FOURTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session 
SENATE 
i 
S. NO. 
I 
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Introduced by Senator Antonio “Sonny” F. Trillanes IV 
EXPLANATORY NOTE 
The National Internal Revenue Code (NIRC) taxes professionals and self-employed 
individuals, such as lawyers and doctors, the same rate as wage earners. However, unlike 
wage earners who are not allowed deductions except for personal and additional 
exemptions, self-employed individuals and professionals enjoy a full array of itemized 
deductions from gross income allowed to corporations. 
Around eighty percent (80%) of tax revenue derived from individual taxpayers is 
collected from the wage earners ox salaried taxpayers. Only twenty percent (20%) is 
collected from self-employed individuals and professionals. In terns of tax paid on gross 
income, the effective tax rate for wage earners is 15.25%, thus a wage earner receiving a 
gross income of P200,OOO pays a tax of P30,500 while a self-employed individual or 
professional w h  
have a gross i w o e  ofP288,OQO pays only P2,280 or a measly 1.14% 
effective tax rate. 
This bill seeks to provide a uniform and equitable taxation by limiting the allowable 
deductions for self-employed individual or professional to address the imbalance of 
taxation between wage earners and self-employed individuals or professionals. The bill 
also proposes to grant self-employed individuals and professionals an optional standard 
deduction of forty percent (40%) of gross income. In addtion to the limit on allowable 
deductions and optional standard dedwtion, this bill also defines “self-employed 
individuals” and “professionals”. 
In view of the foregoing, immediate approval of this measure is earnestly sought. 
A ~ T O ~ I O  
“SONNY” F. ‘TRILLANES IV 
Senator 
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FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
Second Regular Session 
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APR 14 A l i  $8 
SENATE 
%NO. 315 
fif:cf-iv,rp r>>( 
- 
Introduced by Senator Antonio “Sonny” F. Trillanes IV 
AN ACT 
ADOPTING THE SIMPLIFIED NET INCOME TAXATION SCHEME FOR 
INDIVIDUALS ENGAGED IN TRADE/ BUSINESS AND/ OR PRACTICE OF 
PROFESSION, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled. 
SECTION 1. Section 22 of the National Internal Revenue Code (NIRC) of 1997, 
as amended, is hereby further amended by adding the following definitions after 
Subsection (HH) to read as follows: 
“SEC. 22. Definitions. - When used in this Title: 
‘‘X x x” 
“(HH) x x x” 
“(JI) THE TERM ‘SELF-EMPLOYED INDIVIDUALS’ SEALL 
MEAN PERSONS WHO, INDEPENDENT OF EMPLOYER-EMPLOYEE 
RELATIONSHIP, DERIVE INCOME FROM TRADE OR BUSINESS OR 
FROM THE PURSUIT OF AN OCCUPATION. 
“($4 
THF. TERM ‘PROFESSIONALS’ SHALL m A N  PERSONS 
WHO, INDEPENDENT OF EMPLOYER-EMPLOYEE RELATIONSHIP, 
DERIVE INCOME FROM THEIR PROFESSION, THE PRACTICE OR 
EXERCISE OF WHICH REQUIRE AN EXAMINATION AND/ OR 
LICENSE FROM A GOVERNMENT AGENCY.” 
SEC. 2. Section 24 of the NIRC of 1997, as amended, is hereby further amended 
to read as follows: 
“SEC. 24. Income Tax Rates - 
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“(A) Rates of Income Tarc on Individual Citizen and Individual Resident 
Alien ofthe Philippines. - 
‘( (1) x x x 
“(c) x x x 
“x x x, and 
“(2) Rates &Tax 
‘‘X x x 
“(3) SIMPLII?IED NET INCOME TAX FOR SELF-EMPLOYED 
INDIVIDUALS AND FOR PROFESSIONALS. - AN INCOME TAX 
Taxable Income of Idrviduals - 
FOLLOWING THE PRESCRIBED RATE FOR INDIVIDUALS UNDER 
THE PRECEDING PARAGRAPH IS HEREBY IMPOSED UPON THE 
TAXABLE INCOME DERIVED DUaENG EACH TAXABLE YEAR 
FROM ALL SOURCES WITHIN AND WITHOUT THE PHILIF’PINES BY 
AN INDIVIDUAL RESIDENT CITIZEN AND FROM ALL SOURCES 
W I T M  THE PEILTPPINES BY AN 1NDNII)UAL NONRESIDENT 
CITIZEN AND INDIVIDUAL RESIDENT ALIEN ENGAGED Ih’ TRADE, 
BUSINESS OR PRACTICE OF PROFESSION. 
% x x” 
SEC. 3. Section 34 of the NIRC of 1997, as amended, is hereby further amended, 
to read as follo~: 
“SEC. 34. Deductions from Gross Income. - Except for taxpayers 
earning compensation income arising from personal services rendered under an 
employer-employee relationship where ne dedwtions shall be allowed under this 
Section other than under Subsection (M) hereof, in computing taxable income 
subject to income tax under Sections [24(A);] [25(A);] [26;] 27(A), (B) and (C)[;] 
and 21yAX1), there shdl be allowed [the fdlowing] AS deductions from gross 
income [:] THE TERMS SPECBED IN PARAGRAPHS (A) TO (J) OF 
THIS SECTION: PROWDED, ITOWEPER, THAT IN COMPUTING 
TAXABLE INCOME SUBJJZCT TO TAX UNDER SECTION 24(A)(3) EY 
THE 
CASE 
OF 
SELF-EMPLOYED 
INDIVIDUALS 
OR 
PROFESSIONALS, ONLY THE FOLLOWING DEDUCTIONS SUBJECT 
TO SUBSTANTIATION, SBALL BE ALLOWED. 
“(A) A REASONABLE ALLOWANCE FOR SALARIES AND 
OTHER COMPENSATION; 


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“(B) A REASONABLE ALLOWANCE FOR SUPPLIES AND 
UTILITIES INCURRED, IN THE PURSUIT OF THE TAXPAYER’S 
TRADE OR BUSINESS, PROFESSION OR OCCUPATION: 
“(C) A REASONABLE AL,LOWANCE FOR RENTALS AND/ OR 
PAYMENTS WEICH ARE REQUIRED AS CONDITION FOR THE 
CONTINUED USE OR POSSESSION OF PROPERTY TO WHICH THE 
TAXPAYER HAS NOT TAKEN OR IS NOT TAKLNG TITLE OR IN 
WHICH HE HAS NO EQUITY OTHER THAN THAT OF A LESSEE, 
USER OR POSSESSOR, IN THE PURSUIT OF THE TAXPAYER’S 
TRADE OR BUSINESS, PROFESSION OR OCCUPATION; 
“(D) INTEREST PAID OR ACCRUED WITHIN A TAXABLE 
YEAR ON LOANS CONTRACTED FROM ACCREDITED FINANCIAL 
INSTITUTIONS WHICH MUST BE PROVEN TO EWVE BEEN 
INCURRED, IN THE PURSUIT OF THE TAXPAYER’S TRADE OR 
BUSINESS, PROFESSION OR OCCUPATION; 
“(E) TAXES PAID OR INCURRED WITHIN THE TAXABLE 
YEAR, IN THE PURSUIT OF THE TAXPAYER’S TRADE OR BUSINESS, 
PROFESSION OR OCCUPATION, EXCEPT: 
“(1) THE INCOME TAX PROVIDED FOR UNDER THIS TITLE; 
“(2) INCOME TAXES IMPOSED BY AUTHORITY OF ANY 
FOREIGN COUNTRY; 
“(3) ESTATE AND DONOR’S TAXES; AND 
“(4) 
TAXES ON REAL PROPERTY NOT USED IN THE 
TAXPAYER’S 
TRADE 
OR 
BUSINESS, 
PROFESSION 
OR 
OCCUPATION. 
“(F) A REASONABLE ALLOWANCE FOR DEPRECIATION, OR 
THE EXHAUSTION, WEAR AND TEAR OF PROPERTY USED IN THE 
PURSUIT OF THE TAXPAYER’S TRADE OR BUSINESS, PROFESSION 
OR OCCUPATION; 
“(G) A REASONABLE ALLOWANCE FOR RESEARCH AND 
DEVELOPMENT NOT IN EXCESS OF FIVE PERCENT (5%) OF GROSS 
INCOME, IN THE PURSUIT OF THE TAXPAYER’S TRADE OR 
BUSINESS, PROFESSION OR OCCUPATION; AND 
“(a) CONTRIBUTION MADE TO THE GOVERNMENT AND 
ACCREDITED 
RELIEF 
ORGANIZATIONS 
FOR 
THE 
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REHABILITATION OF CALAMITY STRICKEN AREAS DECLARED 
BY THE PRESIDENT.” 
“(A) Expenses. - 
‘k x x. 
“(L) Optional Standard Deduction. - In lieu of the deductions allowed 
under the preceding Subsections, an individual subject to tax under Section 24, 
other than a nonresident alien, may elect a standard deduction in an amount not 
exceeding forty percent (40%) of his gross [sales or gross receipts, as the case 
may be] INCOME. x x x 
“(M) x x x. 
“X x x” 
SEC. 4. Disposition of Incremental Revenue from the Inyllementation of this 
Act. - The amount of incremental revenue derived from this Act, shall be allocated and 
used exclusively for the following purposes: 
(1) 
Nine billion two hundred million pesos (Php9.2 billion) for the 
rehabilitation and development of Region VI (Western Visayas); 
(2) 
One billion pesos (Phpl.0 billion) for public tertiary education to finance 
the capital outlay of state universities and colleges, annwlly, upon effectivity of this Act, 
with the Commission on Higher Education (CHED) as the implementing agency; 
(3) 
One billion pesos (Phpl.0 billion) for the construction, expansion, repair 
and development of sea ports and piers, and the development of the shipping industry, 
annually, upon effectivity of this Act, with the Philippine Ports Authority @PA) as the 
implementing agency; and 
(4) 
Five billion pesos (Php5.0 billion) shall be appropriated annually, upon 
effectivity of this Act, as a “National Standby Calamity Fund” 
“Incremental Revenue” shall mean the difference between the revenue collection 
derived from self-employed individuals and professionals in taxable year 2007 and in 
taxable year 2008. 
The incremental revenue for the succeeding years, shall be computed using 
taxable year 2007 as the base year. 
Such allocations shall be segregated as separate trust funds by the National 
Treasury and shall be over and above the annual appropriations for similar purposes. 
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SEC. 5. Mandatory Registration by Self-Employed Individuals and 
Professionals. - All self-employed individuals and professionals, as defined in this Act, 
shall register with the appropiaie Government licensing a d  
QF regulatory agency, for 
purposes of the unified list of taxpayers who are self-employed individuals and 
professionals: Provided, that the Social Security System (SSS), the Professional 
Regulations Commission (PR€), the Department of Trade and I&us@y (DTI)-bard of 
Investments (BOI), and other licensing and or regulatory agencies, shall be required to 
submit on a quarterly basis to the Bureau of Internal Revenue (BE), 
a list of self- 
employed individuals OT professionals registered with such agency. 
SEC. 6. Applicability Clause. - This Act shall apply to income earned or paid to, 
and deductions incwed op paid by, self-emphyed i&~idu& and professionals, 
effective beginning taxable year 2008. 
SEC. ?. SeparCriPility €lease. - If any p ~ ~ i ~ i o n  
of this Act is declared 
unconstitutional or invalid, the remainder thereof not affected thereby shall continue to be 
in full force and effect. 
SEC. 8. Repealing Clause. - All laws, decrees, orders, rules and regulations or 
other issuance or parts thereof inconsistent with the provision of this Act are hereby 
repealed, mended or &ified 
accordingly. 
SEC. 9. Eflectivity. - This Act shall take effect fifteen (15) days after its 
pblkation in at Least t a w  (2) newspapers of generat circdation, 
Approved, 
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