Republic Act 9178 or the Barangay Micro Business

Enterprises Act of 2002

Republic Act No. 9178

AN ACT TO PROMOTE THE ESTABLISHMENT OF BARANGAY MICRO BUSINESS

ENTERPRISES (BMBEs), PROVIDING INCENTIVES AND BENEFITS THEREFOR,

AND FOR OTHER PURPOSES.

Signed into law by President Macapagal-Arroyo on November 13, 2002, and its IRR was

issued on February 7, 2003. The law was implemented by Department of Finance (DOF)

Department Order (DO) No. 17-2004 as circularized by the BIR in RMC No. 40-2004.

PRELIMINARY PROVISIONS

Section 1. Short Title – This Act shall be known as the "Barangay Micro Business

Enterprises (BMBE's) Act of 2002."

Section 2. Declaration of Policy – It is hereby declared to be the policy of the State

to hasten the country's economic development by encouraging the formation and growth

of barangay micro business enterprises which effectively serve as seedbeds of Filipino

entrepreneurial talents, and integrating those in the informal sector with the mainstream

economy, through the rationalization of bureaucratic restrictions, the active granting of

incentives and benefits to generate much-needed employment and alleviate poverty.

Section 3. Definition of Terms – As used in this Act, the following terms shall mean:

(a) "Barangay Micro Business Enterprise," hereinafter referred to as BMBE, 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) The Above definition shall be subjected to

review and upward adjustment by the SMED Council, as mandated under Republic Act

No. 6977, as amended by Republic Act No. 8289.

For the purpose of this Act, "service" shall exclude those rendered by anyone, who is

duly licensed government after having passed a government licensure examination, in

connection with the exercise of one's profession.

(b) "Certificate of Authority" is the certificate issued granting the authority to the

registered BMBE to operate and be entitled to the benefits and privileges accorded

thereto.

(c) "Assets" refers to all kinds of properties, real or personal, owned by the BMBE and

used for the conduct of its business as defined by the SMED Council: Provided, That for

the purpose of exemption from taxes and fees under this Act, this term shall mean all

kinds of properties, real or personal, owned and/or used by the BMBE for the conduct of

its business as defined by the SMED Council.

(d) "Registration" refers to the inclusion of BMBE in the BMBE Registry of a city or

municipality.

(e) "Financing" refers to all borrowings of the BMBE from all sources after registration.

REGISTRATION AND OPERATION OF BMBE

Section 4. Registration and Fees - The Office of the Treasurer of each city or

municipality shall register the BMBE's and issue a Certificate of Authority to enable the

BMBE to avail of the benefits under this Act. Any such applications shall be processed

within fifteen (15) working days upon submission of complete documents. Otherwise,

the BMBEs shall be deemed registered. The Municipal or City Mayor may appoint a BMBE

Registration Officer who shall be under the Office of the Treasurer. Local government

units (LGU's) are encouraged to establish a One-Stop-business Registration Center to

handle the efficient registration and processing of permits/licenses of BMBEs. Likewise,

LGUs shall make a periodic evaluation of the BMBE's financial status for monitoring and

reporting purposes.

Registration must fee must not exceed P1,000 (Go Negosyo Acts of 2014) under the

Department of Trade and Industry – Negosyo Centers.

The LGUs shall issue the Certificate of Authority promptly and free of charge. However,

to defray the administrative costs of registering and monitoring the BMBEs, the LGUs

may charge a fee renewal.

The Certificate of Authority shall be effective for a period of two (2) years, renewable for

a period of two (2) years for every renewal.

As much as possible, BMBEs shall be subject to minimal bureaucratic requirements and

reasonable fees and charges.

Section 5. Who are Eligible to Register – Any person, natural or juridical, or

cooperative, or association, having the qualifications as defined in Section 3(a) hereof

may apply for registration as BMBE.

Section 6. Transfer of Ownership - The BMBE shall report to the city or municipality

of any change in the status of its ownership structure and shall surrender the original

copy of the BMBE Certificate of Authority for notation of the transfer.

INCENTIVES AND BENEFITS

Section 7. Exemption from Taxes and Fees – All BMBEs shall be exempt from tax for

income arising from the operations of the enterprise. However, BMBE is not exempt from

income taxes imposed to passive income subject to final taxes, capital gain tax and all

other forms of passive income and income from revenues not effectively connected or

arising from operations of the BMBE as such.

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.

To avail of the benefits and privileges of a BMBE, an applicant must secure a Certificate

of Authority to operate and be registered as a BMBE from the Office of the Treasurer of

the City or Municipality that has jurisdiction. Once the Certificate of Authority is secured,

the applicant must submit the same to the BIR and apply for Income Tax Exemption.

Generally, the income of BMBE from their operations is exempt, hence, excluded from

gross income subject to regular income tax. Only those income from related activities

are exempted. In lieu of ITR, BMBE is required to file an Annual Information Return,

together with an Account Information Form, or its equivalent, containing data lifted from

audited financial statements and a sworn statement of assets owned and/or used in

business. For self employed individuals, use BIR Form 1701-AIF. For corporations and

partnerships, as well as cooperatives, use BIR Form 1702-AIF. The deadline for filling

the same is the 15th day f the fourth month following the close of the taxable year,

similar to an Annual income Tax Return.

Revocation of BMBE Tax Exemption:

a. Change of business address

b. Value of assets exceeds P3,000,000

c. Voluntary surrender of the Certificate of Authority

d. Death of the sole proprietor

e. Merger or consolidation with an entity not registered as BMBE

f. Sale or transfer of the BMBE enterprise

g. Falsification of documents

h. Retirement from business, or cessation/suspension of operations for one year

The exemption covers only the income taxes enumerated under Title II (Section 40) of

the National Internal Revenue Code (NIRC) of 1997:

1. No gain or loss shall be recognized on a corporation or on its stock or securities if

such corporation is a party to a reorganization and exchanges property in pursuance of a

plan of reorganization solely for stock or securities in another corporation that is a party

to the reorganization. A reorganization is defined as:

(a) A corporation, which is a party to a merger or consolidation, exchanges property

solely for stock in a corporation, which is a party to the merger or consolidation; or

(b) The acquisition by one corporation, in exchange solely for all or a part of its

voting stock, or in exchange solely for all or part of the voting stock of a corporation

which is in control of the acquiring corporation, of stock of another corporation if,

immediately after the acquisition, the acquiring corporation has control of such other

corporation whether or not such acquiring corporation had control immediately before

the acquisition; or

(c) The acquisition by one corporation, in exchange solely for all or a part of its voting

stock or in exchange solely for all or part of the voting stock of a corporation which is

in control of the acquiring corporation, of substantially all of the properties of another

corporation. In determining whether the exchange is solely for stock, the assumption

by the acquiring corporation of a liability of the others shall be disregarded; or

(d) A recapitalization, which shall mean an arrangement whereby the stock and

bonds of a corporation are readjusted as to amount, income, or priority or an

agreement of all stockholders and creditors to change and increase or decrease the

capitalization or debts of the corporation or both; or

(e) A reincorporation, which shall mean the formation of the same corporate business

with the same assets and the same stockholders surviving under a new charter.

2. No gain or loss shall also be recognized if property is transferred to a corporation by a

person, alone or together with others, not exceeding four (4) persons, in exchange for

stock or unit of participation in such a corporation of which as a result of such exchange

the transferor or transferors, collectively, gains or maintains control of said corporation:

Provided, That stocks issued for services shall not be considered as issued in return for

property.

Sale or exchanges of property used for business for shares of stock covered under this

Subsection shall not be subject to value-added tax.

In all of the foregoing instances of exchange of property, prior Bureau of Internal

Revenue confirmation or tax ruling shall not be required for purposes of availing the tax

exemption.

Not covered: This exemption, however does not cover the following:

1. Final Tax or Income Tas due on the following income:

a. Interest, including those from any currency bank deposit and yield or any other

monetary benefit from deposit substitutes and from trust funds ad similar

arrangements;

b. Royalties;

c. Prizes and other winnings;

d. Cash and/or property dividends;

e. Capital gains from the sale of shares of stock not traded through the stock

exchange;

f. Capital gains from the sale or other disposition of real property;

g. The share of an individual in the net income after tax of an association, a joint

account, or a joint venture or consortium;

h. The share of an individual in the distributable net income after tax of a taxable

partnership of which he is a partner;

i. Income from the practice of profession received directly from the clients or from

the professional partnership of which the individual is a partner;

j. Compensation; and

k. All other forms of passive income and income from revenues not effectively

connected with or arising from operations of the BMBEs as such

2. Business Taxes - While BMBEs are generally exempted from income tax, it is subject,

however, to business taxes (3% percentage tax or vat, as the case may be) and other

internal revenue taxes such as documentary stamp taxes and other registration fees.

3. Annual Registration Fee - an annual registration fee in the amount of Five Hundred

Pesos (P500.00) shall be paid by a BMBE upon its registration as such, and every year

thereafter on or before the last day of January. Provided, however, that a BMBE which is

in the form o a cooperative or a marginal income earner as defined in Revenue

Regulations No. 11-2000 shall be exempt from payment of this registration fee.

4. Withholding Tax – while income of the BMBEs is exempt from income tax and

consequently the withholding tax, they are still considered withholding tax agents for

their income payments and are liable to withhold and remit applicable withholding taxes

on the same.

Section 8. 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.

Section 9. Credit Delivery – upon the approval of this Act, the land Bank of the

Philippines (LBP), the Development Bank of the Philippines (DBP), the Small Business

Guarantee and Finance Corporation (SBGFC), and the People's Credit and Finance

Corporation (PCFC) shall set up a special credit window that will service the financing

needs of BMBEs registered under this Act consistent with the Banko Sentral ng Pilipinas

(BSP) policies, rules and regulations. The Government Service Insurance System (GSIS)

and Social Security System (SSS) shall likewise set up a special credit window that will

serve the financing needs of their respective members who wish to establish a BMBE.
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The concerned financial institutions (FIs) encouraged to wholesale the funds to

accredited private financial institutions including community-based organizations such as

credit, cooperatives, non-government organizations (NGOs) and people's organizations,

which will in turn, directly provide credit support to BMBEs.

All loans from whatever sources granted to BMBEs under this Act shall be considered as

part of alternative compliance to Presidential Decree no. 717, otherwise known as the

Agri-Agra Law, or to Republic Act. No. 6977, known as the Magna Carta for Small and

Medium Enterprises, as amended. For purposes of compliance with presidential Decree

no. 717 and Republic Act No. 6977, as amended, loans granted to BMBEs under this Act

shall be computed at twice the amount of the face value of the loans.

To minimize the risks in lending to the BMBEs, the SBGFC and the Quedan and Rural

Credit Guarantee Corporation (QUEDANCOR) under the Department of Agriculture, in

case of agribusiness activities, shall set up a special guaranteed window to provide the

necessary credit guarantee to BMBEs under their respective guarantee programs.

The LBP, DBP. PCFC, SBGFC, SSS, GSIS, and QUEDANCOR shall annually report to the

appropriate Committee of Both Houses of Congress on the status of the implementation

of this provision.

The BSP shall formulate the rules for the implementation of this provision and shall

likewise establish incentive programs to encourage and improve credit delivery to the

BMBEs.

Section 10. Technology Transfer, Production and Management Training, and

marketing Assistance – A BMBE Development Fund shall be set up with an

endowment of Three Hundred Million pesos (P300,000,000.00) from the Philippine

Amusement and Gaming Corporation (PAGCOR) and shall be administered by the SMED

Council.
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The Department of Trade and Industry (DTI), the Department of Science and

Technology (DOST), the university of the Philippines Institute for Small Scale Industries

(UP ISSI), Cooperative Development Authority (CDA), Technical Education and Skills

Development Authority (TESDA), and Technology and Livelihood Resource Center (TLRC)

may avail of the said Fund for technology transfer, production and management training

and marketing assistance to BMBEs.

The DTI, in coordination with the private sector and non-government organization

(NGOs), shall explore the possibilities of linking or matching-up BMBEs with small,

medium, and large enterprises and likewise establish incentives therefor.

The DTI, on behalf of the DOST, UP ISSI, CDA. TESDA and TLRC shall be required to

furnish the appropriate Committees of both Houses of Congress a yearly report on the

development and accomplishments of their projects and programs in relation to

technology transfer, production and management training and marketing assistance

extended to BMBEs.

Section 11. Trade and Investment Promotions – The data gathered from business

registration shall be made accessible to and shall be utilized by private sector

organizations and non-government organizations for purposes of business matching,

trade, and investment promotion.

INFORMATION DISSEMINATION

Section 12. Information Dissemination - The Philippine Information Agency (PIA), in

accordance with the Department of Labor and Employment (DOLE), the DILG and the

DTI, shall ensure the proper and adequate information dissemination of the contents and

benefits of this Act to the general public especially to its intended beneficiaries

specifically in the barangay level.

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PENALTY

Section 13. Penalty - Any person who shall willfully violates any provision of this Act or

who shall in any manner commit any act to defeat any provisions of this Act shall, upon

conviction, be punished by a fine of not less than twenty-five Thousand Pesos

(P25,000.00) but not more than Fifty Thousand Pesos (P50,000.00) and suffer

imprisonment of not less than six (6) months but not more than two (2) years.

In case of non-compliance with the provisions of Section 9 of this Act, the BSP shall

impose administrative sanctions and other penalties on the concerned government

financial institutions, including a fine of not less than Five Hundred Thousand Pesos

(P500,000.00)

MISCELLANEOUS PROVISIONS

Section 14. Annual Report – The DILG, DTI, and BSP shall submit an annual report to

the Congress on the status of the implementation of this Act.

Section 15. Implementing Rules and Regulations – The Secretary of the

Department of Trade and Industry, in consultation with the Secretaries of the DILG,

DOF, and the BSP Governor shall formulate the necessary ruled and regulations to

implement the provisions of this Act within ninety (90) days after its approval. The rules

and regulations issued pursuant to this section shall take effect fifteen (15) days after its

publication in a newspaper of general circulation.

Section 16. Separably Clause - If any provision or part hereof, is held invalid or

unconstitutional, the remainder of the law or the provision not otherwise affected shall

remain valid and subsisting.

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Section 17. Repealing Clause – Existing laws, presidential decrees, executive orders,

proclamations or administrative regulations that are inconsistent with the provisions of

this Act are hereby amended, modified, superseded or repealed accordingly.

Section 18. Effectivity – This Act shall take effect fifteen (15) days after its publication

in the Office Gazette or in at least two (2) newspaper of general circulation.

Republic Act No. 10644

AN ACT PROMOTING JOB GENERATION AND INCLUSIVE GROWTH THROUGH

THE DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES

Enacted on July 15, 2014.

Section 1. Title. - This Act shall be known as the "Go Negosyo Act".

Section. 2. Declaration of Policy. - It is hereby declared the policy of the State to

foster national development, promote inclusive growth, and reduce poverty by

encouraging the establishment of micro, small and medium enterprises (MSMEs) that

facilitate local job creation, production, and trade in the country. MSMEs increase income

for poor households and build both business equity and personal assets over a period of

time. To this end, the State shall develop plans and initiate means to ease the

constraints on the establishment of MSMEs in order to rationalize the existing

bureaucratic regulations, providing greater incentives and benefits to MSMEs, and

strengthening the Micro, Small and Medium Enterprise Development (MSMED) Council.

Section. 3. Establishment of Negosyo Centers. - There shall be established under

the supervision of the Micro, Small and Medium Enterprise Development (MSMED)
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Council, a "Negosyo Center" in all provinces, cities and municipalities. The MSMED

Council shall encourage public-private partnerships in the establishment and

management of Negosyo Centers. In applicable areas, the existing MSME Centers, shall

continue to operate as Negosyo Centers subject to the provisions of this Act. The

Negosyo Centers shall be responsible for promoting ease of doing business and

facilitating access to services for MSMEs within its jurisdiction. The MSMED Council

through the regional offices of the Department of Trade and Industry (DTI) shall perform

oversight functions and shall assign personnel to fulfill the functions of the Negosyo

Centers.