Jan 11, 2013

The Barangay Micro Business Enterprises (BMBE) Act of 2002, in Real Life

This year, I have made up my mind to get BMBE certification for my article writing company, Escrive Writing and Editing.

What is the BMBE? It stands for the Barangay Micro Business Enterprises Act of 2002. It's a law that (theoretically) allows businesses with assets worth less than 3 million pesos to be exempted from paying income tax.

Sounds too good to be true? Ha ha, you got that right. As usual, the law looks much better on paper than it does in real life. Read on to see what I mean.

Applying for the BMBE

First things first: what do you need to submit when you apply for BMBE certification?

If your business has less than P300,000 worth of assets, then all you need are
  • the BMBE application form accomplished in triplicate, 
  • three passport size pictures to attach to the application form, 
  • your municipal business permit, and 
  • your Department of Trade and Industry (DTI) business name registration.
That's all, if you're a sole proprietor.

If you're a corporation, partnership, or cooperative, you also need your Securities and Exchange Commission (SEC) registration. If you're a cooperative, you also need your Cooperative Development Authority (CDA) registration.

Now if your business has more than P300,000 (but less than P3 million) worth of assets, then you also need  to prepare
  • your business' certificate of registration (COR) with the Bureau of Internal Revenue (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; and 
  • Income Tax Return (ITR).

Oh, and no matter how much your assets are worth, you need to pay a P1,000 application fee.

At the municipal hall

So, armed with your requirements, you troop to the municipal hall's Office of the Treasurer (OT) to apply for your BMBE certification. You ask for the person in charge of BMBE.

When I got to the OT, the person I spoke to at the window did not know what BMBE was. I wrote it down for her. "Oh, microbusiness," she said. "You need to go to the BPLO (Business Permits and Licensing Office) for that."

I insisted that the DTI website said I should go to the OT. But she told me to ask the BPLO about it first, and if they send me back to the OT, then she will look for somebody who can help me.

So I went to the BPLO, and of course, they sent me back to the OT. This time, the lady at the OT went into the inner recesses of the office and came back armed with the name of the person I should consult -- at the BPLO.

So I went back to the BPLO looking for "Tiya A---," who turned out to be the head of the BPLO. She wanted very much to help, but she looked as if it was the first time she had heard of the BMBE law, even if the law had been passed in 2002.

I asked Tiya A--- if her computer was connected to the Internet. She graciously let me use it. With Google's help, I found this Guide to RA 9178. She read the page and then said in Filipino, "Oh, yes, that is under the treasurer's office." My heart sank.

Fortunately, one of the BPLO staff overheard us and said to me, "BMBE, ma'am? I have the application form here in my computer. I could print it out for you." And he proceeded to do just that. Then he added, "You should submit that to Ate L---, at the treasurer's office."

What the DTI Says

So the application form was submitted. At that point, I realized that, yes, there is a process for BMBE application at the municipal hall, but since very few people actually apply for it, very few of the staff remember what the process is.

Anyway, while waiting for my certification to be released (it takes about 15 days, the BMBE guide said), I did a little research on how the BMBE is being used in real life.

One thing I noticed is that very few people have blogged about their actual experiences with the BMBE. It's almost as if nobody has ever used it.

So to get a better picture of how BMBE is like on the ground, I called the DTI's Bureau of Micro-, Small-, and Medium-Scale Enterprises Development (751-0384 / 890-4968 / 897-7596 / 897-1693).

There, I found out the sad truth: Very few people benefit from the BMBE law because, even if you get certification from your municipality, there is no guarantee that the BIR will allow you to get income tax exemption. Apparently, the law had been so abused that the BIR is now quite wary as to whom to give the special privilege to.

Of course, there is also the fact that every BIR regional district office has a quota to meet, and the more people you exempt from taxes, the harder it gets to meet your quota.

It was depressing to hear the BMBE advisor tell me these. "So do you mean to say it is futile for me to apply for BMBE?" I asked her.

"No," she clarified. "You should still try. After all, some of the applicants do get income tax exemption."

Well, she has a point. What do I have to lose but, perhaps, a day and the P1,000 application fee?

So I'll be going for it. Will I get income tax exemption? As soon as I find out, I will update this post. Wish me luck!

UPDATE: I got my BMBE certificate and was approved by the BIR for income tax exemption! Read the full story here: BMBE Certified!

Want to know more about the BMBE law? Click here to download the DTI's layman's guide. Or leave your question in the comments below.

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