Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
19th CONGRESS 
First Regular Session 
HOUSE BILL NO.  ____ 
___________________________________________________________________________ 
Introduced by REP. BERNADETTE “DETTE” 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 
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6:22 pm
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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. 
 BERNADETTE “DETTE” G. ESCUDERO 


Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
19th CONGRESS 
First Regular Session 
HOUSE BILL NO.  ____ 
___________________________________________________________________________ 
Introduced by REP. BERNADETTE “DETTE” 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: 
Section 1. Grant of Relief from Payment of Income Tax. – Single proprietorships, 
cooperatives, partnerships or corporations classified as Micro Enterprises under Republic Act 
No. 6977, otherwise known as the “Magna Carta for Small Enterprises,” as amended, shall be 
exempt from income tax: Provided, That the exemption from income tax shall be extended to 
qualified enterprises within the effectivity period as provided under Section 6 of this Act. 
Sec. 2. Grant of Authorization to Deduct Labor Expense from Taxable Income. – In 
computing taxable income subject to income tax under Sections 24(A); 25(A); 26; 27(A), (B), 
and (C); and 28(A)(1) of the National Internal Revenue Code of 1997, as amended, there shall 
be allowed a twenty-five percent (25%) additional deduction on the labor expense incurred for 
each employee hired by single proprietorships, cooperatives, partnerships or corporations 
classified as Small and Medium Enterprises under Republic Act No. 6977, otherwise known 
as the “Magna Carta for Small Enterprises”, as amended: Provided, That no deduction in the 
computation of taxable income shall be extended to taxpayers earning compensation income 
arising from 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. 
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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,