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What You Need to Hear About the BMBE Law

The BMBE Law (Barangay Micro Business Enterprise)  (copy of the law here) has certainly come a long way.

If you had applied for it in 2013, you might have encountered staff and officers at the municipal hall’s business permits and licensing office blankly wondering what the heck are you applying for.

But now, it’s one of the first things small-scale entrepreneurs ask about.

There’s plenty of information online about the BMBE Law nowadays, so I won’t write anymore about the stuff you’ll find rewritten in various forms all over the Internet.

Instead, let’s talk about the nitty-gritties of the BMBE Lawβ€”the stuff you seldom hear about.

BMBE Law: What You Need to Know

Taxes you still need to pay

First, remember that although BMBE certification exempts you from income tax and withholding tax, it does not exempt you from any other tax activities.

So you still need to pay monthly taxes.

If you have employees, freelancers, or landlords, you still need to withhold taxes from them and remit it to the BIR every month.

You still need to pay annual registration renewal with the BIR.

You still need to pay annual renewal with the barangay hall and the municipal/city hall as well.

Forms you still need to file

You don’t need to pay income taxes, but you still need to file your annual income tax return (ITR).

Oh, some BMBE literature will say you don’t need to file your ITR anymore, just your annual Account Information Form (AIF).

But we would advise against doing that.

What if you need to take out a loan, apply for a credit card, or return to regular employment and they ask for your ITR.

What will you give themβ€”your AIF?

Here’s what may happen if you do that: they will probably send the form back to you, and talk down on you, saying: “Sorry, what we need is your ITR.”

And then you will have to go through this painful script of explaining to them that you don’t have an ITR because you are a BMBE…

And of course, they don’t know what a BMBE is, so you’ll have to explain that to them too.

If you are lucky enough to be in touch with a very intelligent agent/officer, your loan or employment application might have a chance of moving forward.

But more likely, you’ll end up with someone who will just sit there staring at you until you produce an ITR, which, of course, you don’t have because you only filed your AIF, as a BMBE.

If you ever need help with filling up your tax forms, you are far more likely to find someone who can help you fill out your ITR than your AIF. Most people (yes, even accountants) don’t even know what an AIF is.

Last but not the least, there are schedules in the ITR which are substantially the same as the AIF–which means the very same data will be submitted to the BIR.

No OSD

If you like filing expenses under the very convenient optional standard deduction (OSD) method, say goodbye to that convenience.

Once you’re BMBE-certified, you’ll have to itemize every single utility, office supply, etc. that you spend for.

I guess the government likes to know exactly how much tax we’re not paying.

Or they want to keep a close watch on our expenses to see if it’s really possible that, after three years of business, you still haven’t gone beyond that Php 3 million line that allows you to keep your BMBE status.

Keep that in mind.

Taxumo and BMBE

We have users who are BMBE certified! Taxumo is an online web application platform which enables BMBEs file and pay their taxes online. We also have a Books feature, which automates bookkeeping so all you need to do is to view, download and copy/paste to your manual books of accounts. Pretty handy if you don’t have an accountant. πŸ˜‰

39 thoughts on “What You Need to Hear About the BMBE Law”

  1. Are apartment and commercial space included in bmbe as it should fall under services? How to file itr of bmbe if iam also a registered professional filing itr, since it should be cosolidated filling?

    1. Hi Rhon, it’s probably best to ask the BIR Contact Center at 981-7003, 981-7020, 981-7040, or 981-7046 for information on how to go about this. There are some complications specific to your case (particularly in being a registered professional) for which we recommend you reach out to the BIR directly. Thanks!

    2. Hi! I am an employee paying income tax under the graduated tax rate. And rightly so for my compensation income. I just wish to clarify, will my being a salaried employee preclude me from registering a business under BMBE(even when the business meet all qualifying reqts as a BMBE)?
      If no, and that I could still register a business under BMBE and since BMBEs are income tax exempt, what would be the annual income tax form I would file for my annual income tax? How do I consolidate my income?

  2. Hi! My business is also under bmbe law. Just want to ask if its ok if i didnt file any quarterly income for 2017.. i will just file it on the annual income this april.. will i be penalized for that?
    Hoping for reply. Thank u.

    1. Hi Justine, you should have filed for quarterly income actually so chances are you’ll still be penalized. πŸ™ You may want to call the BIR contact center directly at 981-7003 or 981-7020 to be sure.

      By the way, if you use Taxumo, we make tax filing easier so you won’t need to worry about something like this in the future! Give it a try now, while it’s free at https://www.taxumo.com πŸ™‚

  3. Hi! Once we have our BMBE CERTIFICATE, do we still need to go to BIR to have our Certificate of Registration (COR) updated?

    Thank you!!!
    Fatima

  4. Our business is under BMBE and I learned from one Tax Accounting Seminar and I asked him(the facilitator) if i need to file my 1701Q? and he told me No need to file the 1701Q since we are BMBE . But we need file the Annual Income tax(1701A).

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  6. Hi! We are just starting our small store as BMBE. I’m confused with income tax from operation and the 3% tax. So if i opt the bundled tax from TRAIN law which is 8%. Are we still subject for the separate 3% tax? How do we do it?

    1. Hi Franz, 8% is not an option when you want to apply for BMBE. So you will be required to pay the Percentage Tax if you get approved but your income tax will be waived for the next 2 years.

  7. Hi! I am an employee paying income tax under the graduated tax rate. And rightly so for my compensation income. I just wish to clarify, will my being a salaried employee preclude me from registering a business under BMBE(even when the business meet all qualifying reqts as a BMBE)?
    If no, and that I could still register a business under BMBE and since BMBEs are income tax exempt, what would be the annual income tax form I would file for my annual income tax? How do I consolidate my income? Note: COPIED FROM MS, CECELLE’S QUESTION AS WE HAVE THE SAME SITUATION BUT SHE GOT NO ANSWER.

  8. Hi. Just wanna ask if the business may incur penalties to those unpaid monthly taxes? my small business is under BMBE as well and forgot to pay for the monthly taxes. Can I still pay for the unpaid monthly taxes without penalties?

  9. Hi DTI Granted as the BMBE Certificate March 2021. But we were only able to submit the BMBE Certificate to BIR today February 4, 2022. They updated our COR. Does it mean we are not exempted for Income Tax from Q2 2021 to Q4 2021?

    1. Yes since you were not able to update or inform BIR about this. Though it would still be best to clarify this with your RDO. πŸ™‚

  10. We are engaged in the Commercial Space Rental. If we apply for BMBE, we shall be exempted from paying INCOME Tax. ( Not not exempted from filing Yearly Tax Return.) The Question: Are we still required to pay Percentage Tax, the fact that we are not in the Sales Business.

    1. Hello Virgilio,

      If you hold a BMBE certificate, it’s important to note that you are exempted from paying income tax. However, it’s important to be aware that this exemption applies specifically to income tax and not to other business taxes.

  11. Hello!

    Very nice article, by the way. I want to ask if an online course can be considered as BMBE. It is a service and below the 3M mark.

    1. Hello Ahiskie,

      Good day!

      Yes, you can apply your online course business as BMBE since “Services” related business or income source is also eligible for BMBE rate. πŸ™‚

  12. Hi Millicent,

    Good day!

    We are a manufacturing business with less than 3M mark and currently on the 2nd year of operation. Can we still apply as BMBE given that we all met the criteria provided?

    Thanks

    1. Hello Kenneth,

      The Barangay Micro Business Enterprise (BMBE) Law in the Philippines was designed to promote and support the growth of micro and small enterprises by providing incentives and benefits to qualified businesses. To determine whether your manufacturing business can apply for BMBE status, you need to ensure that you meet the criteria set by the law. Some of the key criteria typically include:

      1. Asset size should be under PHP 3 million.
      2. Business is engaged in production, processing, or manufacturing.
      3. Should be a Filipino owned business
      4. Operates within a barangay.
      5. Has a complete registration with the local Office of the Treasurer.

      For accurate eligibility, consider consulting your Local Government Unit (LGU).

      Regards,
      Millicent

    1. Hello Mond,

      While the Barangay Micro Business Enterprise (BMBE) law in the Philippines supports micro-businesses with certain benefits, it’s crucial to note that not all types of businesses are eligible. The BMBE law is primarily designed for micro-enterprises engaged in manufacturing, processing, trading, and services, excluding professional services.

      As a financial advisor in the insurance industry, you may fall under the category of professional services, and this might not be covered by the BMBE law.

      It’s advisable to consult directly with the Department of Trade and Industry (DTI) or a legal professional to get accurate advice based on the specifics of your businesses. They can provide guidance on whether your activities qualify for BMBE registration and any potential limitations or considerations you should be aware of. Stay compliant and ensure that you have the correct information tailored to your unique situation.

  13. Hello,

    I am a freelancer working with one of our TV stations. Last year, I opened up a small pet grooming shop and it was treated as a “branch”, hence, I have 2 COR from the BIR. I opted for 8% fixed rate for income tax. I have not heard about BMBE at that time. Can I register my pet grooming shop as BMBE? How would that affect my being a freelancer? Please help…thank you.

    1. Hello Vicky,

      Good day!

      To get the best guidance for your question, I highly recommend reaching out to a Certified Public Accountant (CPA) who specializes in taxation. They have the expertise and knowledge needed to provide you with personalized advice based on your specific situation and they can offer detailed insights and address any tax-related questions or concerns you may have.

      You can easily book a consultation session with a CPA at a rate of Php 1500 for a 45-minute session. Just visit https://www.taxumo.com/taxumo-consult/ to schedule your session and make the payment. They will guide you through the process and give you all the necessary information. πŸ™‚

  14. Which of your CPAs available for consult is familiar or an expert on BMBE matters? Hoping to book a consult soon and am not sure which one to choose.

  15. Hi! What are the tax requirements for BMBE? Should purchases also be substantiated by an official receipt? Is there a way that purchases from businesses that do not issue reciepts can still be included as an expense?

    Thanks

    1. Hi A! As a registered BMBE business, your deduction method should always be itemized standard deduction when it comes to computing income tax. With this, all declared expenses SHOULD be substantiated by an official sales invoice or official receipt. For local businesses that do not issue receipts, unfortunately, you cannot declare these as expenses. Stay tuned for our Facebook live video with the BIR on March 23, 2024. We’ll discuss your question further with the BIR.

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  17. Need help please.. I’m BMBE registered and my COR includes BMBE registered at the bottom part. Per my COR, I only need to file 1701A and 0605, only these two. Do I still need to file quarterly percentage tax though it is not stated in my COR? Thank you in advance

    1. Hi RDA! Maybe check with your RDO. Usually, BMBE registered businesses only pay percentage or VAT and the annual income tax form (zero tax dues). They are exempted from paying income taxes and 0605 this year need not be paid anymore πŸ™‚

  18. Hi! I am a bookkeeper and I have a client who is an OPC with BMBE Cert. Is the OPC subject for withholding tax? Should I withhold tax whenever I pay the OPC?

    1. Hi Jaireh,

      Good day!

      The OPC is only exempted of Income Tax as they are in BMBE category. They should still file and pay the business tax of 3% using the percentage tax form (2551Q). πŸ™‚

  19. Hi,

    I want to register my online shop to the BMBE. My place of residence is in a condominium which is registered as residential. Can I still register my business using my residential address since I do not have a physical store and my business is purely selling goods in the online platform? Thanks.

    1. Hello Gie,

      Good day!

      Yes you can still try and register your business under the BMBE category. But do note that you need to have it registered in DTI first and obtain certification from both DTI and BIR in order for you to be able to use the BMBE rate. πŸ™‚

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