Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

House Bill No. 3392

Introduced by HON. JOSEPHINE VERONIQUE “Jaye” R. LACSON - NOEL
Malabon City, Lone District

EXPLANATORY NOTE

It is the policy of the State to stimulate inclusive economic growth by sustaining
equal employment opportunities amongst those who are unemployed or underemployed, estab-
lish a rising income generation and provide for a higher standard of living for every Juan Dela
Cruz. Sadly, this policy has been constantly reminded for by the several government administra-
tions there are no plan of strategies that has taken place nor implemented.

Economic forecasts since 2010 has shown that big investors are bound to invest
huge amount of capital in order to generate jobs and revenues. However, many failed to forewarn
the growing demands for the micro, small or medium enterprises (MSMEs) in our country. Tak-
ing into account its significant potential to relevantly contribute to our annual gross domestic
product, the Department of Trade and Industry (DTI) made the growth of MSMEs a legislative
priority. As a result, the Philippine MSME sector became a critical driver for the economic
growth of our country.(!)

2014 figures of the Philippine Statistics Authority (PSA) would show that there
are 946,988 establishments in our country. Of these, 99.6% or 942,925 establishments are
MSMES and the remaining 0.4% or 4,063 establishments are large enterprises. Of the total num-
ber of MSMEs, 90.3% or 851,765 establishments are micro enterprises; 9.3% or 87,283 estab-
lishments are small enterprises; and 0.4% or 3,886 establishments are medium enterprises. In that
same year, the MSMEs generated a total of 4,891,836 jobs against the 2,897,421 for the large
enterprises. of these, 30.5% or 2,372,678 jobs were generated by micro enterprises; 25.5% or
1,986,823 by the small enterprises; and 6.8% or 532,335 by the medium enterprises.2)

1. National Economic and Development Authority. (2011). Philippine Development Plan 2011-2016.
2 Department of Trade and Industry. (2014). MSME Statisties.


MSMEs dominate the business sector in terms of number of establishments, and
as a result, dubbed as the backbone of the economic development through investment, job cre-
ation, local taxation, productivity enhancement and technological innovation

Despite the impressive performance of MSMEs for years, their financial capabili-
ty has remained constrained by various factors that prevents them, not just only for surviving or
growing, but from realising their potentials in a highly competitive environment.)

In 2018, the present administration passed into law the Ease of Doing Business Act and
this has significantly changed and improved the state of our MSMEs. However, we barely scratched the
surface and we are still very far to get at par with our neighbouring economies.

This bill seeks to exempt the micro, small or medium enterprises from national
and/or local taxes arising from its first five (5) years, for micro or small, and first two (2) years,
for medium enterprise, of its operations provided that these enterprises are newly registered
businesses and that they do not have any previous or other existing registered businesses and are

not affiliates, subsidiaries or franchises of any existing company.
This bill aims: 1. to encourage micro, small or medium enterprise to get organ-
ised; 2. to give these enterprises the proper time to stand on its own; and 3. to recognise their

valuable role towards nation-building.

IN VIEW OF THE FOREGOING, approval of this bill is earnestly sought.

JOSEPHINE VERONIQUE “Jaye” R. LACSON - NOEL

3. MSMED Council, (2011). Micro, Small and Medium Enterprise Development Plan 2011-2016.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

House Bill No. 3392

Introduced by HON. JOSEPHINE VERONIQUE “Jaye” R. LACSON - NOEL
Malabon City, Lone District

AN ACT EXEMPTING
MICRO AND SMALL ENTERPRISES FROM NATIONAL AND LOCAL TAXES ARIS-
ING FROM THE FIRST FIVE (5) YEARS OF ITS OPERATIONS; MEDIUM ENTER-
PRISES FROM NATIONAL OR LOCAL TAXES ARISING FROM THE FIRST TWO (2)
YEARS OF ITS OPERATIONS.

Be it enacted by the Senate and the House of Representatives of the Philippine
in Congress assembled:

SECTION 1. Short Title. - This act shall be known as the “MSME Tax Exemption
Act of 2019.”

SECTION 2. Declaration of State Polic

State to promote a just and dynamic social order that will ensure the prosperity and independence

It is hereby declared the policy of the

of the nation and free the people from poverty through policies that provide adequate social ser-
vices, promote full employment, a rising standard of living, and an improved quality of life for
all.)

Further, through the goals of the national economy, the state can provide a more
equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of
goods and services produced by the nation for the benefit of the people; and an expanding pro-
ductivity as the key to raising the quality of life for all, especially the underprivileged

4. 1987 Constitution of the Philippines. Article II, Section 9.


It shall foster the promotion of industrialization and full employment based on
sound agricultural development and agrarian reform, through industries that make full and effi-
cient use of human and natural resources, and which are competitive in both domestic and for-
eign markets, However, the State shall protect Filipino enterprises against unfair foreign compe-
tition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the
country shall be given optimum opportunity to develop. Private enterprises, including corpora-
tions, cooperatives, and similar collective organizations, shall be encouraged to broaden the base
of their ownership.)

These policies are created in order to facilitate the inclusive growth of our econ-
omy by fostering a stable macroeconomic environment and well-balanced fiscal, monetary and

trade policies. As a result, we can achieve a higher standard of living.

SECTION 3. Definition. - As used in this Act, the following terms shall mean:

“Micro Enterprises” - shall refer to newly registered business engaged in indus-
try, agribusiness and/or services that has (1) an asset the size up to P3,000,000.00; and (2) an
employment size up to 9 employees, whether a single proprietorship, co-operative, partnership or
corporation

“Small Enterprise” - shall refer to newly registered business engaged in industry,
agribusiness and/or services that has: (1) an asset size of P3,000,001.00 up to P15,000,000.00;
and (2) an employment size from 10 to 99 employees, whether a single proprietorship, co-opera-

tive, partnership or corporation.

“Medium Enterprise” - shall refer to newly registered business engaged in in-
dustry, agribusiness and/or services that has: (1) an asset size of P15,000,001.00 up to
P100,000,000.00; and (2) an employment size from 100 to 199 employees, whether a single pro-
prietorship, co-operative, partnership or corporation.

SECTION 4. Exemption from Taxes and Fees. -

a. Amicro or small enterprises shall be exempt from all national and local taxes
for the first five (5) years of its operation, provided that

1. The micro or small enterprise is a newly registered enterprise and not
an affiliate, subsidiary or a franchise of any existing company;

2. In the case of a sole proprietorship, the proprietor of the micro or small
enterprise shall not have any previous or other existing registered
businesses;

5. 1987 Constitution of the Philippines. Anicle XM, Section 1
66. RA 9501 or the Magna Carta for Micro, Small and Medium Enterprises.


3. In the case of a partnership, either of the partners of the micro or small
enterprise shall not have any previous or existing registered business-
es, and

4. In the case of a corporation, each stockholder of the medium enterprise
shall have at least a five percent (5%) share in stocks and the corpora-
tion shall have no nominal stockholders or stockholders holding the
shares in trust for others. Provided further that, all stockholders of the
micro or small enterprise shall not have held shares of any previous or
existing corporation with at least a five percent (5%) share therein, nor
registered any former or existing sole proprietorship or any partners of
the partnership

b. A medium enterprise shall be exempt from all national or local taxes, which-
ever is lower, for the first two (2) years of its operation, provided that

1. The medium enterprise is a newly registered enterprise and not an af-
filiate, subsidiary or a franchise of any existing company;

2. In the case of a sole proprietorship or partnership, the proprietor or the
partners of the medium enterprise shall not have any previous or other
existing registered companies, partnerships or businesses; and

3. In the case of a corporation, each stockholder of the medium enterprise
shall have at least a five percent (5%) share in stocks and the corpora-
tion shall have no nominal stockholders or stockholders holding the
shares in trust for others. Provided further that, all stockholders of the
start-up enterprise shall not have held shares of any previous or exist-
ing corporation with at least a five percent (5%) share therein, nor reg-

istered any former or existing sole proprietorship or partnership.

SECTION 5. Implementing Rules and Regulations. - The Bureau of Internal
Revenue together with the Department of Trade and Industry shall create the necessary IRR
within thirty (30) days after the effectivity of this act, and thereafter coordinate with Local Gov-
ernment Units the necessary rules and regulations for its effective implementation.

SECTION 6. Separability Clause. - If any provision of this act is subsequently
declared invalid or unconstitutional, other provisions hereof which are not affected thereby, shall

remain in full force and effect.

SECTION 7. Repealing Clause. - All laws, acts, presidential decrees, executive
orders, issuances, presidential proclamations, rules and regulations or parts thereof which are
contrary to and inconsistent with any provision of this Act are hereby repealed, amended or mod-
ified accordingly.


SECTION 8. Effectivity. - This act shall take effect fifteen (15) days after its
complete publication either in the Official Gazette or in at least two (2) newspaper of general cir~
culation

Approved,