NINETEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
»•'-'7iBfticf o( :'IC
rlfli p
SENATE 
S. No. ^^31
RECEIVED 3V;
Introduced by SENATOR RAMON BONG REVILLA, JR.
AN ACT
PROMOTING BUSINESS GROWTH AND RECOVERY BY REDUCING THE COST 
OF BUSINESS COMPLIANCE FOR MICRO, SMALL AND MEDIUM 
ENTERPRISES (MSMEs), AMENDING FOR THE PURPOSE THE NATIONAL 
INTERNAL REVENUE CODE OF 1997, AS AMENDED
EXPLANATORY NOTE
Micro, Small and Medium Enterprises (MSMEs) play a crucial role in developing 
the Philippine economy. MSMEs directly contribute to poverty reduction by creating 
jobs for the country's growing labor force, and stimulating economic development 
particularly in rural areas. MSMEs are training grounds for the new entrepreneurs and 
act as a valuable link to large enterprises as providers of support services. In the 
country, MSMEs are 99.5% of registered business establishments and employ about 
63% of the current workforce. In the past, 40% of the country's Gross Domestic 
Product (GDP) was attributed to the sector.
Despite existing policies that provide an enabling environment for their 
development, the sector remains constrained by the escalating production cost 
and limited access to financing, among others. This has been even exacerbated by 
the global pandemic in 2020, where health restrictions have greatly affected mobility 
and crippled economic activities.
The bill proposes to make the optional tax on gross sales or receipts introduced 
under Republic Act No. 10963, or the " Tax Reform for Acceleration and Inclusion 
(TRAIN) Lav\/', easier to comply by reducing the tax rate from eight percent (8%) to 
five percent (5%) of gross sales or receipts. The bill also aims to simplify the 
convoluted rates under the creditable withholding tax system by reducing the rates to


be used: one percent (1%) for the purchase of goods and properties, and two percent 
(2%) for the purchase of services. Through these measure, the hope is to provide for 
additional fund for business expansion for the MSMEs and expanding their capability 
to contribute to economic development
In view of improving the competitiveness of the MSMEs by reducing the 
compliance cost of tax regulations, the approval of this measure is earnestly sought
RAMCWBONG REVILLA, JR.


NINETEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
SENATE 
S. No.
senate
of ti)f i': ftiirj;
*22 DEC 20, PI 5
Introduced by SENATOR RAMON BONG REVILLA, JR.
AN ACT
PROMOTING BUSINESS GROWTH AND RECOVERY BY REDUCING THE COST 
OF BUSINESS COMPLIANCE FOR MICRO, SMALL AND MEDIUM 
ENTERPRISES (MSMEs), 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:
1 
Section 1. Section 24 of the National Internal Revenue Code of 1997, as
2 
amended, is hereby further amended to read as follows:
3 
"SEC. 24. Income Tax Rates. -
4 
"(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of
5 
the Philippines. -
6 
"(1) XXX
7 
"(2) Rates of Tax on Taxable Income of Individuals. - The tax shall be computed
8 
in accordance with and at the rates established in the following schedule:
9 
"(a) XXX
10 
"(b) Rate of Tax on Income of Purely Self-employed Individuals and/or
11 
Professionals Whose Gross Sales or Gross Receipts and Other Non-Operating Income
12 
Does Not Exceed the Value-added Tax (VAT) Threshold as Provided In Section
13 
[109(BB)] 109 (CC). - Self-employed individuals and/or professionals shall have the
14 
option to avail of [an eight perccn^{-8%)] A FIVE PERCENT (5%) tax on gross sales
15 
or gross receipts and other non-operating income in excess of Two hundred fifty
16 
thousand pesos (P250,000) in lieu of the graduated income tax rates under


1 
Subsection (A)(2)(a) of this Section and the percentage tax under Section 116 of this
2 
Code.
3 
"(c) Rate of Tax for Mixed Income Earners. - Taxpayers earning both
4 
compensation income and income from business or practice of profession shaii
5 
be subject to the following taxes:
6 
"(1) AH Income from Compensation. - The rate prescribed under Subsection
7 
(A)(2)(a) of this Section.
8 
"(2) AH Income from Business or Practice of Profession. -
9 
"(a) If Totai Gross Saies and/or Gross Receipts and Other Non-Operating
10 
Income Do Not Exceed the VAT Threshold as Provided in Section 109(CC) of this
11 
Code. - The rates prescribed under Subsection (A)(2)(a) of this Section on taxable
12 
income, or [eigM-percent (8%-)] RVE PERCENT (5%) income tax based on gross
13 
sales or gross receipts and other non-operating income in lieu of the graduated
14 
income tax rates under Subsection (A)(2)(a) of this Section and the percentage tax
15 
under Section 116 of this Code.
16 
"xxx"
17
18 
Sec. 2. Section 57 of the National Internal Revenue Code of 1997, as amended,
19 
is hereby further amended to read as follows:
20 
"SEC. 57. Withhoiding of Tax at Source. -
21 
"(A) xxx
22 
"(B) Withhoiding of Creditable Tax at Source. - The Secretary of Finance may,
23 
upon the recommendation of the Commissioner, require the withholding of a tax on
24 
the items of income payable to natural or juridical persons, residing in the Philippines,
25 
by payor-corporation/persons as provided for by law, at the rate of [not less than one
26 
percent (1%) but not more than thirty two percent (32%) thereof, which shall be
27 
credited against the income tax liability of the taxpayer for the taxable year: Providedi
28 
That beginning January 1, 2019> the rate-of the-withholding shall not be less-than-ene
29 
pcrcent-(-l-%) but not more than fifteen percent (15%) of the income payment] ONE
30 
PERCENT (1%) FOR THE PURCHASE OF GOODS AND PROPERTIES, AND
31 
TWO PERCENT (2%) FOR THE PURCHASE OF SERVICES, INCLUDING THE
32 
EXERCISE OF PROFESSION AND LEASE OF PROPERTIES, WHICH SHALL BE


1 
CREDITED AGAINST THE INCOME TAX LIABILITY OF THE TAXPAYER FOR
2 
THE TAXABLE YEAR.
3 
"xxx"
4
5 
Sec. 3. Implementing Rules and Regulations (IRR). - Within thirty (30) days
6 
from the effectivity of this Act, the Department of Finance (DOF) shali, in coordination
7 
with the Bureau of Internal Revenue (BIR), promulgate the IRR to effectively
8 
implement the provisions of this Act.
9 
Sec. 4. Separability Clause. - If any provision or part hereof is declared invalid
10 
or unconstitutional, the remainder of this Act or any provision not affected thereby
11 
shall remain in full force and effect.
12 
Sec. 5. Repealing Clause. - All laws, acts, decrees, executive orders, issuances,
13 
and rules and regulations or parts thereof which are contrary to, or inconsistent with,
14 
this Act are hereby repealed, amended or modified accordingly.
15 
Sec. 6. Effectivity. - This Act shall take effect fifteen (15) days after its
16 
publication either in the Official Gazette or in at least two (2) newspapers of general
17 
circulation in the Philippines.
Approved,