How to get your Micro Business Exempted from Tax and Coverage of the Minimum Wage Law?

Are you planning to start a small business in the Philippines? If so, questions like how to register as a micro business, what are the eligibility requirements, how the business taxation works, and how much is the minimum wage for your workers must be serving your curiosity.

There are actually existing laws that appropriately answer the above questions. These laws are:

  1. Republic Act (RA) No. 6727 or the Wage Rationalization Act; and
  2. Republic Act (RA) No. 9178 Barangay Micro Business Enterprises (BMBE’s) Act of 2002.

The Wage Rationalization Act provides the micro businesses exemption from compliance with the minimum wage. Meanwhile, the BMBE’s Act of 2002 “promotes the establishment of barangay micro business enterprises, providing incentives and benefits therefor, and for other purposes (RA 9178).”

WHAT IS A BARANGAY MICRO BUSINESS ENTERPRISE (BMBE)?

This refers to 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 not be more than Three Million Pesos (P3,000,000.00) (Sec 3(a) RA 9178).

HOW TO REGISTER AND OPERATE AS BMBE?

“Registration” refers to the inclusion of BMBE in the BMBE Registry of a city or municipality (Sec 3(d), RA 9178).

To be considered as BMBE, the applicant must (1)register with the Office of the Treasurer of each city or municipality and (2) secure a Certificate of Authority (Sec 4, RA 9178). The applicant shall submit the duly filled out application form in triplicate, signed by the owner or manager of the entity (Section 5, DTI DAO No. 1, s. 2003). 

WHO ARE ELIGIBLE TO REGISTER AS BMBE?

Any person, natural or juridical, or cooperative, or association, who will operate or is operating a micro business as defined by law (Sec 3(a), RA 9178), may apply for registration as BMBE.

ARE BMBEs EXEMPTED FROM TAXES AND FEES?

Exemption from Taxes and Fees All BMBEs shall be exempt from tax for income arising from the operations of the enterprise. The LGUs are encouraged either to reduce the amount of local taxes, fees and charges imposed or to exempt BMBEs from local taxes, fees and charges (Sec. 7, RA 9178)

EXEMPTION FROM THE COVERAGE OF THE MINIMUM WAGE LAW:

The BMBEs shall be exempt from the coverage of the Minimum Wage Law: Provided, That all employees covered under this Act shall be entitled to the same benefits given to any regular employee such as social security and healthcare benefits (Sec. 8, RA 9178).

Check this link for the updated minimum wages from the National Wages and Productivity Commission.

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