RMC No. 40-2004: Circularizes the full text of DOF Order No. 17-04 prescribing the guidelines to implement the registration of Barangay Micro Business Enterprises and the availment of tax incentives under R.A. No. 9178.

Key points

1. Tax exemptions. BMBEs registered with the city or municipal Treasurer are exempt from Income Tax on income from operating the enterprise. Interest, commissions and discounts on loans to BMBEs from LBP, DBP, PCFC and SBGFC, and on GSIS and SSS loans to their member-employees under the Act, are exempt from Gross Receipts Tax.
2. Who can register. A sole proprietorship, corporation, partnership, cooperative or association under Philippine laws with barangay-based, micro-business activities. Total assets, including those from loans but excluding the land under its office, plant and equipment, may not exceed P 3,000,000.00.
3. Barangay-based and micro-business tests. An enterprise is barangay-based if most employees reside in the municipality of its principal place of business. It is micro-business if its main activity is for livelihood or a SMED Council or DTI priority area, it is not a branch, subsidiary, division or office of a large scale enterprise, and its policies are not set by a large scale enterprise or non-owners or non-employees.
4. Certificate of Authority. After eligibility is determined, the City or Municipal Treasurer registers the BMBE and issues a Certificate of Authority using BMBE Form 02. It is effective for two (2) years, subject to Sec. 8 of the Order, and renewable for two (2) years each time.
5. Income not exempt. The Income Tax exemption does not cover items such as interest and deposit yields, royalties, prizes and winnings, dividends, capital gains on unlisted shares and real property, compensation, professional practice income, and other passive or unconnected income.
6. BIR registration. To avail the incentives, the BMBE registers with the BIR RDO where its principal office is located. It submits its authenticated Certificate of Authority, a Sworn Statement of asset values, certified lists of branches and affiliates, and the latest Audited Financial Statement or Account Information Form or equivalent.

Who is affected

• Barangay Micro Business Enterprises
• Lenders such as LBP, DBP, PCFC, SBGFC, GSIS and SSS for exempt loan income

Deadlines and effectivity

• Certificate of Authority: effective for two (2) years
• Renewal: two (2) years for every renewal