BIR Ruling [DA-402-05]

September 26, 2005 BIR RULING [DA-402-05] RA 9178; DA-356-2004 Capstone, Inc . Unit II, #105 Mother Ignacia Street Quezon City Attention: Mr. Arturo J. Munarriz President Gentlemen : This refers to your letter dated March 23, 2005 requesting exemption from the payment of income tax pursuant to the provisions of Republic Act No. 9178. It is represented that pursuant to Republic Act No. 9178, otherwise known as "An Act to Promote the Establishment of Barangay Micro Business Enterprises (BMBEs), Providing Incentives and Benefits Therefor, and for other Purposes," you were awarded the Certificate of Authority for Barangay Micro-Business Enterprise (BMBE) last October 17, 2003; and that this will have a term of two (2) years or until October 17, 2005. In reply, please be informed that Sections 3(a) and 7 of R.A. 9178 provides, viz: "SEC. 3 Definition of Terms. As used in the Act, the following terms shall mean: (a) "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 (P3,000,000.00). The definition shall be subject to review and upward adjustment by the SMED Council, as mandated under Republic Act No. 6977, as amended by Republic Act No. 8289. xxx xxx xxx "SEC. 7. Exemption from Taxes and Fees. All BMBEs shall be exempt from income 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 the BMBEs from local taxes, fees and charges." Inasmuch as Capstone, Inc. is a registered BMBE and was awarded BMBE Certificate of Authority by the Office of the City Treasurer, Quezon City, it is therefor exempt from the payment of income tax for income arising from the operations of the enterprise for a period of two (2) years from October 17, 2003 or until October 17, 2005. (BIR Ruling No. 356-2004 dated June 25, 2004) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. CSHDTE Very truly yours, (SGD.) JOSE MARIO C. BUAG OIC-Commissioner of Internal Revenue