Policy and declared purpose
- Section 1 declares State policy to hasten economic development by encouraging the formation and growth of barangay micro business enterprises as seedbeds of Filipino entrepreneurial talents.
- Section 1 requires integrating barangay micro businesses in the informal sector into the mainstream economy through rationalization of bureaucratic restrictions, active government intervention at the local level, and incentives to generate employment and alleviate poverty.
Definitions governing the rules
- “Act” means the “Barangay Micro Business Enterprises Act of 2002.” (Section 2(a))
- “Barangay Micro Business Enterprise (BMBE)” means a business entity engaged in production, processing, or manufacturing of products or commodities (including agro-processing), trading, and services, whose total assets (including assets arising from loans but excluding the land where the office, plant and equipment are situated) are not more than PHP 3,000,000.00, subject to review and upward adjustment by the SMED Council as mandated under R.A. No. 6977 as amended by R.A. No. 8289 (Section 2(b)).
- A BMBE includes an individual, partnership, cooperative, corporation, association, or other entity incorporated and/or organized and existing under Philippine laws, and registered with the office of the treasurer of a city or municipality in accordance with the implementing rules (Section 2(b)).
- “Services” excludes those rendered by a person duly licensed by the government after passing a government licensure examination in connection with the exercise of the person’s profession as stated in Paragraph 2, Section 3(a) of R.A. No. 9178 (Section 2(b)).
- “Certificate of Authority (CA)” is the certificate issued to an applicant authorizing operation as a BMBE and entitling it to the benefits and privileges of a registered BMBE (Section 2(c)).
- “Assets” means all properties, real or personal, owned by the BMBE and used for the conduct of its business as defined by the SMED Council, and for purposes of exemption from taxes and fees under the Act, Assets includes properties owned and/or used by the BMBE for the conduct of its business as defined by the SMED Council (Section 2(d)).
- “Registration” means inclusion of a BMBE in the BMBE Registry of a city or municipality (Section 2(e)).
- “Financing” means all borrowings of the BMBE from all sources after registration (Section 2(f)).
Registration of BMBEs
- Registration place and authority: The Office of the Treasurer of each city or municipality registers BMBEs and issues a CA to enable access to incentives under the Act (Section 3).
- One CA per BMBE, proper jurisdiction: Only one CA is issued for each BMBE and it is issued only by the Office of the Treasurer that has jurisdiction over the BMBE’s principal place of business (Section 3(b)).
- Eligibility to register: Any person, natural or juridical, cooperative, or association may apply if it has an asset size of not more than PHP 3,000,000.00 excluding land before applying, and is engaged in the business activities defined under Section 2(b) (Section 4).
- Registration application requirement: The applicant must submit a duly filled up application (BMBE Form 01) in triplicate, signed by the owner or manager of the applying entity (Section 5).
- Registration procedures and processing time:
- The applicant files at the Office of the Municipal or City Treasurer where the business is located (Section 6(a)).
- The applicant accomplishes BMBE Form 01 in triplicate and submits it to the Treasurer’s office (Section 6(b)).
- The Municipal or City Treasurer evaluates the application and processes it within 15 working days upon submission of complete documents (Section 6(c)).
- If processed within the 15 working days requirement is not met, the BMBEs are deemed registered (Section 6(c)).
- Certificate of Authority (CA) effectiveness and renewal: A registered BMBE receives a CA as proof of registration effective for 2 years, renewable for 2 years for every renewal (Section 6(d)).
Fees, ownership transfer, and reporting
- CA issuance and charges: The LGU must issue the CA promptly and free of charge; however, to defray administrative costs of registering and monitoring BMBEs, the LGU may charge a fee not exceeding PHP 1,000.00 (Section 7).
- Transfer of ownership reporting: A BMBE must report any change in ownership structure to the city or municipality and must surrender the original CA to enable notation of the transfer (Section 8).
Incentives and benefits for registered BMBEs
- Exemption from income tax: Registered BMBEs are exempt from income tax for income arising from operation of the enterprise (Section 9(a)).
- Local tax encouragement by LGUs: LGUs are encouraged to reduce local taxes, fees, and charges imposed or to exempt BMBEs from local taxes, fees, and charges (Section 9(b)).
- Minimum wage coverage exemption: BMBEs are exempt from the coverage of the Minimum Wage Law, provided that employees covered under the Act are entitled to the same benefits given to regular employees such as social security and healthcare benefits (Section 10).
- Credit delivery and credit windows:
- Upon approval of the Act, 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) must set up a special credit window for financing needs of BMBEs registered under the Act consistent with BSP policies and rules (Section 11).
- GSIS and SSS must likewise set up special credit windows to serve financing needs of their respective members who wish to establish a BMBE (Section 11).
- Financial institutions are encouraged to wholesale funds to accredited private financial institutions, including cooperatives, NGOs, and people’s organizations, which in turn directly provide credit support to BMBEs (Section 11).
- Alternative compliance and loan computation:
- Loans granted to BMBEs under the Act are considered part of alternative compliance to Presidential Decree No. 717 (Agri-Agra Law) or R.A. No. 6977 (Magna Carta for Small and Medium Enterprises), as amended (Section 11).
- For compliance with P.D. No. 717 and R.A. No. 6977 as amended, loans granted to BMBEs are computed at twice the amount of the face value of the loans (Section 11).
- Gross receipts tax exemption on loan income: Interest, 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 the Act, are exempt from gross receipts tax (GRT) (Section 11).
- Guarantee window for agribusiness lending risk: SBGFC and QUEDANCOR must set up a special guarantee window to provide credit guarantee to BMBEs under their respective guarantee programs for agribusiness activities (Section 11).
- Annual reporting to Congress: LBP, DBP, PCFC, SBGFC, SSS, GSIS, and QUEDANCOR must annually report to appropriate committees of both Houses of Congress on implementation status (Section 11).
- BSP rules and incentive programs: The BSP must formulate rules for implementation and establish incentive programs to encourage and improve credit delivery to BMBEs (Section 11).
- Support services and training: BMBEs may avail of technology transfer, production, management training, and marketing assistance of DTI, DOST, UP-ISSI, CDA, TESDA, TLRC, and other concerned agencies (Section 12).
- BMBE Development Fund: A BMBE Development Fund must be set up with an endowment of PHP 300,000,000.00 from PAGCOR and administered by the SMED Council (Section 13).
- Fund utilization for BMBEs: DTI, DOST, UP ISSI, CDA, TESDA, and TLRC may avail of the fund for technology transfer, production and management training, and marketing assistance to BMBEs (Section 13).
- Trade and investment promotion data sharing: Data gathered from business registration must be made accessible to and utilized by private sector organizations and NGOs for business matching and trade and investment promotion (Section 14).
- One-Stop Business Registration Center encouragement: LGUs are encouraged to establish a One-Stop Business Registration Center to handle efficient registration and processing of permits/licenses of BMBEs (Section 15).
Information dissemination
- PIA coordination for public information: The Philippine Information Agency (PIA), coordinating with concerned agencies (DOLE, DILG, and DTI), must ensure proper and adequate information dissemination of the contents and benefits of the Act to the general public, especially intended barangay-level beneficiaries (Section 16).
Penalties and administrative sanctions
- Criminal penalty for willful violations of the Act: Any person who willfully violates any provision of the Act or commits any act to defeat any provision of the Act is punished upon conviction by a fine of not less than PHP 25,000.00 but not more than PHP 50,000.00 and imprisonment of not less than 6 months but not more than 2 years (Section 17(a)).
- Administrative sanctions for non-compliance with Section 9: If there is non-compliance with the provisions of Section 9 of the Act, the BSP must impose administrative sanctions and other penalties on the concerned government financial institutions, including a fine of not less than PHP 500,000.00 (Section 17(b)).
Reporting duties
- Annual reports to Congress: DILG, DTI, and BSP must submit Annual Reports to Congress on the status of implementation of the Act (Section 18).