2 programs that MSMEs should know about
- Ray Talimio Jr.
- 10 hours ago
- 3 min read
UNDERSTANDING the benefits provided by the Board of Investments (BOI) and the Barangay Micro Business Enterprise (BMBE) Law is crucial for micro, small and medium enterprises (MSMEs). Both programs enable access to significant tax incentives, regulatory relief and business development support that can help businesses compete more effectively in domestic and international markets.
The BOI registration process is a gateway to various fiscal and non-fiscal incentives designed to encourage investments in priority sectors identified in the Strategic Investment Priority Plan (SIPP). Businesses that qualify under the SIPP can enjoy income tax holidays, enhanced deductions, special corporate income tax rates, value-added tax zero-rating on local purchases, customs duty exemptions and local tax incentives. These benefits can reduce operational costs and free up capital for expansion, innovation and workforce development.
The SIPP classifies priority investments into three tiers:
· Tier I covers job generating and industrial development activities such as agro processing, logistics, tourism, renewable energy, and information and communications technology.
· Tier II focuses on filling value chain gaps and promoting import substitution, including electric vehicle infrastructure, pharmaceutical production, food security projects and defense manufacturing.
· Tier III targets innovation-driven sectors like artificial intelligence, robotics, data centers powered by renewable energy and advanced manufacturing with integrated research and development.
The Create More Law enhances the BOI incentive system by extending the income tax holiday to as much as seven years, allowing up to 17 years of enhanced deductions for domestic enterprises and providing even longer periods for export-oriented and high-value activities. These are intended to boost the country’s competitiveness in attracting both local and foreign investors while creating more quality jobs.
On the other hand, the BMBE Law caters to microenterprises with assets not exceeding P3 million excluding land. Registration under this law exempts eligible businesses from income tax on income arising from operations, exempts them from the minimum wage law, while retaining mandatory social benefits for employees, and grants them priority access to government financing programs.
One of the biggest advantages of the BMBE program is the minimal cost of registration and renewal, coupled with an accessible online application system. The Department of Trade and Industry (DTI) has streamlined the process through bmbe.dti.gov.ph, which integrates with the business name registration system and generates a certificate of authority valid for two years. This digital shift has reduced barriers for microentrepreneurs and encouraged more informal businesses to formalize their operations.
Illustrative comparisons show how BMBE registration can lead to savings. A business earning P500,000 annually would typically pay P42,500 under the regular tax table or P20,000 under the simplified 8- percent rate. As a registered BMBE, the enterprise would pay only the applicable percentage tax, resulting in lower tax obligations.
Lower than expected
Despite these benefits, uptake of BOI registration and BMBE status remains lower than expected nationwide. As of 2024, MSMEs accounted for 99.59 percent of all registered business establishments in the country, contributing 36 percent to gross domestic product and employing more than 64 percent of the workforce, according to DTI and the Philippine Statistics Authority. However, only a fraction of them are taking advantage of BOI incentives or BMBE exemptions.
Several factors contribute to this gap. Many entrepreneurs remain unaware of these programs or perceive them as complex and burdensome. Others may be discouraged by documentary requirements or by misconceptions about eligibility. Strengthening awareness campaigns, providing mentorship and offering compliance assistance can address these challenges and encourage more businesses to formalize and expand.
For MSMEs, the decision to pursue BOI registration or BMBE status should be grounded on careful evaluation of their current and planned business activities. Exporters, large-scale domestic producers and companies in innovation-driven sectors are likely to benefit most from BOI incentives.
Microenterprises seeking to reduce tax burdens and access affordable financing may find the BMBE pathway more immediately advantageous. In some cases, an enterprise could progress from BMBE registration in its early years to BOI registration as it scales operations.
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Ray G. Talimio Jr. is a member of the Association of Certified Public Accountants in Public Practice (Acpapp). He is an advocate of MSME development, regional economic integration, good governance and public private partnerships.
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