NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
SENATE
S. No.
53
REGEiVEO
cu/n
TIME
INDEX
Introduced by Senator Francis G. Escudero
AN ACT
PROMOTING BUSINESS COMPETITIVENESS BY PROVIDING TEMPORARY 
TAX RELIEF TO SINGLE PROPRIETORSHIPS, COOPERATIVES, 
PARTNERSHIPS OR CORPORATIONS CLASSIFIED AS MICRO, SMALL AND 
MEDIUM ENTERPRISES
EXPLANATORY NOTE
Despite its pivotal role in the economy, Micro, Small and Medium Enterprises 
(MSMEs) are particularly vulnerable to external shocks. This vulnerability was 
particularly highlighted at the height of the coronavirus pandemic, which induced 
restrictions in business operations and decline in consumer demand. Such negative 
impact on cash flows caused temporary and permanent closure of MSMEs and the 
displacement of their employees. Based on the published figures by the Department 
of Trade and Industry, MSME establishments and MSME employment declined by 
42,776 and 129,945 from 2019 to 2020, respectively.
While the most devastating impact of the pandemic has since passed and 
businesses are starting to reopen and recover, they still remain particularly vulnerable 
to factors such as the escalating cost of doing business and limited access to financing 
and markets, among others. As such, there is a need for the government to cushion 
MSMEs against the lingering impact of the pandemic and to bolster their resilience 
against future shocks.
To address this concern and to adhere to the state policy of promoting, 
supporting, strengthening and encouraging the growth and development of MSMEs in 
all productive sectors of the economy, the government can incentivize their continued 
operation in the country. This bill seeks to provide MSMEs a three-year exemption


from income tax to provide temporary relief to MSMEs still reeling from the adverse 
impact of the coronavirus pandemic. Additionally, this bill authorizes the deduction 
from taxable income an amount equivalent to twenty-five percent (25%) of labor 
expenses incurred for every employee hired by small and medium enterprises within 
three years following the effectivity of the proposed measure.
The twin tax relief provision in this proposed measure can provide qualified 
enterprises with additional resources for continuing business activities, hiring more 
people, and expanding business operations. Ultimately, these incentives are but small 
Investments to catalyze the growth of the MSME sector and aid in the government 
efforts in reducing poverty incidence, increasing employment rate and pump-priming 
economic activities in the post-pandemic Philippines.
In view of the foregoing, the passage of the measure is earnestly sought.
FRANCIS G. ESCUDERQ


NINETEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
SENATE
S. No.
53
.CD rms.:
BILLS & INDEX
Introduced by Senator Francis G. Escudero
AN ACT
PROMOTING BUSINESS COMPETITIVENESS BY PROVIDING TEMPORARY 
TAX RELIEF TO SINGLE PROPRIETORSHIPS, COOPERATIVES, 
PARTNERSHIPS OR CORPORATIONS CLASSIFIED AS MICRO, SMALL AND 
MEDIUM ENTERPRISES
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled:
1 
Section 1. Grant of Relief from Payment of Income Tax. - Single
2 
proprietorships, cooperatives, partnerships or corporations classified as Micro
3 
Enterprises under Republic Act No. 6977, otherwise known as the Magna Carta for
4 
Small Enterprises," as amended, shall be exempt from income tax: Provided, That the
5 
exemption from income tax shall be extended to qualified enterprises within the
6 
effectivity period as provided under Section 6 of this Act.
7
8 
Sec. 2. Grant of Authorization to Deduct Labor Expense from Taxable Income.
9 
- In computing taxable income subject to income tax under Sections 24(A); 25(A);
10 
26; 27(A), (B), and (C); and 28(A)(1) of the National Internal Revenue Code of 1997,
11 
as amended, there shall be allowed a twenty-five percent (25%) additional deduction
12 
on the labor expense incurred for each employee hired by single proprietorships,
13 
cooperatives, partnerships or corporations classified as Small and Medium Enterprises
14 
under Republic Act No. 6977, otherwise known as the Magna Carta for Small
15 
Enterprised', as amended: Provided, That no deduction in the computation of taxable
16 
income shall be extended to taxpayers earning compensation income arising from


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22 
23
personal services rendered under an employer-employee relationship: Provided, 
further, That the additional deduction on the labor expense incurred for each 
employee shall be extended to qualified enterprises within the effectivity period as 
provided under Section 6 of this Act.
Sec. 3. Implementing Rules and Regulations (IRR). - Within thirty (30) days 
from the effectivity of this Act, the Department of Finance shall, in coordination with 
the Bureau of Internal Revenue, promulgate the rules and regulations to effectively 
implement the provisions of this Act.
Sec. 4. Separability Clause. - If any provision or part hereof is declared 
unconstitutional, the remainder of this Act or any provision not affected thereby shall 
remain in full force and effect.
Sec. 5. Repealing Clause. - All laws, acts, decrees, executive orders, issuances, 
and rules and regulations or parts thereof which are contrary to and inconsistent with 
this Act are hereby repealed, amended or modified accordingly.
Sec. 6. Effectivity. - This Act shall take effect on the fiscal year immediately 
following its publication in the Official Gazette or in at least two (2) newspapers of 
general circulation, and shall remain in full force and effect for three (3) fiscal years, 
unless otherwise extended through an act of Congress.
Approved,