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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE
- Republic Act No. 9178, or the Barangay Micro Business Enterprise (BMBE) Law aims to help MSME by giving them certain benefits such as assistance in establishing their business, and tax exemptions, among others.
- Under R.A. No. 9178, accredited enterprises who have a total asset value of not more than Three Million Pesos (PhP3,000,000.00) are exempted from payment of income tax. This exemption from income tax, however, does not equate to exemption from payment of value-added tax (VAT) and percentage taxes.
Barangay Micro Business Enterprise (BMBE) Law
Republic Act No. 9178, or the Barangay Micro Business Enterprise (BMBE) Law aims to help MSME by giving them certain benefits such as assistance in establishing their business, and tax exemptions, among others.
Under R.A. No. 9178, accredited enterprises who have a total asset value of not more than Three Million Pesos (PhP3,000,000.00) are exempted from payment of income tax. This exemption from income tax, however, does not equate to exemption from payment of value-added tax (VAT) and percentage taxes.
The law says:
“Section 7. Exemption from Taxes and Fees – All BMBEs shall be exempt from tax for income arising from the operations of the enterprise.
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.” (Section 7, R.A. No. 9178)
To avoid incurring penalties for late payment, an accredited enterprise still has the duty to file its regular income tax return on time.
Tax Reform for Acceleration and Inclusion (TRAIN) Law
Under Republic Act No. 10963 or the TRAIN Law, self-employed individuals whose gross sales or gross receipts do not exceed Two Hundred Fifty Thousand Pesos (PhP250,000) are exempted from payment of income tax.
The law says:
“(a) Tax Schedule Effective January 1, 2018 until December 31, 2022:
|
“Not over ₱250,000 |
0% |
|
|
|
|
xxx |
xxx |
Tax Schedule Effective January 1, 2023 and onwards:
|
“Not over ₱250,000 |
0% |
|
xxx |
xxx” |
(Section 5, R.A. No. 10963, amending Section 24 of the NIRC)
Further, the law says:
“The following individuals shall not be required to file an income tax return:
“(a) An individual whose taxable income does not exceed Two hundred fifty thousand pesos (₱250,000) under Section 24(A)(2)(a): Provided, That a citizen of the Philippines and any alien individual engaged in business or practice of profession within the Philippines shall file an income tax return, regardless of the amount of gross income;
xxx” (Section 13, R.A. No. 10963, amending Section 51 of the NIRC)
Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act
Under Republic Act No. 11534 or the CREATE Act, if an MSME has a net taxable income below Five Million Pesos (PhP5,000,000.00) and total assets, excluding land, below One Hundred Million Pesos (PhP100,000,000.00), it shall be entitled to pay corporate income tax (CIT) at a reduced rate of Twenty Percent (20%), instead of the normal corporate income tax rate of Thirty Percent (30%).
The law says:
“Rates of Income Tax on Domestic Corporations. –
“(A) In General, — Except as otherwise provided in this Code, an income tax rate of twenty-five percent (25%) effective July 1, 2020, is hereby imposed upon the taxable income derived during each taxable year from all sources within and without the Philippines by every corporation, as defined in Section 22(B) of this Code and taxable under this title as a corporation, organized in, or under the laws of the Philippines.
“Provided, That corporations with net taxable income not exceeding Five million pesos and with total assets not exceeding One hundred million pesos (P 100,000,000.00), excluding land on which the particular business entity’s office, plant, and equipment are situated during the taxable year for which the tax is imposed, shall be taxed at twenty percent (20%).” (Section 6, R.A. No. 11534, amending Section 27-A of the NIRC)
Also, such MSME is entitled to pay (1) the minimum corporate income tax (MCIT) at a reduced rate of One Percent (1%) instead of Two Percent (2%); and (2) percentage tax at a reduced rate of One Percent (1%) instead of Three Percent (3%) starting July 1, 2020, until June 20, 2023.
The law says:
“Minimum Corporate Income Tax on Domestic Corporations. –
A minimum corporate income tax of two percent (2%) of the gross income as of the end of the taxable yea.r, as defined herein, is hereby i.mposed on a corporation taxable under this title, beginning on the fourth taxable year immediately following the year in which such corporation commenced its business operations, when the minimum income tax is greater than the tax computed under Subsection (A) of this Section for the taxable year: Provided, That effective July 1, 2020 until June 30, 2023, the rate shall be one percent (1%).” (Section 6, R.A. No. 11534, amending Section 27-E of the NIRC)
Related article: Register as BMBE and Enjoy the Perks
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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