BMBE Frequently Asked Questions

I've been receiving so many questions about BMBE, I decided to post this FAQ for quick reference.

If you have questions that are not answered here, please ask them in the comments box below and I will update this post.

What is BMBE?

The Barangay Micro Business Enterprises Act of 2002, or RA 9178, is a law that (theoretically) allows businesses with assets worth less than 3 million pesos to be exempted from paying income tax.

Aside from a few other benefits, BMBE also exempts you from the minimum wage law.

Am I qualified?

If you are a sole proprietor or corporation with assets worth less than P3 million, you are probably qualified.

I am a sole proprietor. What assets are we talking about here?

If you are a sole proprietor, we're talking about your personal assets, since your business assets and personal assets are one and the same.

The only thing that is not included in the computation of assets is the value of the building and land on which your business is located.

I am registered as a professional. Do I qualify for BMBE?

According to my conversation with the BIR contact center officials, probably not.

I operate a branch/franchise. Can I apply for BMBE?

No. Only main offices can apply for BMBE.

How do I apply for BMBE status?

Please see my detailed post on that: http://nanaynotebook.blogspot.com/2013/01/the-bmbe-in-real-life.html.

And how much does it cost to apply?

P1,000 is the maximum application fee.

If I am approved as BMBE, does that mean I won't have to pay taxes anymore?

Well, first, BMBE applications are approved by the municipal hall, but tax exemptions are approved by the BIR.

Just because you are approved as a BMBE by the municipal/city hall does not necessarily mean you will be granted income tax exemption by the BIR. The DTI knows this situation, and apparently, it's not illegal for the BIR to do that.

Now even if the BIR does grant you income tax exemption, it only means you won't have to pay income tax anymore. You still have to pay the 3% monthly percentage tax.

Will I still need to issue official receipts (ORs) or sales invoices (SIs)?

Absolutely. By the way, make sure your ORs and SIs are printed by BIR-accredited printers. Click the link for the official list of BIR-accredited printers for 2014.

Do they sell ORs/SIs at the BIR?

There may be BIR employees that act as middlemen for these printers. It will save you money if you avoid middlemen and refer to the list instead and contact the printers yourself.

If I get income tax exemption, will I still need to file my ITR?

The last time I asked the BIR, they told me it was required to file, even if you have nothing to pay.

Note that if you are a BMBE, you won't have the option to compute your income tax using the optional standard deduction method (OSD). You'll have to itemize your expenses.

If you don't have an accountant, computing taxes through the itemized expense method can be a headache.

I've gone to my municipal/city hall to apply as BMBE, but nobody seems to know what it is or how to do it.

That always happens. Keep asking and go where they tell you to go. The employees usually want to help, they really just don't know or remember the process.

If you pester the people at the municipal/city hall long enough, somebody who remembers the process will overhear you or notice the hullaballoo, and you'll finally get the help you need.

What if the official I end up talking with really has no idea what the BMBE law is about?

When this happens to you (and it will), call DTI's Bureau of Micro, Small, and Medium Scale Enterprises Development (BSMED) office and let the BSMED official talk to the municipal/city hall official, government office to government office. That should work.

Here are BSMED's numbers: 751-0384 / 890-4968 / 897-7596 / 897-1693. Save those on your phone.

Any more bad news?

Why, yes! When you get your income tax exemption, many of your clients' accountants will not know how to handle your payments as a BMBE entity. They will still insist on withholding tax from you because that's the only way they know how to report the payments they give you as an expense.

To prepare for this scenario, make sure you also get a special certificate (cost: P50) that specifically states you are exempted from income tax and, therefore, from tax withheld at source. Here is mine; you can use it as your template (click to enlarge):

Also, in all my invoices, I add the following note:

This subcontractor is registered as a Barangay Micro-Business Enterprise (BMBE) sole proprietor under RA 9178. Income tax is not part of her registered tax activities, and her withholding tax rate is 0%. A copy of her certificate of exemption from tax withheld at source is available upon request. To report this payment as an expense through Form 1601-E, please mark item 13 in the form as YES and specify RA 9178.

With all these hassles, why again do I want to apply for BMBE?

Because the income tax rates in the Philippines are incredibly high, and if you can be exempted from paying them, you will save a lot of money.

Is there no other way I can save on taxes?

There is! If you are operating a very small business with an annual gross income not exceeding P100,000, you are exempted from paying the monthly percentage tax of 3%.

For more information, read Revenue Memorandum Circular No. 7-2014.

The Nanay Notebook is written by Blessie Adlaon, a work-at-home and homeschooling mom of four. Check out our About page to know more about this blog's author and our policies on advertising, press releases, and reposting.

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Professional or Sole Proprietor: What's the Difference?

If you're a freelancer registering your business to the Philippine Bureau of Internal Revenue (BIR) for the first time, one question invariably comes up: should I register as a professional or as a sole proprietor?

Even if your profession does not require a license, you can register as a professional. And even a licensed professional can register as a sole proprietor. Hence the confusion.

To find answers, I interviewed a few accountants whose job it is to handle people's taxes and registrations. Here's what I found:

Registration Process

Sole proprietor registration takes patience

To register as sole proprietor, you need to

• register your business name with the DTI,  
• get a barangay permit, 
• get a municipal permit, which may require fire safety inspection, sanitary inspection, and medical check-up. 

To secure a municipal permit, you may (depending on your municipality) be required to have

• a fire extinguisher, 
• business insurance, 
• the written permission of your neighbors, 
• etc. 

The plea that your "office" is just a laptop will fall on deaf ears. Government bureaucracy has little room for flexibility.

And, of course, you need to have a tax identification number (TIN).

To register as a professional, you don't need DTI registration. Municipal requirements, if any, are far less stringent than those for sole proprietors. But of course, you will still need a TIN.

Municipal Permit Fees

Sole proprietor's wallet after municipal permit renewal

Sole proprietors need to renew their barangay and municipal permit annually. Barangay permits cost around P500. Municipal permit is generally computed at 2% of your gross sales based on your issued official receipts. (If you earn P100,000 annually, you'll need to pay P2,000 at permit renewal time.)

On the other hand, professionals only need to pay for professional tax receipt (PTR), usually amounting to P500.

BIR-required Books

The BIR these days has a nagging distrust of professionals. So in addition to the three ledgers/journals that all self-employed individuals need to consistently fill out, professionals also have an appointment book they need to register with the BIR and keep updated.

Sole proprietors are not required to have this appointment book.

Reporting of Employee Wages

Professionals work alone. If you plan to take on employees or get freelance help, you should register as a sole proprietor so you can report their wages as part of your expenses.

Possibility of Income Tax Exemption

The lovely law you will never hear about in a BIR seminar

Sole proprietors with assets totaling less than P3 million have the option to apply for income tax exemption under the BMBE law, or RA 9178. (Click on the links to learn more about BMBE in Real Life and BMBE Certification.)

Professionals cannot apply as a BMBE.

If you are approved as a BMBE, you could save much more than the difference between your municipal fee renewal and a professional's PTR fees. Compare:

	BMBE  Sole Prop	Professional
Gross sales	P200,000.00	P200,000.00
Optional standard deduction	– 80,000.00	– 80,000.00
Net sales	120,000.00	120,000
Personal exemption	– 50,000.00	– 50,000.00
Total taxable income	70,000.00	70,000.00
Income tax due	0.00* *BMBE income tax rate	8,500.00* *standard income tax rate
Municipal fees	4,000.000 *2% of gross sales	500.00 *PTR fee
TOTAL ANNUAL FEE (income tax due + municipal fees)	P4,000.00	P9,000.00

Percentage Taxes, Annual Registration Fees, and Official Receipts

Whether you register as a sole proprietor or a professional, you will be required to 

• pay monthly percentage taxes, which is 3% of previous month's receipts;
• pay an annual registration fee of P500, due January 31; and
• issue official receipts printed by a BIR-accredited printer, not just any ordinary printing house.

Which option did I choose? 

I registered as a sole proprietor under the trade name Escrive Writing and Editing. Sole proprietorship works for me because I was approved as a BMBE. 

But if I weren't a BMBE, I would probably find a professional registration more advantageous, despite the additional book I would have to fill out.


   

The Nanay Notebook is written by Blessie Adlaon, a work-at-home and homeschooling mom of four. Check out our About page to know more about this blog's author and our policies on advertising, press releases, and reposting.

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New (!) BIR Rules for Filing Income Taxes for the Year 2013, Due April 15, 2014

(This image just felt so right.)

Oh, yes, the Bureau of Internal Revenue (BIR) powers-that-be have done it again.

On January 24, 2014, the Department of Finance and the BIR issued this Revenue Regulation 2-2014 that says income tax for 2013 must be filed using the new 2013 edition tax forms released just recently (because when I downloaded it in late January, it was still the 2011 version).

In other words, if you had tried to be a good citizen and filed your taxes early (like I did), then sorry, good citizen, you'll just have to do the effing paperwork and visit your RDO to file your taxes again!

(Yes, I am humungously pissed. Does it show? Good.)

Thank goodness BMBEs like me are exempted from income tax, and according to the Tax Code of the Philippines, Chapter IX, Sec. 51.A.2.d, "An individual who is exempt from income tax pursuant to the provisions of this Code and other laws, general or special" is not required to file his/her ITR.

So I guess I'll just skip filing an ITR this year.

But I wanted an ITR in case I apply for a loan. The ITR, after all, is the main reason why I registered in the first place. Oh well, here's hoping I won't need an ITR in 2014.

Anyway, I am not writing to rant (even though I already did that). For your guidance, fellow tax payers, here is the full text of the BIR's latest notorious new regulation -- one of so many in very recent years.

Oh, and my annotations in red.

- - - - -

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE
BUREAU OF INTERNAL REVENUE
REVENUE REGULATIONS No. 2-2014

January 24, 2014

SUBJECT : New Income Tax Forms
TO : All Revenue Officials, Employees, and Others Concerned

SECTION 1 - Objective.

These Revenue Regulations are issued to prescribe the new BIR forms that will be used for income tax returns (ITRs) filing covering and starting the taxable year ended December 31, 2013.

SECTION 2 - Scope.

Pursuant to Section 244, in relation to Sections 6(H), 51(A)(1) and 51(A)(2) of the National Internal Revenue Code of 1997 (Tax Code), as amended, these Regulations are issued to prescribe the use of revised income tax forms with bar codes, and to reflect the changes in information required from said forms. This will also enable the said forms to be read by an optical character reader (OCR) for ease in scanning.

SECTION 3 - Filing of New ITR Forms. (Click on the links to find the new downloadable BIR forms.)

All taxpayers required to file their ITRs under Section 51(A)(1) of the Tax Code and those not required to file under Section 51(A)(2) but who opted to do so, covering and starting taxable year ended December 31, 2013 shall use the applicable forms as follows:

1. BIR Form No. 1700 version June 2013 (Annual Income Tax Return for Individuals Earning Purely Compensation Income);
2. BIR Form No. 1701 version June 2013 (Annual Income Tax Return for Self-Employed Individuals, Estates and Trusts);
3. BIR Form No. 1702-RT version June 2013 (Annual Income Tax Return for Corporations, Partnerships and Other Non-Individual Taxpayers Subject Only to the REGULAR Income Tax Rate);
4. BIR Form No. 1702-EX version June 2013 (Annual Income Tax Return for Use Only by Corporations, Partnerships and Other Non-Individual Taxpayers EXEMPT Under the Tax Code, as amended, [Sec. 30 and those exempted in Sec. 27(C)] and Other Special Laws, with NO Other Taxable Income); and
5. BIR Form No. 1702-MX version June 2013 (Annual Income Tax Return for Corporations, Partnerships and Other Non-Individuals with Mixed Income Subject to Multiple Income Tax Rates or with Income Subject to Special/Preferential Rate)

SECTION 4 - Rounding Off to the Nearest Peso in the ITR.

The requirement for entering centavos in the ITR has been eliminated. If the amount of centavos is 49 or less, drop down the centavos (e.g., P 100.49 = P 100.00). If the amount is 50 centavos or more, round up to the next peso (e.g., P 100.50 = P101.00). (Note: In the new form, the spaces for centavos were simply omitted, so instead of writing "101.00," you would simply write "101.")

SECTION 5 - Mandatory Itemized Deductions.

A. Corporations, partnerships and other non-individuals are mandated to use the itemized deductions in the following cases:

1. Those exempt under the Tax Code, as amended [Section 30 and those exempted under Section 27(C)] and other special laws, with no other taxable income; 
2. Those with income subject to special/preferential tax rates; and 
3. Those with income subject to income tax rate under Section 27(A) and 28(A)(1) of the Tax Code, as amended, and also with income subject to special/preferential tax rates. Juridical entities whose taxable base is the gross revenue or receipts (e.g., non-resident foreign international carriers) are not entitled to the itemized deductions nor to the optional standard deduction (OSD) under Section 34(L) of the Tax Code, as amended.

B. Individual taxpayers who are not entitled to avail of the OSD and thus use only the itemized deduction method are as follows:

1. (BMBEs, take note!) Those exempt under the Tax Code, as amended, and other special laws with no other taxable income [e.g. Barangay Micro Business Enterprise (BMBE)]; 
2. Those with income subject to special/preferential tax rates; and 
3. Those with income subject to income tax rate under Section 24 of the Tax Code, as amended, and also with income subject to special/preferential tax rates.

SECTION 6 - Transitory Provisions. (Oh, here comes my favorite part.)

Taxpayers who filed using old forms for their 2013 ITRs (manual and/or electronic) must re-file using the new income tax forms upon their availability. (Re-file. Of course. We business owners really have nothing better to do. We're a non-busy lot, after all.)

SECTION 7 - Repealing Clause.

All existing regulations and other issuances or portions thereof which are inconsistent with the provisions of these Regulations are hereby repealed, amended, or modified accordingly. (Yes, supreme leader.)

SECTION 8 - Effectivity.

These Regulations shall take effect starting the taxable year ended December 31, 2013 and after fifteen (15) days following publication in two (2) newspapers of general circulation.

("Starting the taxable year ended December 13, 2013"? So you mean, like, January 2013? 

Wow. And to think, this was only signed in January 2014 and published on newspapers on February 6, 2014. Wowwwwww. 

Pardon my ignorance, but is this really how these regulations are supposed to work -- take effect now, sign and inform the public a year later?)

(Original Signed)
CESAR V. PURISIMA
Secretary of Finance

Recommending approval

(Original Signed)
KIM S. JACINTO-HENARES
Commissioner of Internal Revenue

Click on the link to download the original text of REVENUE REGULATIONS No. 2-2014.

The Nanay Notebook is written by Blessie Adlaon, a work-at-home and homeschooling mom of four. Check out our About page to know more about this blog's author and our policies on advertising, press releases, and reposting.

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A Salute to BIR RDO 045!

The BIR is probably one of the country's most maligned government agencies. Nobody loves the taxman.

But as quick as we are to complain, we should also be quick to give credit where credit is due.

In these past few days that I've been doing multiple transactions with the Bureau of Internal Revenue, I have been witness to the dedication and spirit of service of its people in RDO 045, so much so that I am compelled to write about them.

RDO 045 – I was amazed to see so much patience, kindness, and warmth in such a stress-filled place:

• the chief of the Collections department, Mr. Robert Caliuag;
• the security guards; 
• the ladies in TSS windows 2, 3, and 4; 
• the young men receiving ATP applications at Window 1; and
• the people signing documents and encoding reports at the second floor, especially the gentleman right beside the stairs and the ladies routing the documents to be signed.

They all extended kind help to a lost and confused taxpayer (me). If you know their names, please let me know so that they can be mentioned properly here.

But of special mention are two people in particular: revenue collection officer Elmer Torcuator and Taxpayers Service Section Chief Jose S. Flores.

Elmer Torcuator: Tapat sa Bureau

"Tapat sa Bureau" is my husband's favorite way of describing a person whose dedication to his job makes him go above and beyond the call of duty. Last June 10, 2013, I saw this kind of dedication in Mr. Elmer Torcuator.

He was in charge of receiving payments. I was at the line to pay for three certifications. Many were in line because it was the deadline for filing taxes withheld at source.

Anyway, I joined the payments queue at 4 p.m. I noticed that the line moved very slowly, so I went to the front to investigate.

It turns out that the new machines issued to the RDOs for making ORs were incredibly slow! It took around 5 minutes to generate one transaction, and most people in the line had more than one transaction to do. (Paging BIR head office: Palitan niyo naman po ang mga machine na ito!)

The BIR personnel did not stop people from falling in line, right up to 5 p.m. Walang cut-off. Needless to say, Mr. Torcuator had to stay beyond 5 p.m. to finish the line.

In case you did not know, government employees do not receive overtime pay, and there is no time-offset benefit either.

I completed my transaction five minutes before 7 p.m. There were around ten more people behind me, so it's safe to say that Mr. Torcuator was at work until at least 8 p.m.

Three hours of overtime work without pay would be enough to make many people cranky – but Mr. Torcuator was cheerful the whole time, chatting us up and keeping us entertained. It was a pain to be in line from 4 to 7 p.m., but this revenue collections officer made it all bearable. Thank you, Mr. Torcuator.

Jose Flores: The Gracious Chief

I was sent by the frontdesk ladies to see Mr. Flores because, apparently, he was in charge of processing requests for certifications.

I needed a certification because, as a registered BMBE, I am exempted from income tax. Since income tax is the basis of withholding tax, my income tax exemption naturally exempts me from withholding tax from my clients as well.

But the person in charge of my payments at [a certain publishing company] did not seem to understand that. So although I already showed her my Certificate of Registration which proved I was exempt from income tax, she still required me to get a certificate stating I was also exempt from tax withheld at source.

Mr. Flores granted my request for a certificate, but the certification he gave me was the standard certification stating I was exempt from Income Tax. Apparently, nobody ever asks for a certificate of exemption from withholding tax at source (probably because that is normally taken for granted when one is certified to be exempt from income tax).

When I saw that the certification only mentioned my exemption from income tax, I called the publishing company's accounting office to ask the abovementioned lady if this certification was sufficient to make her stop withholding taxes from my payments.

She said no. She needs to see the words "exempted from tax withheld at source."

Because I had already wasted so much time on her requirement, I found the courage to return to Mr. Flores with my phone and ask him to please do the explaining to the lady.

Now, mind you, Mr. Flores is a very busy man. His table was completely covered with applications for Authority to Print official receips/sales invoices. (Imagine how many businesses there are in RDO 045, and all of us need to have our receipts/invoices renewed by Aug. 30, thanks to Commissioner Henares' new OR/SI ruling, which we all heard about only in May because it was so inadequately publicized!)

But he graciously took my phone, talked to the lady, and tried to give her a quick review in basic accounting principles. And then, having failed to get through to her, he agreed to revise my certificate!

As he personally typed out the new certificate, he sighed a little and mentioned, "Dapat may iba na tayong natatapos na gawain kung hindi dahil dito." But he smiled and nodded at me, as if to assure me that he knew it was not my fault.

Finally, the certificate was finished and printed. It needlessly took up a busy man's time, but he was gracious and kind about it all the way. For that, I am extremely grateful. Thank you, Mr. Jose Flores.

Thank you, BIR RDO 045!

The Nanay Notebook is written by Blessie Adlaon, a work-at-home and homeschooling mom of four. Check out our About page to know more about this blog's author and our policies on advertising, press releases, and reposting.

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SSS Arrears and the Kasambahay Law: Frequently Asked Questions (FAQ)

After I posted my article on the SSS, Philhealth, HDMF and the Kasambahay Law, a few follow-up questions on the SSS were posted by some readers – and all of them are about arrears.

I'm posting the questions here, and the answers, based on what the SSS customer service hotline told me.

1. Our helper has been with us for several years already, but we are beginning to pay for his/her SSS contributions only this year. Will we need to pay for the past years?

Yes. If your househelp has been with you since 1990, you will have to pay contributions for all months starting from 1997 because the Social Security Act took effect in 1997. 

In addition, there is a 3% penalty per month of delay, as per Section 22 of the Social Security Act:

If any contribution is not paid to the SSS as herein prescribed, [the employer] shall pay besides the contribution a penalty thereon of three percent (3%) per month from the date the contribution falls due until paid. 

If your kasambahay has been with you for ten years on a P2,000 monthly salary, expect to be charged more than P60,000 total of contributions due plus penalties. (Ouch, I know!)

2. What figures will the computation of SSS contribution arrears be based on?

The computation will be based on the total contribution due, based on the kasambahay's salary.

Although the rule before the Kasambahay Law was that even those whose salary fell below P5,000 had to contribute an employee share, the SSS considers it your obligation, not theirs, to collect from your employee the employee share.

Therefore, their presumption is that you had collected that share in previous years and simply did not remit it to them.

3. Will I have to pay the entire sum in full all in one blow?

You may be able to arrange for payment in installments with your SSS branch office, but that, too, will be subject to additional interest.

4. After the contribution arrears have been paid, will my kasambahay be considered an active member for all the years paid? Will those years be included in the computation of the kasambahay's retirement pension?

Yes.

5. Ever since our kasambahay has been with us, we have been giving him/her money to pay SSS contributions. But recently, we discovered that our kasambahay has not been remitting those payments to SSS! What happens now? Will the SSS charge me for all those years that I inadvertently failed to pay for my kasambahay's contributions?

Unfortunately, yes. The SSS considers this an issue between you and your kasambahay. The SSS will have no part in it. As far as the SSS is concerned, you did not pay contributions, and they will base their computation of arrears on what they have on record.

6. Our kasambahay has been given a raise four times already since he/she began working with us. Which salary shall the SSS use to base its computation for my arrears?

You shall be asked to fill out a form on how much your kasambahay's wages had been in past years. This is a legal document, so you are expected to tell the truth.

DISCLAIMER: All information posted on this article are based on what I understood from my calls to the SSS hotline. I have made every effort to make it as accurate as possible, but I accept no responsibility for consequences that may befall you should any of the information here turn out to be wrong. Should you be aware of any inaccuracies in the information posted here, please inform me so that the erratum may be announced and the correction made. Thanks!

The Nanay Notebook is written by Blessie Adlaon, a work-at-home and homeschooling mom of four. Check out our About page to know more about this blog's author and our policies on advertising, press releases, and reposting.

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The SSS Household Employer Under the Kasambahay Law: Register, Pay, Report [Updated July 31, 2014]

UPDATE: On December 2013, the government launched the 3-in-1 kasambahay registration system for SSS, Philhealth, and HDMF. This change affects the forms you need to submit in steps 1 and 2 of this guide. The contribution and contribution reporting process (steps 3 and 4) remain the same, as far as we know. Please click on the link to download and learn how to use the Kasambahay and Household Employer Unified Registration Form.

If your kasambahay has never been an SSS member, then you need to register as household employer so that your kasambahay can get an SSS number. (If your kasambahay has been an active member before being employed with you, he/she can simply continue as a volunteer member. Click here for details.)

Here are the things you need to know in registering, paying, and reporting your kasambahay's SSS contributions, as an SSS household employer.

1. To register yourself as an employer, get the forms R-1, R-1A, and L-501 from an SSS office, or download them from the SSS portal, then fill them out and submit to the SSS office nearest you.

2. To register your kasambahay, get the form E-1 and ask your kasambahay to fill it out. You will need to submit this to the SSS, along with the original copy (for presentation) and photocopy (for submission) of supporting documents.

You will find all required supporting documents at the back or bottom of the forms.

Also, bring a USB where you can upload the installer for the SSS R3 generator. The SSS requires employers to encode your contribution reports using this software, and they will not receive your forms if you do not submit a soft copy along with the printouts.

Important reminder: In the form R-1A, you will be asked for your kasambahay's date of employment. The SSS will require you to pay your kasambahay's contributions starting from the date of employment. Therefore, if you have receipts of payment in previous years, bring your receipts with you so you do not get charged a second time. It is also good to bring your kasambahay with you, in case the SSS wants to interview him/her, to make sure that the payments have been made in the past years.

3. Start paying your kasambahay's SSS contributions. Do so before the 10th of the following month. For your convenience, it is better to pay through SM Payment Centers, Bayad Centers, or SSS accredited banks, such as Chinabank, Metrobank, and BPI.

How much should you pay? Please refer to the 7th, 8th, and 9th columns in the table below (click the image to enlarge).

Note that if your kasambahay is earning less than five thousand pesos per month, you are required to shoulder 100% of the contribution. If your kasambahay is earning five thousand pesos or more, the contributions are divided, as indicated on the table (click image to enlarge):

4. Report your contributions quarterly. After you have paid your employees' premiums, you need to submit a summary of your employees’ contributions using forms R-3, R-5, and a copy of the bank's receipts within 10 days after the applicable quarter. 

You can submit your R3 form online by logging on to https://www.sss.gov.ph/sss/register.jsp, and choosing Employer, then Household.

Reader's question: What if our kasambahay has been employed with us since the year 2000 but we only began paying contributions this year? Click on the link to see the answer: SSS Arrears and the Kasambahay Law.

The Nanay Notebook is written by Blessie Adlaon, a work-at-home and homeschooling mom of four. Check out our About page to know more about this blog's author and our policies on advertising, press releases, and reposting.

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SSS, HDMF, Philhealth, and the Kasambahay Law [UPDATED July 20, 2014]

By this time, all of us must have heard about the Kasambahay Law. We know that under the law, we are required to pay for our household worker's SSS, HDMF (PAG-IBIG), and Philhealth benefits.

How do you go about it, and what do you need to know?

SSS

If your kasambahay has been an SSS member in the past, you can fulfill the Kasambahay Law by simply registering your kasambahay as voluntary member and shouldering your legal share of the SSS payments. You do not need to register as employer. 

I got the above information from a supervisor at the Department of Labor and Employment (DOLE) contact center. (The agent passed the phone to her when she found out I was writing all these in my blog.)

If you are using this method of SSS payments for your kasambahay, the DOLE advises that you clearly indicate in the contract that although your kasambahay is registered as voluntary member, you are shouldering your legal share of the payments as employer. And make sure to keep your own copy of all receipts.

To change your kasambahay's membership status to Voluntary, simply make payments in his/her behalf using his/her SSS number, using the SSS Form RS-5. According to the SSS website, "Posting of said payment will change the membership status from covered employee, self-employed, OFW or non-working spouse to a voluntary paying member." 

If your kasambahay has never been an SSS member, then he/she cannot begin as a voluntary member (SSS rules forbid that; don't ask me why) and you, alas, will need to register as employer. I have a separate article on that. Click the link to read The SSS Household Employer Under the Kasambahay Law: Register, Pay, Report.

Now you can start paying your kasambahay's SSS contributions. Do so before the 10th of the following month. For your convenience, it is better to pay through SM Payment Centers, Bayad Centers, or SSS accredited banks, such as Chinabank, Metrobank, and BPI.

How much should you pay? See the table below (click to enlarge). If your kasambahay is registered as a voluntary member, then the required contribution is found on the last column (SE/VM/OFW).

Note that if your kasambahay is earning less than five thousand pesos per month, you are required to shoulder 100% of the contribution. If your kasambahay is earning five thousand pesos or more, the contributions are divided, as indicated on the table:

QUESTION: What if our kasambahay has been with us since the year 2000 but we only began paying contributions this year? Click on the link to see the answer: SSS Arrears and the Kasambahay Law.

Philhealth

According to the DOLE, you can register your kasambahay as Individually Paying Member (IPM). Do this by filling out the Philhealth Member Registration Form and submitting it, along with supporting documents, to the nearest Philhealth office. To find the Philhealth office nearest you, call the Philhealth contact center at (02) 441-7442.

As IPM, your kasambahay is required to pay P600 quarterly or P2,400 per year. As employer, you are required to shoulder this in full if your kasambahay is earning less than P5,000. If your kasambahay is earning  P5,000 or more, you shoulder half of the payments while your kasambahay shoulders the other half.

Now if you want to register as employer rather than register your kasambahay as an IPM, I've written a separate article on that. Please click the link to read The Philhealth Household Employer Under the Kasambahay Law: Register, Pay, Report.

Where to pay: Click on the link to find a list of Philhealth accredited collecting partners.

PAG-IBIG/HDMF UPDATED! (June 11, 2013)

For HDMF, you don't have to will be advised to register as employer, contrary to what their hotline agent told me earlier this month. I found this out because I went to the HDMF office today to register our househelp, and lo and behold, they told me to register as employer!

To see the steps on how to register as employer, click on the link.

On the other hand, I have just been on the phone with the Marketing Department of the HDMF main office in Cubao. Although they still advise that we register as employer, they admitted that there is no real sanction if your kasambahay is registered as individual payor, as long as you shoulder your legal share of his/her payments and have proof of doing so.

Whether or not you are registering as employer, you should register your kasambahay as member online. Click on the link to reach their online registration portal.

After your online registration, print out the Member Data Form that will be generated. Submit that form to the nearest HDMF office, along with

1. proof of income, which is basically a statement from you saying that Mr./Ms. So-and-so has been working with you since (the date of first employment) and is earning (amount) per month, and 
2. two of your kasambahay's valid IDs.

What valid IDs can you use for PAG-IBIG application if you do not have a birth certificate?

• Voter's ID (you don't need a birth certificate to get this; just fill out the form)
• Postal ID (you don't need a birth certificate to get this either)
• Philhealth ID (you can get Philhealth ID using these documents: http://www.philhealth.gov.ph/downloads/membership/pmrf.pdf)
• SSS ID (you can get an SSS ID using these documents: https://www.sss.gov.ph/sss/uploaded_images/forms/normal/e1.pdf)

Then, you can remit payments at the nearest PAG-IBIG office. Unfortunately, banks only accept loan repayments, not member contributions.

The PAG-IBIG website also says we can now pay monthly contributions through Gcash. However, there has been issues with the posting of payments this way, and there is currently no way that I have found of verifying posting of contributions via online.

On the other hand, you will receive a confirmation from Globe that your payment has been processed, so if you keep records of these verifications, you should be able to update your posted contributions using such records.

How much to pay? PAG-IBIG contributions are 4% of the kasambahay's salary, with maximum salary set at P5,000.

So if your kasambahay is earning, say, P4,000 per month, you pay the entire 4%, or P160, every month.

If your kasambahay's salary is P5,000 or more, you need to pay P200, but you can split this amount 50-50 between you and your kasambahay, so you only pay P100 each.

More Info

DOLE's FAQ: If you have more questions about the Kasambahay Law, like "Is our live-out yaya considered a kasambahay?" or "Am I required to provide my kasambahay with shampoo and soap, etc.?" then check out this FAQ published by the DOLE: Q&A on Batas Kasambahay.

For an easy-to-understand document on the Batas Kasambahay, here's GMA's Batas Kasambahay infographic.

Sample contract that you can use for your kasambahay: check out Smart Parenting's sample kasambahay contract. (Look at the bottom of the Smart Parenting page for the contract links.)

The Nanay Notebook is written by Blessie Adlaon, a work-at-home and homeschooling mom of four. Check out our About page to know more about this blog's author and our policies on advertising, press releases, and reposting.

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BMBE Certified!

I am stoked! Today, I received my new Certificate of Registration (COR) from the Bureau of Internal Revenue (BIR), and in that new certificate, the registered activity Income Tax (IT) has been canceled.

In other words, I am now exempted from paying income tax on my business! Why? Because I have been certified by my municipality as a Barangay Micro-Business Enterprise (BMBE)!

To learn more about the BMBE law, click here.

Here's my new COR (I added the red oval for highlight):

Click image to enlarge

But here's what I'm so pleased about: I received this revised certificate on the very same day that I submitted the documentary requirements to the BIR -- the very same day! In fact, I am not just pleased; I am shocked. I was expecting my BMBE application at the BIR to be difficult, especially after all the trouble I had trying to get my BMBE certificate at the municipal hall.

At the municipal hall

I had a hard time applying for BMBE at the municipal hall because nobody there seemed to remember what the BMBE law was and the process for applying for the certification. (Read the full story here.)

When the municipal hall staff finally remembered the procedure for BMBE application, they gave me this application form, that I needed to fill out in triplicate:

Right-click and click on Save Link As to get a printable copy of this form.

After I filled out the form and attached the passport-sized ID picture, I paid a P1,000 application fee, then submitted the form and my newly renewed municipal permit to the Business Process Licensing Office (BPLO). There they looked at the form and the municipal permit, then they printed out my BMBE certificate on the spot!

Click on image to enlarge

At BIR RDO 045

Because I did not want to go out of the house to file my BMBE certificate with my BIR RDO, I asked my mom to do it for me. I gave her 

1. an authorization letter,
2. my BMBE certificate from the municipal hall,
3. my municipal permit for 2013,
4. my old COR for replacement/revision,
5. and some money, in case she needs to pay for anything.

When she came home, I was all nerves. My first question was, "Was there any problem?"

She looked puzzled. "What problem were you expecting?" Oh, I don't know. I've found that government offices can be full of surprises. But the biggest surprise is no surprise, like now! I love you, RDO 045!

My mom then handed me my revised COR with a receipt for P100 stapled to it. I don't know exactly what the P100 was for. Right now, I don't care. I am exempted from income tax for two years! (Then, I will have to go through the process again to renew my application.) I still have to pay my monthly percentage tax, though. Do I need to file anything quarterly? I still don't know. I'll update this post when I find out.

UPDATE: I only needed to file quarterly income tax for the first quarter of 2013, for the period before my COR was revised. First quarter income after the approval of my new COR was not included in the computation. I didn't need to file anything anymore for the second quarter and all quarters after that, as per the BIR contact center, because as the 1701 and 1701-Q form says, we shouldn't file income tax if we have zero income tax payments due.

Now I am sending a copy of my revised COR to all my clients so that they can stop withholding taxes from the payments they send me. (Since withholding taxes are merely an advance on income taxes, if you are exempted from income tax, then you are also exempted from withholding tax. Reference: TaxAcctgCenter.org.)

Come April 2014, I won't have to file a form 1701 (Annual Income Tax Return for Self-Employed, Professionals, Estates, and Trusts ) anymore. Instead, I'll be filing an Account Information Form (1701-AIF) only. Whoopee!

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The Barangay Micro Business Enterprises (BMBE) Act of 2002, in Real Life

This year, I have made up my mind to get BMBE certification for my article writing company, Escrive Writing and Editing.

What is the BMBE? It stands for the Barangay Micro Business Enterprises Act of 2002. It's a law that (theoretically) allows businesses with assets worth less than 3 million pesos to be exempted from paying income tax.

Sounds too good to be true? Ha ha, you got that right. As usual, the law looks much better on paper than it does in real life. Read on to see what I mean.

Applying for the BMBE

First things first: what do you need to submit when you apply for BMBE certification?

If your business has less than P300,000 worth of assets, then all you need are

• the BMBE application form accomplished in triplicate, 
• three passport size pictures to attach to the application form, 
• your municipal business permit, and 
• your Department of Trade and Industry (DTI) business name registration.

That's all, if you're a sole proprietor.

If you're a corporation, partnership, or cooperative, you also need your Securities and Exchange Commission (SEC) registration. If you're a cooperative, you also need your Cooperative Development Authority (CDA) registration.

Now if your business has more than P300,000 (but less than P3 million) worth of assets, then you also need  to prepare

• your business' certificate of registration (COR) with the Bureau of Internal Revenue (BIR)
• a sworn affidavit executed by the sole proprietor or the President of the enterprise that the enterprise is barangay-based and micro-business in nature and scope;
• a sworn Statement of Assets and Liabilities supported by pertinent documents;
• pictures of the place of business and its assets, other than cash, receivables and intangibles;
• a copy of Loan Contract/s, if any, and duly-notarized Certification of Amortization Payments on the Loan; and 
• Income Tax Return (ITR).

Oh, and no matter how much your assets are worth, you need to pay a P1,000 application fee.

At the municipal hall

So, armed with your requirements, you troop to the municipal hall's Office of the Treasurer (OT) to apply for your BMBE certification. You ask for the person in charge of BMBE.

When I got to the OT, the person I spoke to at the window did not know what BMBE was. I wrote it down for her. "Oh, microbusiness," she said. "You need to go to the BPLO (Business Permits and Licensing Office) for that."

I insisted that the DTI website said I should go to the OT. But she told me to ask the BPLO about it first, and if they send me back to the OT, then she will look for somebody who can help me.

So I went to the BPLO, and of course, they sent me back to the OT. This time, the lady at the OT went into the inner recesses of the office and came back armed with the name of the person I should consult -- at the BPLO.

So I went back to the BPLO looking for "Tiya A---," who turned out to be the head of the BPLO. She wanted very much to help, but she looked as if it was the first time she had heard of the BMBE law, even if the law had been passed in 2002.

I asked Tiya A--- if her computer was connected to the Internet. She graciously let me use it. With Google's help, I found this Guide to RA 9178. She read the page and then said in Filipino, "Oh, yes, that is under the treasurer's office." My heart sank.

Fortunately, one of the BPLO staff overheard us and said to me, "BMBE, ma'am? I have the application form here in my computer. I could print it out for you." And he proceeded to do just that. Then he added, "You should submit that to Ate L---, at the treasurer's office."

What the DTI Says

So the application form was submitted. At that point, I realized that, yes, there is a process for BMBE application at the municipal hall, but since very few people actually apply for it, very few of the staff remember what the process is.

Anyway, while waiting for my certification to be released (it takes about 15 days, the BMBE guide said), I did a little research on how the BMBE is being used in real life.

One thing I noticed is that very few people have blogged about their actual experiences with the BMBE. It's almost as if nobody has ever used it.

So to get a better picture of how BMBE is like on the ground, I called the DTI's Bureau of Micro-, Small-, and Medium-Scale Enterprises Development (751-0384 / 890-4968 / 897-7596 / 897-1693).

There, I found out the sad truth: Very few people benefit from the BMBE law because, even if you get certification from your municipality, there is no guarantee that the BIR will allow you to get income tax exemption. Apparently, the law had been so abused that the BIR is now quite wary as to whom to give the special privilege to.

Of course, there is also the fact that every BIR regional district office has a quota to meet, and the more people you exempt from taxes, the harder it gets to meet your quota.

It was depressing to hear the BMBE advisor tell me these. "So do you mean to say it is futile for me to apply for BMBE?" I asked her.

"No," she clarified. "You should still try. After all, some of the applicants do get income tax exemption."

Well, she has a point. What do I have to lose but, perhaps, a day and the P1,000 application fee?

So I'll be going for it. Will I get income tax exemption? As soon as I find out, I will update this post. Wish me luck!

UPDATE: I got my BMBE certificate and was approved by the BIR for income tax exemption! Read the full story here: BMBE Certified!

Want to know more about the BMBE law? Click here to download the DTI's layman's guide. Or leave your question in the comments below.

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FREE DOWNLOAD: The Philippine K-12 Curriculum

This year, the Philippines finally took the big step and implemented the K-12 curriculum. It's true, we are ill-prepared for it, but in my humble opinion, this step is something like childbirth: No matter how much you prepare for it, you are often still caught flat-footed when the time comes -- but it's an inevitable step you need to take before you can get on with the extremely rewarding business of raising a child.

In any case, I know you're here not to hear about how much I love the K-12 curriculum and why. You want the curriculum download. So here it is. Please right-click on the links below and click "Save link as" to save the files on your computer:

Full K-12 curriculum (21.2 MB)
English and Mother Tongue (2.5 MB)
Filipino, Health, ESP (2.2 MB)
Filipino, Grades 1-10 (2.84 MB)
Araling Panlipunan (576 KB)
Mathematics (1.3 MB)
Science (10.6 MB)
Kindergarten (1.2 MB)

(Files uploaded June 18, 2012)

UPDATE: NEW English K-12 curriculum (uploaded April 17, 2013)

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Philhealth FAQ

Short news: Last Tuesday, my husband Neil suffered a cardiac episode, so we had to rush him to the National Kidney Transplant Institute – which, by the way, is currently the cheapest good-quality government hospital in Quezon City.

(Special thanks to Neil's excellent cardiologist, Dr. Joseph Michael Jaro, who obviously knows very well what he's doing. I would recommend him to anybody. Doc, you rock!)

It was a mere case of supraventricular tachycardia (SVT, i.e., too-fast heartrate and too-low blood pressure) so we were home the very next day.

But during that incident, I learned a few things about Philhealth that I would like to share with you today.

Question: If I have been a Philhealth member for only one month, can I use it if I get hospitalized today?

No. Alas, although I had been a Philhealth member for years, I had neglected paying my dues since I started doing freelance work. I had only been able to start paying again last month, in August, so I was not able to get Philhealth benefits for my husband, who shares my Philhealth insurance.

In order for one to get Philhealth benefits, one needs to have made at least three payments in a span of six months. Since Neil got hospitalized in September, I could have gotten Philhealth benefits if, say

• we had paid in June, July, and August; or
• March, April, May; or even
• March, May, August.

Question: Can I pay in advance?

Yes. In fact, just to be sure I never get into the same predicament again, I have already paid my dues until December. In January of 2012, I will probably pay for the whole year. (You can pay for a maximum of one year advance only. I've heard that Philhealth does not accept payment for more than 12 months advance.)

Retroactive payments are not allowed.

Question: Does my spouse still need to get his own Philhealth account, if he/she is already my dependent?

No – and yes. 

For immediate purposes, your spouse does not need a Philhealth account if he/she is listed as your dependent. You spouse will get Philhealth benefits under your account.

However, the question is, what happens if you die – or retire?

Once a Philhealth member retires at 60, he or she qualifies as a non-paying member – but only if he/she has already made at least 120 Philhealth payments. That's approximately 10 years of monthly dues.

If I retire and my spouse hasn't got those 120 Philhealth payments in his name, then I will have Philhealth benefits in my old age, when I need them most, but he won't.

There is also the question of "What if the Philhealth member dies?" Then the member's dependents will be left high and dry. You do not want that to happen to your loved ones, especially if the cost is only P100 per month.

UPDATE 1: As of June 2013, the required Philhealth contribution has been increased to P150 per month for individually paying members and P175 per month for employed members, total of employer and employee contribution.

UPDATE 2: I just found out that if you had been a member of Medicare, the government insurance program before Philhealth existed, your contributions in Medicare will be counted as part of the 120 Philhealth contributions required for you to qualify for free lifetime membership after retirement.

More questions?

I hope this post has answered some of your Philhealth questions. For more questions (or to verify what I have written here), you may call their customer service hotline at (02) 441-7442.

You can also ask some of your questions in this blog. Perhaps some of the readers – or maybe even I – can answer them.

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FREE Downloadable Printable Award-Winning (and Perfectly Legal) Children's Books!

I'm supposed to be working to make up for yesterday's lost work day, as I had to play nurse to hubby who had an attack of supraventricular tachycardia (in layman's terms: super-fast heartbeat, super-low blood pressure, very dangerous. It sent him to the ICU in 2009.)

But just as I was about to start working, my friend Rich (pilya, maganda, at may magic powers) sent me this excellent link: http://canvas.ph/downloads.htm.

Mommies (and daddies), if you haven't clicked on the link yet, do so now. It will lead you to this excellent site where you can download wonderful, downloadable, printable, and absolutely free children's books written by Filipino writers. (Tarie, are you reading this?)

What's more, the downloading and printing out are perfectly legal, authorized by the publishers themselves, God bless them!

Of course, once you've read these wonderful, award-winning stories to your kids, you might want to buy the hardback versions. They are available in Fully Booked, the Ayala Museum and at 1/of Gallery in Serendra.

Let's support Philippine literature and early literacy! And cheers to free books!

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Free Download: The Conscious Partnering Conference 2011

On May 23 to 27, there will be a FREE Conscious Partnering Conference, which will teach us all how we can create amazing relationships in all areas of our lives.

Whether you are managing your own employees in your own business, managing your boss and colleagues at your place of employment, trying to maintain an intimate relationship, or raising kids and a husband (or wife), these talks can help you.

For me, the best part about it is that registration is free! What's more, if we can't make time to join the live call, we can download the recordings afterward.

I've registered five minutes ago. If you wish to register too, you can go to http://consciouspartnering.net/.

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Free Download: The Philippine DepEd Curriculum for Second Year High School

Here's the next installment of the Department of Education's high school curriculum:  second year (sophomore) subjects:

English II
Mathematics II
Science II
Filipino II
Araling Panlipunan II
Music and Arts II
Physical Education II
Edukasyon sa Pagpapahalaga II

I don't have the curricula for the third year and fourth year subjects yet. Will post when I find them.

DOWNLOAD TROUBLE? We've been receiving reports that Docstoc has been requiring payments. If this happens to you, you can also download the zipped files for free HERE.

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Free Download: The Philippine DepEd Curriculum for First Year High School

Here's the new high school curriculum that the Department of Education will be using in 2011. If I am not mistaken, it is based on the Understanding by Design (UbD) curriculum framework -- a rather difficult framework, resulting in a rather complex curriculum design.

So far, I have the curricula for year 1 and year 2 subjects.

Click here to download the Philippine freshman curriculum for the following subjects:

English I
Mathematics I
Science I
Filipino I
Araling Panlipunan I
Music and Arts I
Physical Education I
Edukasyon sa Pagpapahalaga I

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Free Professional-Looking Blogger Templates

Have you ever wondered about those blogs that look like they were designed professionally? I have.

I mean, for a personal blog like the Nanay Notebook, I felt a regular template such as the one I use now is fine, but for a business blog like Escrive.com, I needed something that looked much nicer.

Well, I've finally found a place to get all those nice free Blogger templates: http://btemplates.com/!

There were so many templates to choose from, and the best part: they're all free!

How to change your template?

1. Just download the template you want, unzip the ZIP file, find the XML file within.

2. Go to your Blogger Design tab, click Edit HTML, and before you do anything else, if you have a previous template, click on Download Full Template in case you ever change your mind and want to revert to it.

3. Now to upload your new template, click on Browse, find your new template's folder, then click the XML file within. The in the same Blogger page, click Upload.

4. Preview and, if you like what you see, click Save Template.

Now go get your own professional-looking blog site!

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FREE E-book Download: How to Make Money from Your Blog

For all my readers who've been asking me how one can make money from one's blog, here's an e-book that will answer your questions much better than I can: Six Figure Affiliate Blogging by Zac Johnson.

To download it, just go to www.BloggingTips.com. A pop-up will show that will offer you a free download of the e-book. You just need to leave your name and e-mail and subscribe to the blog.

I've read it and it's chockful of useful information. I must tell you, though, that if you follow it, you'll need to do a LOT of work on your blog. If you don't have a lot of free time, you'll have to do it little by little, as I intend to do. The important thing is to start.

So what are you still here for? Go download, and happy reading.

Disclosure: This site and author are receiving no compensation or rewards for promoting this e-book. We are not affiliated with BloggingTips.com.

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Free Download: The Philippine Basic Education Curriculum for Elementary School Students

School has started for the rest of the Philippines, and while my kids and I had begun informally homeschooling last April, we weren't following a specific curriculum yet.

Well, Teacher Mommy has finally realized that while teaching spontaneously is fun, a lesson plan and a curriculum are invaluable when it comes to pacing and directing your lessons.

So I downloaded the Philippine Basic Education curriculum today for all elementary subjects. This is the curriculum used by the Department of Education. We'll be following it in our household, and I'll be supplementing it as necessary.

If any of you homeschooling moms are interested in using these curricula as well, you can download the zipped files for free HERE.
 

Looking for the NEW K-12 curriculum? Click on the link to go to our K-12 curriculum download page.

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