BIR Tax Exemption for Small Business in the Philippines – Step-by-Step Guide

Every peso counts for small businesses in the Philippines. One legal method to cut costs and stay fully compliant is by applying for a Bureau of Internal Revenue (BIR) Certificate of Tax Exemption (CTE).

A CTE is a legal document issued by the BIR. It simply confirms you or your organization is exempt from specific taxes. This helps lower expenses, builds trust with donors and partners, and simplifies government transactions.

A Certificate of Tax Exemption is usually valid for three years. Some groups, like non-stock, non-profit schools, don’t need to renew. Their CTE stays valid unless the BIR cancels it¹.

This guide explains who qualifies for a BIR tax exemption for small business in the Philippines along with the documents required and the steps to apply. It also highlights how Wise Business can make paying government fees and managing cross-border finances easier, so small businesses can focus on sustainable growth.

Table of contents
Who can apply for a BIR certificate of tax exemption? Step-by-step guide to applying for a BIR CTE Required documents for specific applicant types Essential role of BIR tax exemption for small business in the Philippines Challenges when applying for small business tax exemption

Who can apply for a BIR certificate of tax exemption?

The type and structure of your business or organization determine your eligibility. A BIR tax exemption for small business in the Philippines is generally available to the following groups:

• Individuals with minimal or no income: If you earn 250,000 PHP or less each year, you don’t need to pay income tax. That’s automatic under the law². But if you need proof for a scholarship or livelihood program, you can get a Certificate of Exemption from your local BIR office.
• Barangay Micro Business Enterprises (BMBEs): BMBEs are small businesses with total assets of 3,000,000 PHP or less. When registered under the BMBE Act, they don’t pay income tax on income from their operations³.
• Non-stock, non-profit educational institutions: Schools and similar organizations that reinvest all earnings to support their educational mission.
• Non-stock, non-profit organizations under Section 30 of the Tax Code: Charitable, religious, and civic groups that operate without a profit motive.
• Cooperatives: Entities registered with the Cooperative Development Authority (CDA), especially those focused on serving their members.

Satisfying the legal requirements isn’t enough. You must apply for and receive a CTE before you can officially claim your tax-exempt status.

---

Step-by-step guide to applying for a BIR CTE

Step 1: Determine eligibility

Check if you or your organization qualifies for a small business tax exemption in the Philippines.

Being registered with the SEC or CDA doesn’t make you tax-exempt. You still need to apply to the BIR for a CTE to confirm your status⁴.

Step 2: Prepare the required documents

Prepare your documents early to prevent delays. The documents vary by your classification, such as individual, cooperative, or non-profit. These may include:

• a proof of income or affidavits for individuals
• articles of incorporation and bylaws for corporations
• certificates from agencies like the CDA or SEC

Applicants often face rejection because of missing or incomplete documents.

Step 3: Pay fees

Most applications require:

• 100 PHP certification fee
• 30 PHP documentary stamp tax

Keep all receipts to submit with your application.

Step 4: File your application at your BIR Revenue District Office (RDO)

Visit the RDO where your business or organization is registered.

Bring both original documents and certified true copies for verification.

Step 5: Wait for review

The BIR will evaluate your application.

Processing times vary. Simple applications may be approved quickly, while complicated cases, such as non-profits, might take longer.

Step 6: Receive your certificate

Once approved, you will receive your Certificate of Tax Exemption.

Keep it in a secure place — it will be needed for government and financial transactions.

Step 7: Maintain and renew

Most CTEs last three years. Renew on time to keep your tax-exempt status⁵.

---

Required documents for specific applicant types

When applying for a BIR tax exemption for small business in the Philippines, the documents you need will depend on your classification. Here are the most common requirements for each type of applicant:

For individuals applying for scholarship or livelihood programs:

• Barangay-issued Certificate of Low Income/No Income, signed by the Barangay Chairman
• Notarized affidavit confirming low or no income
• Proof of payment for the 100 PHP certification fee and 30 PHP documentary stamp tax

For cooperatives:

• Certified true copies of the Articles of Cooperation and Bylaws from the CDA
• A certified true copy of the current Certificate of Good Standing issued by the CDA
• A certified true copy of the cooperative’s BIR Certificate of Registration (Form 2303)

For non-stock, non-profit educational institutions:

• Application letter for a tax exemption ruling
• Certified true copies of financial statements for the past three years
• Certified true copy of a government recognition, permit, or accreditation from agencies such as CHED, DepEd, or TESDA

For other non-stock, non-profit corporations:

• Application letter citing the relevant Section 30 paragraph of the Tax Code
• Certified true copy of the latest Articles of Incorporation and Bylaws from the SEC
• Certification under oath by an executive officer, detailing the organization’s activities and income sources

Requirements may change. Check the latest BIR memorandums or contact your local RDO to confirm the most up-to-date checklist.

---

Essential role of BIR tax exemption for small business in the Philippines

Confirms your tax-exempt status

• A BIR tax exemption for small business in the Philippines is official proof of tax-exempt status.
• A CTE shows you don’t need to pay income tax on money linked to your exempt purpose. But other taxes, like VAT or percentage tax, might still apply. You also need to withhold taxes when required⁶.
• This confirmation is vital for compliance. It also gives business owners peace of mind, knowing their tax status is clear and legally recognized.

Builds trust with donors and partners

• Many international donors and local partners require verified proof of tax-exempt status before they engage with an organization.
• For nonprofits, having a CTE strengthens credibility. It can also make government transactions and bidding processes smoother and more efficient.

Protects against future tax issues

• During a BIR review or compliance check, a valid CTE serves as legal proof of your tax-exempt status. This prevents disputes and penalties while clarifying your obligations.
• It also supports smooth operations for small businesses with tax exemptions in the Philippines.

---

Challenges when applying for small business tax exemption in the Philippines

Specific challenges remain even with a BIR tax exemption for small business in the Philippines. Here are three common issues and how to address them:

Staying up-to-date with tax laws

Tax rules in the Philippines change frequently. For busy business owners, keeping track of updates while managing daily operations can be difficult.

To stay compliant, regularly check BIR announcements and updates.

Handling documentation and compliance

Applying for and maintaining a small business tax exemption Philippines requires detailed paperwork. Missing or incomplete files are a common cause of delays or rejected applications.

Managing international transactions

Businesses working with foreign clients face challenges like handling multiple currencies and avoiding high exchange fees.

Modern payment tools can help streamline cross-border transactions. They also make it easier to keep accurate financial records for BIR reporting.

For such companies, high foreign exchange fees and slow transactions add extra complexity.

---

Wise Business: A smarter way to manage international payments

💡If you're a business in the Philippines trying to go global, you've probably hit a wall of confusing foreign exchange fees when collecting payments from international customers. Wise Business helps you cut through all that complexity—be it a local bank transfer or a wire transfer. By simplifying how you receive payments, you're free to pursue what matters—growing a local brand with global sights.

• Obtain account details to receive payments in USD, EUR, GBP, SGD, HKD and more for a one-time fee of 1,400 PHP.
• Simply share your account details with customers or add them to invoices.
• Zero fees when you get paid via ACH, FAST, InstaPay/PESONet, & other local transfers.
• Full fee transparency when clients pay you via Wire / SWIFT.
• Hold, send, and convert money at the mid-market rate in one account.
• Accept payments from customers and payment service providers (PSPs) like Stripe and Amazon.

➡️Get started with Wise Business today

---

Conclusion

Securing a BIR tax exemption for small business in the Philippines is an important step toward legal compliance and long-term growth.

A valid CTE protects your organization from penalties. It also creates opportunities for funding and stronger partnerships.

By knowing the eligibility requirements and staying organized with the right documents, you can manage your tax obligations with confidence.

For businesses handling international payments, Wise Business presents an easy way to manage multiple currencies, streamline payments, and simplify reporting — supporting your tax-exempt status and growth goals.

Take the first step toward smoother operations and lasting success.

➡️Get started with Wise Business

---

Sources:

1. REVENUE MEMORANDUM CIRCULAR NO. 123-2024
2. RMC No. 97-2021
3. Republic Act No. 9178
4. RMO No. 38-2019
5. RMC No. 123-2024
6. REVENUE MEMORANDUM ORDER NO. 38-2019

Sources checked on 24 September 2025.