In the Philippines, sari-sari store owners are classified by the BIR as marginal income earners (MIE). They are self-employed business owners whose annual total gross sales or receipts do not exceed PHP100,000.
MIEs typically follow minimal registration and tax compliance requirements, wherein registration with the BIR only necessitates the applicant to fill out Form 1901 along with only two other documents, unlike other types of business owners who have to deal with numerous paperwork, requirements, and procedures.
Are you planning to set up your own sari-sari store soon? Here’s what you need to know about being a proprietor of a business that belong in the MIE category.
Starting a Sari-Sari Store: 10 Thing You Need to Know
1. The Activities of MIEs Are Principally for Subsistence or Livelihood
Other types of occupations that MIEs belong to include farmers, fishermen, agricultural growers or producers selling directly to consumers, small carinderia owners or proprietors, tricycle drivers or operators of such single unit tricycles and the like.
Those whose income is subjected to withholding tax are not MIEs. Licensed professionals, artists, consultants, brokers, and others whose income is subjected to withholding tax do not belong to the MIE category.
2. MIEs are exempted from the payment of the Annual Registration Fee (ARF)
This exemption is one of the perks of being an MIE, unlike other business entities such as Corporations or Partnerships when it comes time to apply for a business permit renewal at the start of the year.
3. MIEs Are Also Exempted from Paying Business Taxes
This includes exemptions from having to pay value added tax (VAT) or any Percentage Taxes.
4. MIEs Are Subject to Income Tax
MIEs are different from minimum wage earners in this regard because the latter are exempted from having to pay income tax.
5. Registration of Books of Accounts Is Required
MIEs must register and maintain Books of Accounts, where a two-column journal or other simplified books of daily expense and revenues is regularly recorded. These can be easily purchased at bookstores or shops.
6. Issuing Sales Invoice Is a Requirement
MIEs are required to issue registered principal receipts or sales invoices. This is stated under BIR Revenue Memorandum Order (RMO) 12-2013.
7. Filing of Annual Income Tax Return Must Be Fulfilled on a Yearly Basis
Filing and parents of annual income tax return require the MIE owners to fill out BIR Form 1701, just like any other self-employed individuals.
8. Earnings of MIEs Must Not Exceed PHP100,000
MIEs are those whose businesses have earnings, gross sales, or receipts that do not exceed PHP100,000 within a 12-month period. This is less than employees’ earning minimum wage, and the amount of PHP100,000 is gross of the cost of sales or services.
9. An MIE Does Not Earn Compensation as an Employee
A salaried worker or an individual earning compensation as an employee does not fall under the MIE classification.
10. Registration of a Business as an MIE Is Less Cumbersome Than Other Classification Types
These are the requirements for registration: Filled out BIR Form 1901, along with two documents: the Sworn Statement of Income for the Year (Annex “A”) and an NSO Certified Birth Certificate.
Some contend that even though MIEs enjoy certain tax privileges and exemptions, it is inconvenient for those belonging in this category to maintain and register books of accounts on a regular basis.
Considering that these types of business owners earn no more than PHP100,000, it seems to be an additional burden to comply with this tax obligation. Nevertheless, it is the current law, and citizens must abide by it until it is hopefully revised to reflect current realities.
Need help in renewing your business permit this coming January 2016? Sign Up to Full Suite’s Business Renewal Services for 2016 or Call us at 746 0121