BIR Ruling No. 073-13

February 18, 2013 BIR RULING NO. 073-13 R.A. 9178; BIR Ruling No. 397-11; and BIR Ruling No. 398-11 TD Farms Brgy. Cabuloran Dagami, Leyte Attention: Mr. Gualberto Diaz Dico Sir : This refers to your letter dated March 9, 2012, requesting for exemption from income tax and other benefits enjoyed by Barangay Micro Business Enterprise (BMBE) under Department Order No. 17-2004. It is represented that you are the proprietor of TD Farms, with TIN 191-519-408-000 and principal place of business at Brgy. Cabuloran Dagami, Leyte, which was granted a BMBE Certificate of Authority by the Municipality of Dagami, Leyte pursuant to Republic Act No. 9178; and that the BMBE Certificate of Authority will expire on March 6, 2014. In reply, please be informed that Sections 3 (a) and 7 of R.A. 9178 provide, 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 above 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." aIAcCH Moreover, DOF ORDER NO. 017-04 entitled "GUIDELINES TO IMPLEMENT THE REGISTRATION OF BARANGAY MICRO BUSINESS ENTERPRISES AND THE AVAILMENT OF TAX INCENTIVES UNDER R.A. 9178, OTHERWISE KNOWN AS THE "BARANGAY MICRO BUSINESS ENTERPRISES (BMBEs) ACT OF 2002" provides that: RULE 3 Guidelines in the Availment of Income Tax Exemption SEC. 1. Exemption from Income Tax. A duly registered BMBE shall be exempt from income tax on income arising purely from its operations as such BMBE: Provided, That this income tax exemption shall not apply to the following: (a) Interest, including those from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; (b) Royalties; (c) Prizes and other winnings; (d) Cash and/or property dividends; (e) Capital gains from the sale of shares of stock not traded through the stock exchange; (f) Capital gains from the sale or other disposition of real property; (g) The share of an individual in the net income after tax of any association, a joint account, or a joint venture or consortium; (h) The share of an individual in the distributable net income after tax of a taxable partnership of which he is a partner; (i) Income from the practice of profession received directly from the clients or from the professional partnership of which the individual is a partner; (j) Compensation; and HIEAcC (k) All other forms of passive income and income from revenues not effectively connected with or arising from operations of the BMBEs as such." Inasmuch as TD Farms is a registered BMBE and was awarded a BMBE Certificate of Authority by the Office of the Municipal Treasurer of Dagami, Leyte, it is therefore EXEMPT from the payment of income tax for income arising from the operations of the enterprise for a period of two (2) years from 6 March 2012 until 6 March 2014. (BIR Ruling No. 397-11 dated October 25, 2011 and BIR Ruling No. 398-2011 dated October 25, 2011) 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. AEIDTc Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue