Sunday, December 19, 2010

The Barangay Micro Business Enterprise Law, Philippines

Micro business enterprises and start-up companies in the Philippines might find the BMBE Law useful. If your start up company has total assets not exceeding 3 million pesos, registration under the BMBE Law may prove to be a helpful incentive for your company to be exempted from the minimum wage law and payment of income tax. All you need is to pay a registration fee of only P1,000.00 to the proper local government unit where you intend to put up your start-up company.

The Law

The Barangay Micro Business Enterprises (BMBEs) Act of 2002 (R.A. 9178, July 22, 2002) was enacted to hasten the country’s economic development by encouraging the formation and growth of barangay micro business enterprises which effectively serve as seedbeds of Filipino entrepreneurial talents, and integrating those in the informal sector with the mainstream economy, through the rationalization of bureaucratic restrictions, the active intervention of the government specially in the local level, and the granting of incentives and benefits to generate much-needed employment and alleviate poverty.

“Barangay Micro Business Enterprise," hereinafter referred to as BMBE, 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 but exclusive of the land on which the particular business entity's office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000).

Any person, natural or juridical, or cooperative, or association, having the qualifications of a Barangay Micro Business Enterprise as defined may apply for registration as BMBE.

Procedure for Registration

The following are the procedures when applying for registration as BMBE:

a. an applicant for BMBE shall go to the Office of the Municipal or City Treasurer where the business is located;

b. the applicant shall accomplish BMBE Form 01 in triplicate and submit to the Office of the Municipal or City Treasurer;

c. the Municipal or City Treasurer evaluates the application. Application shall be processed within fifteen (15) working days upon submission of complete documents. Otherwise, the BMBEs shall be deemed registered; and

d. a registered BMBE shall be issued a Certificate of Authority (CA) as proof of registration, which will be effective for a period of two (2) years, renewable for a period of two (2) years for every renewal.

All BMBEs shall be exempted from income tax for income arising from the operation of the enterprise. The Local Government Units (LGUs) are encouraged either to reduce the amount of local taxes, fees and charges imposed or to exempt the BMBE from local taxes, fees and charges.

The BMBEs shall be exempt from the coverage of the Minimum Wage Law: Provided, That all employees covered under the Act shall be entitled to the same benefits given to any regular employee such as social security and healthcare benefits.

Application of the Law

Case: Mrs. Nenita Naidas wishes to put up a resort in the City of Muntinlupa under the name “Nitz Garden and Swimming Pool.” She has a capital of P2.5M for the construction of the swimming pool and other improvements therein. She wants to legally put up her business without going through expensive registration fees and subsequent expenses for labor benefits. Does her business qualify for the BMBE Law?

Legal Opinion: Yes, it is definitely advisable for Mrs. Naidas to register as a Barangay Micro Business Enterprise (BMBE). Under the Barangay Micro Business Enterprises (BMBEs) Act of 2002 (R.A. 9178, July 22, 2002), a registered BMBE shall be exempted from income tax for income arising from the operation of the enterprise. In addition, a registered BMBE shall also be exempted from the coverage of the Minimum Wage Law. In this regard, registration shall be valid for and renewable every two years. A registration fee not exceeding P1,000.00 shall be paid to the local government unit concerned.


Department Administrative Order No. 01, Series of 2003, Implementing Rules and Regulations of R.A. 9178, Otherwise Known as the “Barangay Micro Business Enterprises (BMBEs) Act of 2002.”


  1. This is very helpful. Do you still have to go thru all the other processes of getting a permit and clearance and pay the corresponding fees (Barangay clearance, DTI registration, Business Permit from City hall) or does the CA suffice already? I'm assuming we don't need to go thru BIR as well since we are exempted from income tax.

    Hope you can help clarify. This surely helps with making the business more profitable and less steps to legitemize your business.

    Thank you so much.

    1. Here's the thing, the local government unit has its own procedure on how to seek BMBE Certification.

      On the part of the BIR, each district has its own procedure as well. In this regard, I suggest that you submit a certificate of exemption for their record purposes.

  2. Very informative post. Especially pointing out the importance of business registration in the Philippines. Great Ideas!