Tax Exemption for Small Business or Microenterprise

Sometimes saving on taxes is just a matter of knowing what law provides for certain tax incentives and benefits.

In RA 9179, small businesses or microenterprises can avail of tax exemption. This law entitled “The Barangay Micro Business Enterprises Act” was enacted in November 13, 2002 to promote entrepreneurship or encourage the formation and growth of small business or barangay micro business enterprises by providing tax incentive and benefits.  Under this law, a small business is referred to as a Barangay Micro Business Enterprise (BMBE) and 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 shall not be more than Three Million Pesos (P3,000,000.00). This amount is exclusive of the value of the land on which the office, plant or equipments of a small business are situated.

A small business or microenterprise under this law is exempted from tax for income arising from the operations of the enterprise. In order to avail of such exemption, a small business or micro-enterprise needs to apply for registration with the BMBE Officer or Treasurer of local government unit where the small business is located. The application for registration of the small business shall be processed by the Office of the Treasurer within fifteen (15) days from submission of complete documents, otherwise it shall be deemed approved. Once the application is approved, the Office of the Treasurer shall issue a Certificate of Authority. The Certificate of Authority shall serve as the authority of the small business or microenterprise to operate and be entitled to the benefits and privileges granted. 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.

Not every business owner or entrepreneur knows this tax incentive or exemption granted by our government to encourage entrepreneurship.