Small Scale Industries (UP-ISSI), and the Department of Science and Technology (DOST).
So for the next two years, I will be exempted from paying the quarterly and annual tax. I will only have to pay the monthly percentage tax, which is 3% of gross income. After two years, I will need to renew my certification, and if I’m still qualified, like if I don’t build a warehouse and acquire equipment worth 3.5 million pesos in the next two years, I will have to get my COR with BIR updated again.
For WAHMs, freelancers, independent contractors, or crafters who are on a fence whether to register their small businesses or not, please read my post on Paying Taxes. Once you are registered, go ahead and visit your local Negosyo Center. It’s so easy to get certified now.
Here’s what a Certificate of Authority looks like.
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