Sl'ttlll r 
SIXTEENTH CONGRESS OF THE REPUBLIC ) 
(I?iIf!n llf tile .~-t'(,Hbr1J 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
'14 
MAY 13 P 2 :55 
SENATE 
HEO:IVEil BY: __ ,~ 
S.No. 2223 
Introduced by Senator Ralph G. Recto 
AN ACt 
EXEMPTING MARGINAL INCOME EARNERS FROM INCOME TAX AND VALUE-
ADDED TAX, AMENDING FOR THE PURPOSE SECTIONS 22, 24,109 (1) AND 236 
OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND 
FOR OTHER PURPOSES 
Explanatory Note 
This bill aims to provide the needed refuge for our country's marginal income earners 
(MIE) who are suddenly placed in a position where they might find it more difficult to provide 
for their daily subsistence iftheir meager income were to be taxed by the BIR. 
In 2008, Congress passed Republic Act No. 9504 wherein one of its salient features was 
to exempt minimmn wage earners from the payment of income tax. While this measure is 
laudable, there is, however, another sector in the labor force and economy that deserves similar 
tax treatment and these are the MIEs. 
The MIEs, as defined under tax regulations, are those individuals not deriving 
compensation as an employee under an employer-employee relationship and are self-employed 
and deriving gross sales or receipts not exceeding One hundred thousand pesos (PIOO,OOO) in 
any 12-month period. The threshold amount is increased to P140,000 under the bill to provide 
for inflation and considering the current minimmn wage rate. 
Among the individuals classified by the regulations as MIEs are as follows: a) 
agricultural growers/producers (farmers/fishermen) selling directly to ultimate consmners; b) 
small sari-sari stores; c) small carinderias or "turo-turos"; and d) drivers/operators of a single 
unit tricycle. This sector captnres a huge part of the lower income class (at least 75% of the 
population) wherein income from their piincipal source of livelihood is barely enough for their 
subsistence. 
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It is worth noting that while MIEs individually operate in small scale, collectively, they 
are recognized as major contributors to the economy as this sector provides income opportunities • 
to those who are unemployed. Moreover, based on the success stories of many tycoons, this 
sector is seen as a seedbed of entrepreneurship and provides a strong potential for small 
businesses to grow into large enterprises. 
Unfortunately, the Bureau of Internal Revenue's recent issuance of Revenue 
Memorandmn Circular No. 7-2014 which clarifies the issues on the registration and compliance 
requirements of MIEs, seems to undermine the daily economic hardships being experienced by 
the MIEs. The said circular requires MIEs to comply with the following requirements: a) 
register their business with the Bureau of Internal Revenue (BIR); b) register their book of 
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accounts; c) issue receipts/sales invoices; and d) file the appropriate income tax return and pay 
the tax due thereon. 
It is undeniable that aside from imposing income tax on the income of MIEs, registration 
of business with the BIR entails costs and not to mention loss of income opportunity for MIEs 
since the application for registration can be cumbersome as it includes submission of other 
documentary requirements which can be retrieved only from other government agencies, 'such as 
authenticated Birth Certificate from the Philippine Statistics Authority, Mayor's Business Permit 
from the local government unit concerned, and Certificate of Registration from the Department 
of Trade and Industry. 
It is for this reason that MIEs view RMC No. 7-2014 as an exercise of fiscal power by the 
government that has confiscatory effects. 
Therefore, in recognition of the importance of MIEs to our econom;y and to alleviate their 
sorry plight, this proposed bill seeks to exempt MIEs from the payment of income tax and value-
added tax and to institutionalize their exemption from the registration requirements under the 
Tax Code. 
In view of the foregoing, immediate passage of this bill is earnestly sought. 
laim 
• 


SIXTEENTH CONGRESS OF THE REPUBLIC ) 
SCiwit 
(C)!h;r \If liie ~Hrrbr~ 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
'14 
MAY 13 P 2 ':55 • 
SENATE 
S.No. 2223 
.~ 
Introduced by Senator Ralph G. Recto 
AN ACT 
EXEMPTING MARGINAL INCOME EARNERS FROM INCOME TAX AND VALUE-
ADDED TAX, AMENDING FOR THE PURPOSE SECTIONS 22, 24, 109 (1) AND 236 
OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND 
FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
1 
Section 1. Section 22 of Republic Act No. 8424, as amended, otherwise known as the 
2 
National Internal Revenue Code of 1997, is hereby further amended by adding the following 
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definition after Subsection (HH) to read as follows: 
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"SEC. 22. llefinitions. - When used i).1 this Title: 
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"(A) x x x" 
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"x x x 
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"(HH) x x x 
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"(II) THE TERM 'MARGINAL INCOME EARNER' SHALL REFER TO 
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AN INDIVIDUAL WHO IS NOT DERIVING COMPENSATION AS AN 
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EMPLOYEE UNDER AN EMPLOYER-EMPLOYEE RELATIONSHIP BUT 
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ONE WHO IS SELF-EMPLOYED WHOSE GROSS SALES OR RECEIPTS 
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DERIVED FROM THEIR PRINCIPAL SOURCE OF LIVELIHOOD 
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DO NOT EXCEED ONE HUNDRED FORTY THOUSAND PESOS (PI40,000.00)." 
14 
Section 2. Section 24 (A) of Republic Act No. 8424, as amended, otherwise known as the 
15 
National Internal Revenue Code of 1997, is hereby further amended to read as follows: 
16 
"Section 24. 
Income Tax Rates. -
17 
"(A) 
Rates ofIncome Tax on Individual Citizen and Individual Resident 
18 
Alien ofthe Philippines. -
Page 1 01'3 
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"(1) 
xxx" 
"(2) 
x x x" 
"x x x" 
"Provided, That minimum wage earners as defined in Section 22 (HH) of this 
Code shall be exempt from the payment of income tax on their taxable income; 
Provided, further, That the holiday pay, overtime pay, night shift differential pay 
and hazard pay received by such minimum wage earners shall likewise be exempt 
from income tax. 
"IN THE CASE OF MARGINAL INCOME EARNERS AS DEFINED 
UNDER SECTION 22 (II) OF THIS CODE, ALL INCOME DERIVED FROM 
THEIR PRINCIPAL SOURCE OF LIVELIHOOD SHALL ALSO BE EXEMPT 
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FROM INCOME TAX." 
13 
Section 3. Section 109 (1) of Republic.Act No. 8424, as amended, otherwise known as 
14 
the National Internal Revenue Code of 1997, is hereby further amended to read as follows: 
15 
"Section 109. Exempt Transactions. - (1) Subject to the provisions of Subsection (2) 
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hereof, the following transactions shall be exempt from the value-added tax: 
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"(A) 
x x x 
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"x x x 
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"(W) Sale or lease of goods or properties or the performance of services other than 
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the transactions mentioned in the preceding paragraphs, the gross annual sales andlor 
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receipts do not exceed the amonnt of One million five hundred thousand pesos 
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(Pl,500,000): Provided, That not later than January 31, 2009 and every three (3) years 
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thereafter, the amount herein stated shall be adjusted to its present value using the 
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Consumer Price Index, as published by the National Statistics Office (NSO); 
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"(X) 
SALE OR LEASE OF GOODS AND SALE OF SERVICES BY SELF-
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EMPLOYED INDIVIDUALS WI-lOSE GROSS SALES OR RECEIPTS DERIVED 
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FROM THEIR PRINCIPAL SOURCE OF LIVELIHOOD DO NOT EXCEED ONE 
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HUNDRED FORTY THOUSAND PESOS (PI40,OOO.00)." 
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"x x x" 
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1 
Section 4. Section 236 (B) of Republic Act No. 8424, as amended, otherwise known as 
2 
the National Internal Revenue Code of 1997, is hereby further amended to read as follows: 
3 
"Section 236. Registration Requirements. -
"(A) 
x x x 
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"(B) 
Annual Registration Fee. - An annual registration fee in the amount of Five 
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hundred pesos (P500) for every separate or distinct establishment of place of business, 
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including facility types where sales transactions occur, shall be paid upon registration 
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and every year thereafter on or before the last day of January; Provided, however, That 
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cooperatives, individuals earning purely compensation income whether locally or abroad, 
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MARGINAL INCOME EARNERS, and overseas workers are not liable to the 
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registration fee herein imposed." 
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"xxx" 
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Section 5. Implementing Rules and Regulations. - The Secretary of Finance, shall, upon 
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the recommendation of the Commissioner of Internal Revenue, promulgate not later than thirty 
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(30) days upon the effectivity of this Act the necessary rules and regulations for its proper and 
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effective implementation. 
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Section 6. Repealing Clause. - All laws, Acts, Presidential Decrees, Executive Orders, 
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issuances, presidential proclamations, rules and regulations or parts thereof which are contrary to 
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and inconsistent with any provision of this Act are hereby repealed, amended or modified 
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accordingly. 
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Section 7. Effectivity. - This Act shall take effect fifteen (15) days after its complete 
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publication either in the Official Gazette, or in at least two (2) newspapers of general circulation. 
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Approved, 
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