BIR Ruling No. 477-12

July 30, 2012 BIR RULING NO. 477-12 R.A. 9178; BIR Ruling No. 009-12; BIR Ruling No. 476-11; BIR Ruling No. 397-11; BIR Ruling No. 398-11; BIR Ruling No. 249-11 Thinkways Technologies and Innovations Block 8 Lot 9 Kasaganaan Mutual Homes Catitipan, Buhangin District, Davao City Attention: Lord Byron D. Pableo Owner/Manager Gentlemen : This refers to your letter dated February 12, 2012, duly indorsed by Revenue Region No. 19- Davao City, requesting for the issuance of a Certificate of Tax Exemption under Republic Act No. 9178, otherwise known as the "An Act to Promote the Establishment of Barangay Micro Business Enterprises (BMBE's), Providing Incentives and Benefits Therefor, and for Other Purposes." TCcDaE It is represented that pursuant to Republic Act No. 9178, "An Act to Promote the Establishment of Barangay Micro Business Enterprises (BMBEs), Providing Incentives and Benefits Therefor, and for Other Purposes", Thinkways Technologies and Innovations, was awarded the Certificate of Authority for Barangay Micro-Business Enterprise (BMBE) last February 10, 2012; and that this will have a term of two (2) years or until February 10, 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 definition shall be subject to review and upward adjustment by the SMED Council, as mandated under Republic Act No. 6977, us 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." 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 SECTION 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; cADSCT (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 an 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 (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 Thinkways Technologies and Innovations, is a registered BMBE and was awarded BMBE Certificate of Authority by the City of Davao, 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 February 10, 2012 or until February 10, 2014. (BIR Ruling No. 397-2011 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 ascertained that the facts are different, then this ruling shall be considered null and void. EDCcaS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue