HOTSPOT
We do not know if overseas merchants in popular shopping apps face the same strict business registration and tax requirements, but the local merchants have been given until this month to fulfill certain legal requirements if they want to continue selling in the online platforms.
Owners of big businesses don’t think about these requirements. They have accountants, lawyers, and lobbyists lining up and applying for them.
The registration requirements are good for the consumers, because it will establish a paper trail for merchant accountability in cases of “lemon” or substandard products, apart of course from having the merchants join the formal sector of the economy. But hopefully the registration process and taxes don’t kill the micro, small, and medium-scale enterprises (MSME) through red tape and taxes.
Friends and acquaintances with stores at the shopping apps are reporting about the avalanche of requirements which are not easy to understand and also could cost them a lot by way of taxes. The platforms’ legal compliance units cite new regulations from the Bureau of Internal Revenue for imposing new requirements.
This is where the Department of Trade and Industry and the local governments’ business departments should step in. Many or most of the MSMEs appear to qualify as “barangay micro business enterprises” and thus deserving of the privileges and perks under Republic Act No. 9178, otherwise known as the Barangay Micro Business Enterprises (BMBEs) Act of 2002.
As explained in a primer released by the Bulacan Chamber of Commerce, “BMBEs are essential to the country’s economic development since they effectively serve as seedbeds of Filipino entrepreneurial talent. Thus, the Act primarily aims to integrate micro enterprises in the informal sector into the mainstream of the economy. Strengthening BMBEs would mean more jobs and livelihood, and a better quality of life for Filipinos.”
Incentives under the law include: income tax exemption from income arising from operations; minimum wage law exemption; priority to a special credit window; and technology transfer, production and management training, and marketing assistance programs.
The law encourages local governments to either reduce the amount of local taxes, fees, and charges imposed or exempt the BMBEs from local taxes, fees, and charges.
The BMBE classification and the law granting protection and perks to BMBEs don’t appear to be popular and widely-known. BMBE registration does not show up when checking many local governments’ websites and Facebook pages. It is a matter that local governments should address and fix, in order to attract more registrations and to give as much privileges and perks the entrepreneurs deserve.
The DTI website says “any person, natural or juridical, such as partnership, corporation, association and cooperative, having the qualifications and none of the disqualifications shall be eligible to register as BMBEs.”
Qualified to register as a BMBE are persons meeting the following qualifications:
1. With assets of not more than ₱3 million excluding land;
2. Engaged in the production, processing, or manufacturing of products or commodities, including agro-processing, trading, and services;
3. Registered with the DTI for sole proprietorships; for juridical persons: with the Securities and Exchange Commission, for corporations, partnerships, and associations; and with the Cooperative Development Authority for cooperatives.
Once found to be qualified, the person will be issued a Certificate of Authority, an essential requirement for applying for an income tax exemption.
But with majority of businesses and merchants online and offline being MSMEs and BMBEs, the DTI and local governments should be pro-active in registering them and having them avail of the law’s benefits. Perhaps the local governments should open new BMBE windows or even an entire BMBE department just for this purpose so they are easily identifiable by and accessible to prospective BMBEs.
The BIR should expedite the process of availing of tax exemptions by opening its own BMBE windows. This transaction could and ought to be done entirely online, and should not be a pain to everyone.
The shopping apps could also promote BMBE registration among its merchants.
Hopefully we see MSMEs and BMBEs organize themselves by area or by type of product, obtain the services of their own accountants and lawyers for mutual benefit, and advocate for more lawful perks and privileges. For one, they should propose the raising of the asset cap of ₱3 million for BMBE eligibility, considering the impact of inflation since this cap was first set.