Establishment and Incentives for BMBEs

Key definitions and covered activities

Section 3(a) defines a “Barangay Micro Business Enterprise (BMBE)” as any business entity or enterprise engaged in production, processing, or manufacturing of products or commodities (including agro-processing), trading, and services whose total assets shall not be more than Three Million Pesos (P3,000,000.00).
Section 3(a) states that total assets include those arising from loans, but exclude the land on which the business entity’s office, plant and equipment are situated; the definition is reviewable for upward adjustment by the SMED Council as mandated under Republic Act No. 6977 as amended by Republic Act No. 8289.
Section 3(a) provides that “services” excludes those rendered by any person duly licensed by the government after passing a government licensure examination, in connection with the exercise of one’s profession.
Section 3(a) defines “Certificate of Authority” as the certificate granting a registered BMBE the authority to operate and the entitlement to the benefits and privileges under this Act.
Section 3(a) defines “Assets” as all properties (real or personal) owned by the BMBE and used for the conduct of its business as defined by the SMED Council; for tax and fee exemptions, Assets means all lands or properties, real or personal, owned and/or used by the BMBE for the conduct of its business.
Section 3(a) defines “Registration” as inclusion of a BMBE in the BMBE Registry of a city or municipality.
Section 3(a) defines “Financing” as all borrowings of the BMBE from all sources after registration.

Registration, fees, and operation

Section 4(a) provides that the Office of the Treasurer of each city or municipality shall register BMBEs and issue a Certificate of Authority so the BMBE may avail of benefits under this Act.
Section 4(a) requires the processing of an application within fifteen (15) working days upon submission of complete documents; otherwise, the BMBE is deemed registered.
Section 4(a) authorizes the Municipal or City Mayor to appoint a BMBE Registration Officer under the Office of the Treasurer.
Section 4(a) encourages LGUs to establish a One-Stop-Business Registration Center to handle efficient registration and processing of permits/licenses of BMBEs, and requires LGUs to conduct periodic evaluation of BMBEs’ financial status for monitoring and reporting.
Section 4(a) requires LGUs to issue the Certificate of Authority promptly and free of charge, but allows LGUs to charge a fee not exceeding One Thousand Pesos (P1,000.00) to defray administrative costs of registering and monitoring BMBEs.
Section 4(a) provides that the Certificate of Authority is effective for two (2) years and renewable for two (2) years for every renewal.
Section 4(a) directs that BMBEs shall, as much as possible, be subject to minimal bureaucratic requirements and reasonable fees and charges.
Section 5 provides that any person (natural or juridical), cooperative, or association qualified under Section 3(a) may apply for registration as a BMBE.
Section 6 requires that when there is a change in the BMBE’s ownership structure, the BMBE must report to the city or municipality of such change and must surrender the original copy of the BMBE Certificate of Authority for notation of the transfer.

Tax, wage, and credit-related incentives

Section 7(a) provides that all BMBEs are exempt from income tax for income arising from the operations of the enterprise.
Section 7(a) encourages LGUs to either reduce local taxes, fees, and charges or exempt BMBEs from local taxes, fees, and charges.
Section 8(a) provides that BMBEs are exempt from the coverage of the Minimum Wage Law, but all employees covered under this Act must receive the same benefits as regular employees, including social security and healthcare benefits.

Credit delivery and financial reporting

Section 9(a) requires the Land Bank of the Philippines (LBP), Development Bank of the Philippines (DBP), Small Business Guarantee and Finance Corporation (SBGFC), and People’s Credit and Finance Corporation (PCFC) to set up a special credit window to service financing needs of registered BMBEs consistent with Bangko Sentral ng Pilipinas (BSP) policies and rules.
Section 9(a) requires the GSIS and SSS to set up special credit windows to serve financing needs of their respective members who wish to establish a BMBE.
Section 9(a) encourages the concerned financial institutions to wholesale funds to accredited private financial institutions, including community-based organizations such as credit, cooperatives, non-government organizations (NGOs), and people’s organizations, which shall provide credit support directly to BMBEs.
Section 9(a) provides that all loans granted to BMBEs under this Act are considered part of alternative compliance to Presidential Decree No. 717 (Agri-Agra Law) or Republic Act No. 6977 (Magna Carta for Small and Medium Enterprises) as amended.
Section 9(a) provides that for compliance computations under 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.
Section 9(a) provides that notwithstanding any laws to the contrary, interests, commissions, and discounts derived from loans by LBP, DBP, PCFC and SBGFC granted to BMBEs, and loans extended by GSIS and SSS to their respective member-employees under this Act, are exempt from gross receipts tax (GRT).
Section 9(a) requires the SBGFC and Quedan and Rural Credit Guarantee Corporation (QUEDANCOR) (for agribusiness activities) to set up a special guarantee window to provide necessary credit guarantees to BMBEs under their respective guarantee programs.
Section 9(a) requires the LBP, DBP, PCFC, SBGFC, SSS, GSIS, and QUEDANCOR to annually report to the appropriate Committees of both Houses of Congress on the status of implementation of this credit delivery provision.
Section 9(a) requires the BSP to formulate the rules for implementation and to establish incentive programs to encourage and improve credit delivery to BMBEs.

Technology, training, and marketing assistance

Section 10(a) establishes a BMBE Development Fund with an endowment of Three Hundred Million Pesos (P300,000,000.00) from PAGCOR, and provides that it is administered by the SMED Council.
Section 10(a) authorizes DTI, DOST, UP ISSI, CDA, TESDA, and TLRC to use the Fund for:
- technology transfer,
- production and management training, and
- marketing assistance to BMBEs.
Section 10(a) requires the DTI, in coordination with the private sector and NGOs, to explore linking or matching BMBEs with small, medium and large enterprises, and to establish incentives therefor.
Section 10(a) requires the DTI, in behalf of DOST, UP ISSI, CDA, TESDA, and TLRC, to furnish the appropriate Committees of both Houses of Congress a yearly report on development and accomplishments of projects and programs related to the assistance extended to BMBEs.

Trade, investment, and information dissemination

Section 11(a) requires data gathered from business registration to be made accessible to, and utilized by, private sector organizations and NGOs for purposes of business matching, trade, and investment promotion.
Section 12(a) requires the Philippine Information Agency (PIA), in coordination with the DOLE, DILG, and DTI, to ensure proper and adequate information dissemination of the contents and benefits of this Act to the general public, especially intended beneficiaries in the barangay level.

Penalties and administrative sanctions

Section 13(a) imposes criminal liability on any person who willfully violates any provision of this Act or commits any act to defeat any provision of this Act.
Section 13(a) provides that, upon conviction, the penalty is a fine of not less than Twenty-five Thousand Pesos (P25.000.00) but not more than Fifty Thousand Pesos (P50,000.00), and imprisonment of not less than six (6) months but not more than two (2) years.
Section 13(a) provides that for non-compliance with Section 9, 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).

Implementation, reporting, and effectivity

Section 14(a) requires the DILG, DTI, and BSP to submit an annual report to Congress on the status of implementation of this Act.
Section 15(a) requires the Secretary of the Department of Trade and Industry, in consultation with the Secretaries of DILG, DOF, and the BSP Governor, to formulate implementing rules and regulations within ninety (90) days after approval.
Section 15(a) provides that the rules and regulations issued under this Act take effect fifteen (15) days after publication in a newspaper of general circulation.
Section 16(a) establishes separability: if any provision or part is held invalid or unconstitutional, the remaining provisions remain valid and subsisting.
Section 17(a) provides a repealing/inconsistency rule: inconsistent existing laws, presidential decrees, executive orders, proclamations, or administrative regulations are amended, modified, superseded, or repealed accordingly.
Section 18(a) provides effectivity: this Act takes effect fifteen (15) days after publication in the Official Gazette or in at least two (2) newspapers of general circulation.

Issuance date and approval

The Act is Republic Act No. 9178.
The Act was approved on November 13, 2002.
The President signed the Act on NOV 13 2002.
The Act is titled to promote the establishment of BMBEs, providing incentives and benefits therefor, and for other purposes.