My sari-sari store or small business has less than ₱3 million in assets. Can I register as a BMBE and stop paying income tax?

Why

The Barangay Micro Business Enterprises (BMBEs) Act of 2002 (Republic Act No. 9178) was written to pull small informal businesses into the formal economy by giving them incentives. Under Section 3(a), a BMBE is any business engaged in production, processing, manufacturing, agro-processing, trading or services whose total assets, including those financed by loans but excluding the land on which its office, plant and equipment are situated, are not more than ₱3,000,000. For this purpose, 'services' excludes those rendered by government-licensed professionals in the exercise of their profession, so a doctor's or accountant's practice cannot register as a BMBE.

Under Section 5, any natural or juridical person, cooperative or association meeting that definition may apply. Registration was originally done by the city or municipal treasurer, but Section 5(b) of the Go Negosyo Act (Republic Act No. 10644, 2014) gave the DTI, through the Negosyo Center in each city or municipality, the sole power to issue the BMBE Certificate of Authority, and Section 15 of that Act repealed the old registration section. The certificate is renewable every two years, and the Negosyo Center may charge a fee of not more than ₱1,000.

The main benefit is in Section 7: all BMBEs are exempt from income tax for income arising from the operations of the enterprise. The same section only encourages, and does not require, LGUs to reduce or waive local taxes, fees and charges, so whether you pay less for your mayor's permit depends on your LGU's ordinances. The law exempts income tax only. It does not by itself exempt you from registering with the BIR, issuing invoices, or other national taxes, so confirm your filing obligations with your Revenue District Office.

Section 8 exempts BMBEs from the coverage of the Minimum Wage Law, but it expressly keeps the employees' entitlement to the same benefits given to any regular employee, such as social security and healthcare benefits. So you still have to register your workers with SSS, PhilHealth and Pag-IBIG and remit contributions. Section 9 also directs government financial institutions such as Land Bank, DBP, SSS and GSIS to open special credit windows for BMBEs.

The certificate has to be kept honest. Under Section 6, a BMBE must report any change in its ownership structure and surrender the original certificate for notation of the transfer. Section 13 punishes anyone who wilfully violates the Act or commits any act to defeat its provisions with a fine of ₱25,000 to ₱50,000 and imprisonment of six months to two years, so declaring assets below the cap when they are not is a real risk.