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 Law—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 them—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.
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. 😉