Republic of the Philippines​
HOUSE OF REPRESENTATIVES​
Quezon City 
TWENTIETH CONGRESS 
First Regular Session​
HOUSE BILL NO. ____ 
Introduced by REP. BERNADETTE “DETTE” G. ESCUDERO 
AN ACT  
PROMOTING BUSINESS GROWTH AND RECOVERY BY REDUCING THE 
COST OF BUSINESS COMPLIANCE FOR MICRO, SMALL AND MEDIUM 
ENTERPRISES, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED 
EXPLANATORY NOTE 
Pursuant to Article XII of the 1987 Constitution on National Economy and 
Patrimony, it is the declared duty of the State to promote a sustained, self-reliant, 
and inclusive national economy through the equitable distribution of opportunities, 
income, and wealth. In line with this mandate, the State is compelled to provide 
support and ensure the growth and development of all sectors and industries, 
including Micro, Small, and Medium Enterprises (MSMEs), given their vital role in 
national development. 
The MSME sector is widely recognized as the bedrock of the Philippine 
economy. In Sorsogon City alone, local government data indicates that around 1,000 
MSMEs are engaged in manufacturing and processing—comprising at least 20% of 
the city’s total registered businesses. Nationally, data from the Department of Trade 
and Industry (DTI) for fiscal year 2023 shows that MSMEs account for 99.6 percent 
of the country’s 1,076,279 total business establishments, collectively generating 
approximately 67 percent of establishment-based employment. This translates to 
over 6.35 million jobs, underscoring the sector’s critical role in productivity, 
employment generation, and inclusive growth. 
Beyond their contribution to national output, MSMEs are instrumental in 
catalyzing regional development. Their broad geographic presence and diverse 
sectoral participation support the government’s goals of decongesting urban centers, 
redistributing wealth, reducing poverty, and promoting balanced national growth. 
However, despite their importance, MSMEs continue to face significant challenges, 
both internal to the sector and in relation to the policies that govern them. 
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Among the most pressing issues are the rising cost of doing business, limited 
access to credit and financing, restricted market reach, and stagnant productivity. In 
addition, complex tax regulations and burdensome compliance requirements 
constrain MSMEs’ ability to sustain and expand operations. 
This bill seeks to amend relevant provisions of Republic Act No. 10963, or the 
Tax Reform for Acceleration and Inclusion (TRAIN) Law, to ease the tax burden on 
MSMEs and improve their competitiveness. Specifically, the measure proposes two 
key reforms: 
1. Reducing the optional income tax rate on gross sales or receipts from eight
percent (8%) to five percent (5%), thereby encouraging broader use of
the simplified tax regime among eligible MSMEs; and
2. Streamlining the creditable withholding tax system into two tiers: one
percent (1%) on the purchase of goods and properties, and two percent (2%)
on the purchase of services.
These reforms aim to lower compliance costs, simplify tax administration, and
allow MSMEs to redirect savings toward business expansion, job creation, and 
operational resilience. Enhanced financial flexibility will also help MSMEs reinvest 
capital, cushion against inflation, and withstand global market volatility. 
Ultimately, by empowering the MSME sector through simpler, fairer, and more 
supportive tax mechanisms, the State reaffirms its constitutional mandate to 
promote equitable economic growth, foster entrepreneurship, and uphold the right 
of small enterprises to meaningful participation in national development. 
In view of the foregoing, immediate and favorable consideration of this 
measure is earnestly sought. 
HON. BERNADETTE “DETTE” G. ESCUDERO 
Representative 
1st District, Sorsogon 
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Republic of the Philippines​
HOUSE OF REPRESENTATIVES​
Quezon City 
TWENTIETH CONGRESS 
First Regular Session​
HOUSE BILL NO. ____ 
Introduced by REP. BERNADETTE “DETTE” G. ESCUDERO 
AN ACT  
PROMOTING BUSINESS GROWTH AND RECOVERY BY REDUCING THE 
COST OF BUSINESS COMPLIANCE FOR MICRO, SMALL AND MEDIUM 
ENTERPRISES, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
Section 1. Section 24 of the National Internal Revenue Code of 1997, 
as amended, is hereby further amended to read as follows:  
“Sec. 24. Income Tax Rates. – 
“(A) Rates of Income Tax on Individual Citizen and Individual 
Resident Alien of the Philippines. –  
“(1) x x x; 
“(2) Rates of Tax on Taxable Income of Individuals. – The tax 
shall be computed in accordance with and at the rates established in 
the following schedule: 
“(a) x x x; 
“(b) Rate of Tax on Income of Purely Self-employed 
Individuals and/or Professionals Whose Gross Sales or Gross 
Receipts and Other Non-operating Income Does Not Exceed the 
Value-added Tax (VAT) Threshold as Provided in Section 
[109(BB)] 109(CC). – Self-employed individuals and/or 
professionals shall have the option to avail of [an eight percent 
(8%)] A FIVE PERCENT (5%) tax on gross sales or gross 
receipts and other non-operating income in excess of Two 
hundred fifty thousand pesos (P250,000) in lieu of the 
graduated income tax rates under Subsection (A)(2)(a) of this 
Section and the percentage tax under Section 116 of this Code. 
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“(c) Rate of Tax for Mixed Income Earners. - Taxpayers 
earning both compensation income and income from business 
or practice of profession shall be subject to the following taxes: 
“(1) x x x; 
“(2) All Income from Business or Practice of 
Profession. –  
“(a) If Total Gross Sales and/or Gross Receipts and 
Other Non-Operating Income Do Not Exceed the VAT 
Threshold as Provided in Section [109(BB)] 109(CC) of 
this Code. – The rates prescribed under Subsection 
(A)(2)(a) of this Section on taxable income, or of [eight 
percent (8%)] FIVE PERCENT (5%) income tax based 
on gross sales or gross receipts and other non-operating 
income in lieu of the graduated income tax rates under 
Subsection (A)(2)(a) of this Section and the percentage 
tax under Section 116 of this Code. 
“x x x.” 
Sec. 2. Section 57 of the National Internal Revenue Code of 1997, as 
amended is hereby further amended to read as follows: 
“Sec. 57. Withholding of Tax at Source. –   
“(A) x x x; 
“(B) Withholding of Creditable Tax at Source. - The Secretary of 
Finance may, upon the recommendation of the Commissioner, require 
the withholding of a tax on the items of income payable to natural or 
juridical 
persons, 
residing 
in 
the 
Philippines, 
by 
payor-corporation/persons as provided for by law, at the rate of [not 
more than fifteen percent (15%) thereof] ONE PERCENT (1%) FOR 
THE PURCHASE OF GOODS AND PROPERTIES, AND TWO 
PERCENT (2%) FOR THE PURCHASE OF SERVICES INCLUDING 
THE EXERCISE OF PROFESSION AND LEASE OF PROPERTIES, 
which shall be credited against the income tax liability of the taxpayer 
for the taxable year; 
“x x x.” 
Sec. 3. Implementing Rules and Regulations. – 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 of this Act or the application 
of such provision to any person or circumstance is declared invalid, the remainder of 
the Act or the application of such provision to other persons or circumstances shall 
not be affected thereby. 
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Sec. 5. Repealing Clause. – All laws, decrees, administrative issuances, 
rules and regulations, and orders or parts thereof inconsistent with this Act are 
deemed repealed or modified accordingly.  
Sec. 6. Effectivity. – This Act shall take effect after fifteen (15) days 
following the completion of its publication in the Official Gazette or in two (2) 
national newspapers of general circulation, whichever comes first. 
 
Adopted, 
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